Correspondence 0000950170-23-043551 from ATRenew Inc. (RERE) (CIK 0001838957) (RERE)
ATRenew Inc. (RERE) (CIK 0001838957)
Date: Aug. 21, 2023 · CIK: 0001838957 · Accession: 0000950170-23-043551
AI Filing Summary & Sentiment
File numbers found in text: 001-40486
Referenced dates: July 24, 2023
Letter
VIA EDGAR Division of Corporation Finance Office of Trade & Services Securities and Exchange Commission RE: ATRenew Inc. (the “Company”) Annual Report on Form 20-F for the Fiscal Year Ended December 31, 2022 Filed on April 18, 2023 File No. 001-40486
Dear Mr. Phippen, Mr. Watson, Ms. Thompson and Mr. Pattan:
This letter sets forth the Company’s response to the comments contained in the letter dated July 24, 2023 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2022 filed with the Commission on April 18, 2023 (the “2022 Form 20-F”). The Staff’s comments are repeated below in bold and followed by the Company’s responses thereto. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the 2022 Form 20-F.
Form 20-F for the Fiscal Year Ended December 31, 2022
Item 3. Key Information
The Holding Foreign Companies Accountable Act, page 4
1.In future filings, please disclose the location of your auditor's headquarters. Additionally, where you discuss the HFCAA, revise to clarify that such act was amended by the Consolidated Appropriations Act, 2023, and where you disclose the risk that "the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange," also disclose the related risk that an exchange may determine to delist your ADSs. Make conforming changes, as applicable, in your risk factor on page 42. Tell us what your disclosure will look like.
In response to the Staff’s comment, the Company respectfully proposes to include the following revised disclosure (page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown in strikethrough and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed.
Division of Corporation Finance
Office of Trade & Services
Securities and Exchange Commission August 21, 2023
Page 2
Page 4:
The Holding Foreign Companies Accountable Act
Pursuant to the Holding Foreign Companies Accountable Act, which was amended by the Consolidated Appropriations Act, 2023 in December 2022, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States and the NYSE may determine to delist the ADSs. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor, the headquarters of which is located in mainland China. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of this annual report on Form 20-F for the fiscal year ended December 31, 2021. …
Pages 42 – 43:
Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.
Pursuant to the HFCAA, which was amended by the Consolidated Appropriations Act, 2023 in December 2022, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States and the NYSE may determine to delist the ADSs.
On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong and our auditor’s headquarters is located in mainland China and thus was subject to that determination. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. …
Doing Business in China, page 4
2.We note your disclosure discussing the "various risks and uncertainties related to doing business in China." In future filings, please revise to clarify that the risks associated with operating in China also apply to your operations in Hong Kong. In this regard, while we note that you carve-out Hong Kong from your definition of "China" in your Introduction section, you disclose on page 28 that you have "one regional operation center in Hong Kong." Make conforming changes throughout your risk factor discussion as applicable, and in particular, include risk factor disclosure explaining whether there are laws/regulations in Hong Kong that result in oversight over data security, how this oversight impacts the company’s business, and to what extent the company believes that it is compliant with the regulations or policies that have been issued. Tell us what your disclosure will look like.
In response to the Staff’s comment, the Company respectfully proposes to include the following revised disclosure (page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown in strikethrough and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed.
Division of Corporation Finance
Office of Trade & Services
Securities and Exchange Commission August 21, 2023
Page 3
Page 1:
“China” or the “PRC” are to the People’s Republic of China excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan;
Page 10:
An investment in our ADSs involves significant risks. You should consider carefully all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our ADSs. Below is a summary of material risks we face, organized under relevant headings. The operational risks associated with being based in and having operations in mainland China also apply to operations in Hong Kong. While entities and businesses in Hong Kong operate under different sets of laws from mainland China, the legal risks associated with being based in and having operations in mainland China could apply to our operations in Hong Kong, if the laws applicable to mainland China become applicable to entities and businesses in Hong Kong in the future. Full-fledged discussion of these risks can be found in the section headed “Risk factors.”
Page 11:
Risks Related to Doing Business in China
Our business operations are primarily conducted in mainland China and we We are also subject to complex and evolving laws and regulations in mainland China as well as risks and uncertainties relating to doing business in mainland China in general, including, but are not limited to, the following:
…
As of the date of this annual report, the laws or regulations currently effective in Hong Kong regarding data security are not applicable to our business operations in Hong Kong. As such, we believe that data security laws and regulations in Hong Kong have no impact on our business operations in Hong Kong. However, new laws or regulations related to data security in Hong Kong may be enacted or promulgated in the future, and such laws and regulations may have a material impact on our business in Hong Kong. For a detailed description of risks related to doing business in China, please refer to risks disclosed under “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China.”
