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United States securities and exchange commission logo
August 13, 2021
Chaohui Chen
Director and Chief Executive Officer
uCloudlink Group Inc.
Unit 2214-Rm1, 22/F, Mira Place Tower A
132 Nathan Road, Tsim Sha Tsui
Kowloon, Hong Kong
Re: uCloudlink Group
Inc.
Amendment No. 1 to
Registration Statement on Form F-3
Filed July 26, 2021
File No. 333-257782
Dear Mr. Chen:
We have limited our review of your registration statement to
those issues we have
addressed in our comments. In some of our comments, we may ask you to
provide us with
information so we may better understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form F-3, as amended July 26, 2021
Prospectus Cover Page
1. Please disclose
prominently on the prospectus cover page that you are not a Chinese
operating company but a
Cayman Islands holding company with operations conducted by
your subsidiaries and
through contractual arrangements with a variable interest entity
(VIE) based in China
and that this structure involves unique risks to investors. Explain
whether the VIE
structure is used to replicate foreign investment in Chinese-based
companies where Chinese
law prohibits direct foreign investment in the operating
companies, and disclose
that investors may never directly hold equity interests in the
Chinese operating
company. Your disclosure should acknowledge that Chinese regulatory
authorities could
disallow this structure, which would likely result in a material change in
Chaohui Chen
FirstName
uCloudlinkLastNameChaohui Chen
Group Inc.
Comapany
August 13, NameuCloudlink
2021 Group Inc.
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your operations and/or value of your ADSs, including that it could
cause the value of such
securities to significantly decline or become worthless. Provide a
cross-reference to your
detailed discussion of risks facing the company and the offering as a
result of this
structure.
2. Provide prominent disclosure about the legal and operational risks
associated with being
based in or having the majority of the company s operations in China
or Hong Kong.
Your disclosure should make clear whether these risks could result in
a material change in
your operations and/or the value of your ADSs or could significantly
limit or completely
hinder your ability to offer or continue to offer securities to
investors and cause the value
of such securities to significantly decline or be worthless. Your
disclosure should address
how recent statements and regulatory actions by China s government,
such as those
related to the use of variable interest entities and data security or
anti-monopoly concerns,
has or may impact the company s ability to conduct its business,
accept foreign
investments, or list on an U.S. or other foreign exchange. Your
prospectus summary
should address, but not necessarily be limited to, the risks
highlighted on the prospectus
cover page.
3. Clearly disclose how you will refer to the holding company,
subsidiaries, and VIEs when
providing the disclosure throughout the document so that it is clear
to investors which
entity the disclosure is referencing and which subsidiaries or
entities are conducting the
business operations. Refrain from using terms such as we or
our when describing
activities or functions of a VIE. Disclose clearly the entity
(including the domicile) in
which investors are purchasing their interest.
Prospectus Summary
4. Disclose clearly that the company uses a structure that involves VIEs
based in China and
what that entails and provide early in the summary a diagram of the
company s corporate
structure, including who the equity ownership interests are of each
entity. Describe all
contracts and arrangements through which you purport to obtain
economic rights and
exercise control that results in consolidation of the VIEs' operations
and financial results
into your financial statements. Identify clearly the entity in which
investors are
purchasing their interest and the entity(ies) in which the company s
operations are
conducted. Describe the relevant contractual agreements between the
entities and how
this type of corporate structure may affect investors and the value of
their investment,
including how and why the contractual arrangements may be less
effective than direct
ownership and that the company may incur substantial costs to enforce
the terms of the
arrangements. Disclose the uncertainties regarding the status of the
rights of the Cayman
Islands holding company with respect to its contractual arrangements
with each VIE, its
founders and owners, and the challenges the company may face enforcing
these
contractual agreements due to uncertainties under Chinese law and
jurisdictional limits.
5. In your summary of risk factors, disclose the risks that your
corporate structure and being
based in or having significant operations in China poses to investors.
In particular,
Chaohui Chen
uCloudlink Group Inc.
August 13, 2021
Page 3
describe the significant regulatory, liquidity, and enforcement risks
with cross-references
to the more detailed discussion of these risks in the prospectus. For
example, specifically
discuss risks arising from the legal system in China, including risks
and uncertainties
regarding the enforcement of laws and that rules and regulations in
China can change
quickly with little advance notice; and the risk that the Chinese
government may intervene
or influence your operations at any time, or may exert more control
over offerings
conducted overseas and/or foreign investment in China-based issuers,
which could result
in a material change in your operations and/or the value of your ADSs.
Acknowledge any
risks that any actions by the Chinese government to exert more
oversight and control over
offerings that are conducted overseas and/or foreign investment in
China-based issuers
could significantly limit or completely hinder your ability to offer
or continue to offer
securities to investors and cause the value of such securities to
significantly decline or be
worthless.
6. Disclose each permission that you, your subsidiaries or your VIEs are
required to obtain
from Chinese authorities to operate and issue these securities to
foreign investors. State
whether you, your subsidiaries, or VIEs are covered by permissions
requirements from the
CSRC, CAC or any other entity that is required to approve of the VIE
s operations, and
state affirmatively whether you have received all requisite
permissions and whether any
permissions have been denied.
7. Provide a clear description of how cash is transferred through your
organization. Disclose
your intentions to distribute earnings or settle amounts owed under
the VIE agreements.
Quantify any cash flows and transfers of other assets by type that
have occurred between
the holding company, its subsidiaries, and consolidated VIEs, and
direction of transfer.
Quantify any dividends or distributions that a subsidiary or
consolidated VIE have made
to the holding company and which entity made such transfer, and their
tax consequences.
Similarly quantify dividends or distributions made to U.S. investors,
the source, and their
tax consequences. Describe any restrictions on foreign exchange and
your ability to
transfer cash between entities, across borders, and to U.S. investors.
Describe any
restrictions and limitations on your ability to distribute earnings
from your businesses,
including subsidiaries and/or consolidated VIEs, to the parent company
and U.S. investors
as well as the ability to settle amounts owed under the VIE
agreements.
8. We note that the consolidated VIEs constitute a material part of your
consolidated
financial statements. Please provide in tabular form condensed
consolidating schedule -
depicting the financial position, cash flows and results of operations
for the parent, the
consolidated variable interest entities, and any eliminating adjustments
separately - as of
the same dates and for the same periods for which audited consolidated
financial
statements are required. Highlight the financial statement information
related to the
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9. Disclose that trading in your securities may be prohibited under the
Holding Foreign
Companies Accountable Act if the PCAOB determines that it cannot
inspect or fully
investigate your auditor, and that as a result an exchange may
determine to delist your
securities. If the PCAOB has been or is currently unable to inspect
your auditor, revise
your disclosure to so state.
Risk Factors
10. Revise your risk factors to acknowledge that if the PRC government
determines that the
contractual arrangements constituting part of your VIE structure do
not comply with PRC
regulations, or if these regulations change or are interpreted
differently in the future, your
shares may decline in value or become worthless if you are unable to
assert your
contractual control rights over the assets of your PRC subsidiaries
that conduct all or
substantially all of your operations.
11. Given the Chinese government s significant oversight and discretion
over the conduct of
your business, please revise to separately highlight the risk that the
Chinese government
may intervene or influence your operations at any time, which could
result in a material
change in your operations and/or the value of your ADSs. Also, given
recent statements
by the Chinese government indicating an intent to exert more oversight
and control over
offerings that are conducted overseas and/or foreign investment in
China-based issuers,
acknowledge the risk that any such action could significantly limit or
completely hinder
your ability to offer or continue to offer securities to investors and
cause the value of such
securities to significantly decline or be worthless.
12. In light of recent events indicating greater oversight by the
Cyberspace Administration of
China over data security, particularly for companies seeking to list
on a foreign exchange,
please revise your disclosure to explain how this oversight impacts
your business and your
offering and to what extent you believe that you are compliant with
the regulations or
policies that have been issued by the CAC to date.
Chaohui Chen
FirstName
uCloudlinkLastNameChaohui Chen
Group Inc.
Comapany
August 13, NameuCloudlink
2021 Group Inc.
August
Page 5 13, 2021 Page 5
FirstName LastName
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
Please contact Katherine Wray, Staff Attorney, at 202-551-3483 or Jan
Woo, Legal
Branch Chief, at 202-551-3453 with any questions.
Sincerely,
Division of
Corporation Finance
Office of Technology