Our Holding Company Structure, page 5
3.We note your disclosure on page 5 that "[w]e are not an operating company but a Cayman Islands holding company with operations primarily conducted by our subsidiaries in China." In future filings, please disclose this statement prominently at the beginning of your Item 3 disclosure and also disclose that this structure involves unique risks to investors. Additionally, disclose that investors may never 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 your operations and/or a material change in the value of your ADSs, including that it could cause the value of such ADSs to significantly decline or become worthless. Provide a cross-reference to your detailed discussion of risks facing the company as a result of this structure. Tell us what your disclosure will look like.
The Company respectfully clarifies to the Staff that the Company completely unwound its VIE structure in April 2022 by terminating the contractual arrangements with the former VIE and acquiring all equity interests in the former VIE. As such, investors are not subject to risks that are unique to the VIE structure.
Division of Corporation Finance
Office of Trade & Services
Securities and Exchange Commission August 21, 2023
Page 4
In response to the Staff’s comments, in lieu of emphasizing unique risks associated with the VIE structure, the Company proposes to further revise and enhance the existing disclosure related to the Company’s holding company structure by moving the disclosure under the heading “Our Holding Company Structure” on page 5 up to page 3 as the first paragraph under the heading “Item 3. Key Information” and make the following changes to the disclosure under the heading “Our Holding Company Structure” (page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown in strikethrough and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed.
Pages 5 – 6:
Our Holding Company Structure
…
ATRenew Inc. is a Cayman holding company and our operations are conducted primarily through subsidiaries in China. By purchasing the ADSs, you are purchasing interests in our Cayman holding company, as opposed to interests in our subsidiaries in China. Were this holding company structure to be challenged or disallowed by any regulatory authorities, our business operations would be materially and adversely affected and the value of the ADSs could significantly decline or become worthless. This holding company structure also involves certain risks in terms of dividend distribution, direct investment in entities in mainland China and obtaining benefits under relevant tax treaty. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the historical contractual arrangements with the former VIE that establish the structure for operating certain of our businesses in mainland China did not comply with mainland China regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, our shares and/or ADSs may decline in value or become worthless if we are deemed to be unable to assert our contractual control rights over the assets of the consolidated affiliated entities.” This holding company structure involves certain risks in terms of dividend distribution, direct investment in entities in mainland China and obtaining benefits under relevant tax treaty. See “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and other distributions on equity paid by our subsidiaries in mainland China to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries in mainland China to make payments to us could have a material and adverse effect on our ability to conduct our business,” “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—Regulation of loans to and direct investment in entities in mainland China by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of financing activities to make loans or additional capital contributions to our subsidiaries in mainland China and the consolidated affiliated entities in mainland China, which could materially and adversely affect our liquidity and our ability to fund and expand our business” and “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—Regulations relating to offshore investment activities by mainland China residents may limit the ability of our subsidiaries in mainland China to change their registered capital or distribute profits to us or otherwise expose us or beneficial owners who are mainland China resident to liability and penalties under mainland China law.” See also “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Foreign Exchange and Dividend Distribution.”
Page 11:
Risks Related to Our Corporate Structure
We and the consolidated affiliated entities face risks and uncertainties related to our former corporate structure, including, but not limited to, the following:
Division of Corporation Finance
Office of Trade & Services
Securities and Exchange Commission August 21, 2023
Page 5
•If the PRC government finds that the historical contractual arrangements with the former VIE agreements that establish the structure for operating certain of our businesses in mainland China did not comply with PRC mainland China regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, our shares and/or ADSs may decline in value or become worthless if we are deemed to be unable to assert our contractual control rights over the assets of the consolidated affiliated entities.
Pages 41 – 42:
Risks Related to Our Corporate Structure
If the PRC government finds that the historical contractual arrangements with the former VIE agreements that establish the structure for operating certain of our businesses in mainland China did not comply with PRC mainland China regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, our shares and/or ADSs may decline in value or become worthless if we are deemed to be unable to assert our contractual control rights over the assets of the consolidated affiliated entities.
ATRenew Inc. is not a Chinese operating company but a Cayman holding company with its operations conducted primarily through subsidiaries, and historically through subsidiaries and contractual arrangements with the former VIE, in China. By purchasing the ADSs, you are purchasing interests in our Cayman holding company, as opposed to interests in our subsidiaries in China. Although the VIE structure was completely unwound in April 2022, the holding company structure has been maintained. Were
Show Raw Text
CORRESP 1 filename1.htm CORRESP ATRenew Inc. 12th Floor, No. 6 Building 433 Songhu Road, Shanghai The People’s Republic of China August 21, 2023 VIA EDGAR Mr. Adam Phippen Mr. Tony Watson Ms. Jennifer Thompson Mr. Austin Pattan Division of Corporation Finance Office of Trade & Services Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 RE: ATRenew Inc. (the “Company”) Annual Report on Form 20-F for the Fiscal Year Ended December 31, 2022 Filed on April 18, 2023 File No. 001-40486 Dear Mr. Phippen, Mr. Watson, Ms. Thompson and Mr. Pattan: This letter sets forth the Company’s response to the comments contained in the letter dated July 24, 2023 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2022 filed with the Commission on April 18, 2023 (the “2022 Form 20-F”). The Staff’s comments are repeated below in bold and followed by the Company’s responses thereto. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the 2022 Form 20-F. Form 20-F for the Fiscal Year Ended December 31, 2022 Item 3. Key Information The Holding Foreign Companies Accountable Act, page 4 1.In future filings, please disclose the location of your auditor's headquarters. Additionally, where you discuss the HFCAA, revise to clarify that such act was amended by the Consolidated Appropriations Act, 2023, and where you disclose the risk that "the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange," also disclose the related risk that an exchange may determine to delist your ADSs. Make conforming changes, as applicable, in your risk factor on page 42. Tell us what your disclosure will look like. In response to the Staff’s comment, the Company respectfully proposes to include the following revised disclosure (page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown in strikethrough and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed. Division of Corporation Finance Office of Trade & Services Securities and Exchange Commission August 21, 2023 Page 2 Page 4: The Holding Foreign Companies Accountable Act Pursuant to the Holding Foreign Companies Accountable Act, which was amended by the Consolidated Appropriations Act, 2023 in December 2022, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States and the NYSE may determine to delist the ADSs. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor, the headquarters of which is located in mainland China. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of this annual report on Form 20-F for the fiscal year ended December 31, 2021. … Pages 42 – 43: Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Pursuant to the HFCAA, which was amended by the Consolidated Appropriations Act, 2023 in December 2022, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States and the NYSE may determine to delist the ADSs. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong and our auditor’s headquarters is located in mainland China and thus was subject to that determination. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. … Doing Business in China, page 4 2.We note your disclosure discussing the "various risks and uncertainties related to doing business in China." In future filings, please revise to clarify that the risks associated with operating in China also apply to your operations in Hong Kong. In this regard, while we note that you carve-out Hong Kong from your definition of "China" in your Introduction section, you disclose on page 28 that you have "one regional operation center in Hong Kong." Make conforming changes throughout your risk factor discussion as applicable, and in particular, include risk factor disclosure explaining whether there are laws/regulations in Hong Kong that result in oversight over data security, how this oversight impacts the company’s business, and to what extent the company believes that it is compliant with the regulations or policies that have been issued. Tell us what your disclosure will look like. In response to the Staff’s comment, the Company respectfully proposes to include the following revised disclosure (page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown in strikethrough and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed. Division of Corporation Finance Office of Trade & Services Securities and Exchange Commission August 21, 2023 Page 3 Page 1: “China” or the “PRC” are to the People’s Republic of China excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan; Page 10: An investment in our ADSs involves significant risks. You should consider carefully all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our ADSs. Below is a summary of material risks we face, organized under relevant headings. The operational risks associated with being based in and having operations in mainland China also apply to operations in Hong Kong. While entities and businesses in Hong Kong operate under different sets of laws from mainland China, the legal risks associated with being based in and having operations in mainland China could apply to our operations in Hong Kong, if the laws applicable to mainland China become applicable to entities and businesses in Hong Kong in the future. Full-fledged discussion of these risks can be found in the section headed “Risk factors.” Page 11: Risks Related to Doing Business in China Our business operations are primarily conducted in mainland China and we We are also subject to complex and evolving laws and regulations in mainland China as well as risks and uncertainties relating to doing business in mainland China in general, including, but are not limited to, the following: … As of the date of this annual report, the laws or regulations currently effective in Hong Kong regarding data security are not applicable to our business operations in Hong Kong. As such, we believe that data security laws and regulations in Hong Kong have no impact on our business operations in Hong Kong. However, new laws or regulations related to data security in Hong Kong may be enacted or promulgated in the future, and such laws and regulations may have a material impact on our business in Hong Kong. For a detailed description of risks related to doing business in China, please refer to risks disclosed under “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China.” Our Holding Company Structure, page 5 3.We note your disclosure on page 5 that "[w]e are not an operating company but a Cayman Islands holding company with operations primarily conducted by our subsidiaries in China." In future filings, please disclose this statement prominently at the beginning of your Item 3 disclosure and also disclose that this structure involves unique risks to investors. Additionally, disclose that investors may never 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 your operations and/or a material change in the value of your ADSs, including that it could cause the value of such ADSs to significantly decline or become worthless. Provide a cross-reference to your detailed discussion of risks facing the company as a result of this structure. Tell us what your disclosure will look like. The Company respectfully clarifies to the Staff that the Company completely unwound its VIE structure in April 2022 by terminating the contractual arrangements with the former VIE and acquiring all equity interests in the former VIE. As such, investors are not subject to risks that are unique to the VIE structure. Division of Corporation Finance Office of Trade & Services Securities and Exchange Commission August 21, 2023 Page 4 In response to the Staff’s comments, in lieu of emphasizing unique risks associated with the VIE structure, the Company proposes to further revise and enhance the existing disclosure related to the Company’s holding company structure by moving the disclosure under the heading “Our Holding Company Structure” on page 5 up to page 3 as the first paragraph under the heading “Item 3. Key Information” and make the following changes to the disclosure under the heading “Our Holding Company Structure” (page reference is made to the 2022 Form 20-F to illustrate the approximate location of the disclosure) in its future Form 20-F filings (with deletions shown in strikethrough and additions underlined), subject to updates and adjustments to be made in connection with any material development of the subject matter being disclosed. Pages 5 – 6: Our Holding Company Structure … ATRenew Inc. is a Cayman holding company and our operations are conducted primarily through subsidiaries in China. By purchasing the ADSs, you are purchasing interests in our Cayman holding company, as opposed to interests in our subsidiaries in China. Were this holding company structure to be challenged or disallowed by any regulatory authorities, our business operations would be materially and adversely affected and the value of the ADSs could significantly decline or become worthless. This holding company structure also involves certain risks in terms of dividend distribution, direct investment in entities in mainland China and obtaining benefits under relevant tax treaty. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the historical contractual arrangements with the former VIE that establish the structure for operating certain of our businesses in mainland China did not comply with mainland China regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, our shares and/or ADSs may decline in value or become worthless if we are deemed to be unable to assert our contractual control rights over the assets of the consolidated affiliated entities.” This holding company structure involves certain risks in terms of dividend distribution, direct investment in entities in mainland China and obtaining benefits under relevant tax treaty. See “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and other distributions on equity paid by our subsidiaries in mainland China to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries in mainland China to make payments to us could have a material and adverse effect on our ability to conduct our business,” “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—Regulation of loans to and direct investment in entities in mainland China by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of financing activities to make loans or additional capital contributions to our subsidiaries in mainland China and the consolidated affiliated entities in mainland China, which could materially and adversely affect our liquidity and our ability to fund and expand our business” and “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—Regulations relating to offshore investment activities by mainland China residents may limit the ability of our subsidiaries in mainland China to change their registered capital or distribute profits to us or otherwise expose us or beneficial owners who are mainland China resident to liability and penalties under mainland China law.” See also “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Foreign Exchange and Dividend Distribution.” Page 11: Risks Related to Our Corporate Structure We and the consolidated affiliated entities face risks and uncertainties related to our former corporate structure, including, but not limited to, the following: Division of Corporation Finance Office of Trade & Services Securities and Exchange Commission August 21, 2023 Page 5 •If the PRC government finds that the historical contractual arrangements with the former VIE agreements that establish the structure for operating certain of our businesses in mainland China did not comply with PRC mainland China regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, our shares and/or ADSs may decline in value or become worthless if we are deemed to be unable to assert our contractual control rights over the assets of the consolidated affiliated entities. Pages 41 – 42: Risks Related to Our Corporate Structure If the PRC government finds that the historical contractual arrangements with the former VIE agreements that establish the structure for operating certain of our businesses in mainland China did not comply with PRC mainland China regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, our shares and/or ADSs may decline in value or become worthless if we are deemed to be unable to assert our contractual control rights over the assets of the consolidated affiliated entities. ATRenew Inc. is not a Chinese operating company but a Cayman holding company with its operations conducted primarily through subsidiaries, and historically through subsidiaries and contractual arrangements with the former VIE, in China. By purchasing the ADSs, you are purchasing interests in our Cayman holding company, as opposed to interests in our subsidiaries in China. Although the VIE structure was completely unwound in April 2022, the holding company structure has been maintained. Were