Correspondence 0000950170-23-065953 from Dingdong (Cayman) Ltd (DDL)
Dingdong (Cayman) Ltd
Date: Nov. 24, 2023 · CIK: 0001854545 · Accession: 0000950170-23-065953
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-40533
Referenced dates: October 27, 2023, September 29, 2023
Letter
Division of Corporation Finance Office of Trade & Services Securities and Exchange Commission Re: Dingdong (Cayman) Ltd Form 20-F for Fiscal Year Ended December 31, 2022 Filed March 22, 2023 File No. 001-40533
Dear Mr. Stringer and Mr. Parker:
This letter sets forth the response of Dingdong (Cayman) Limited (the “Company”) to the comments contained in the letter dated October 27, 2023, from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s responses to the Staff’s comment letter dated September 29, 2023 with respect to the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2022 (the “Form 20-F”).
For ease of review, we have set forth below each of the numbered comments of the Staff’s letter and our responses thereto. Further, we will include the revisions proposed in our responses to the Staff’s comments in future annual report filings with the Commission, after the Staff’s completion of its review of our responses. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the Form 20-F.
Response Dated September 29, 2023
Introduction, page 1
1.We note your proposed disclosure and response to comment 1 that you intend to revise certain “China” or “PRC” references to “mainland China” to the extent the context requires throughout the Form 20-F in future filings. Please provide your proposed revisions.
Response: We respectfully submit that we propose to revise the referenced disclosure in the Form 20-F in future filings as follows, with the added disclosure underlined for your ease of reference. Given the large amount of “China” mentioned throughout the Form 20-F, the following is a non-exhaustive list of examples for illustration purposes only.
Page 9
The e-commerce industry in mainland China, in particular the fresh grocery e-commerce industry, is intensely competitive. We compete for users, orders, products and third-party suppliers. Our current or potential competitors include (i) other fresh grocery e-commerce
Division of Corporation Finance
Office of Trade & Services
Page 2
players in mainland China, (ii) traditional e-commerce and other Internet companies in mainland China, and (iii) major traditional retailers in mainland China that are moving into fresh grocery e-commerce and physical retail stores and supermarkets. See “Item 4. Information on the Company—B. Business Overview—Competition.”
Page 19
As the online retail industry is still evolving in mainland China, new laws and regulations may be adopted from time to time and regulators may interpret existing laws and regulations differently from what they do now to require additional licenses and permits other than those we currently have, and to address new issues that arise from time to time.
Page 22
We rely on proper operation and maintenance of our mobile platform and internet infrastructure and telecommunications networks in mainland China. Any malfunction, capacity constraint or operation interruption may have an adverse impact on our business.
Currently, all of our sales of products are generated online through Dingdong Fresh, our mobile app and mini-programs. Therefore, the satisfactory performance, reliability and availability of our mobile platform are critical to our success and our ability to attract and retain users. Our business depends on the performance and reliability of the internet infrastructure in mainland China……If we are unable to enter into and renew agreements with these providers on acceptable terms, or if any of our existing agreements with such providers are terminated as a result of our breach or otherwise, our ability to provide our services to our users could be adversely affected. Access to internet in mainland China is maintained through state-owned telecommunications carriers under administrative control, and we obtain access to end-user networks operated by such telecommunications carriers and internet service providers to give users access to our mobile platform……
Page 28
Risks Relating to Doing Business in mainland China
Changes in mainland China’s economic, political or social conditions or government policies could materially and adversely affect our business and results of operations.
Substantially all of our operations are conducted in mainland China. Accordingly, our results of operations, financial condition, and prospects are influenced by economic, political, and legal developments in mainland China. Mainland China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange, and allocation of resources. The PRC government exercises significant control over mainland China’s economic growth through strategically allocating resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to
Division of Corporation Finance
Office of Trade & Services
Page 3
particular industries or companies. While the PRC economy has experienced significant growth over the past decades, that growth has been uneven across different regions and between economic sectors and may not continue… Furthermore, any adverse changes in the policies of the PRC government or in the laws and regulations in mainland China could have a material adverse effect on mainland China’s overall economic growth……
2.We note your proposed disclosure in response to comment 2 and reissue our comment. Revise to discuss the applicable laws and regulations in Hong Kong and/or Macau, as applicable, as well as the related risks and consequences. Disclose how regulatory actions related to data security or anti-monopoly concerns in Hong Kong/Macau have or may impact the company’s ability to conduct its business, accept foreign investment or list on a U.S./foreign exchange. Include risk factor disclosure explaining whether there are laws/regulations in Hong Kong/Macau that result in oversight over data security, how this oversight impacts the company’s business and the ability to offer securities, and to what extent the company believes that it is compliant with the regulations or policies that have been issued. In this regard, we note your proposed disclosure references the Law of PRC on Safeguarding National Security in Hong Kong but does not discuss the related risks and consequences, including how it could impact the company's business or ability to offer securities. With respect to regulatory actions related to data security or anti-monopoly concerns, your proposed disclosure only seems to address laws applicable in mainland China, rather than Hong Kong.
Response: We respectfully submit that we did not nor do we currently have any Macau entity, and our Hong Kong subsidiary is only an intermediary holding entity which conducts no business operations. There had been no revenues generated by our Hong Kong subsidiary, nor do we expect it to contribute any revenues in the future. Our operations had been and will continue to be mainland China-focused. Therefore, we do not believe any regulatory actions related to data security or anti-monopoly concerns in Hong Kong or Macau would have or may impact our ability to conduct our business, accept foreign investments, or list on a U.S./foreign exchange.
Furthermore, risks related to data security or anti-monopoly concerns and foreign investments have been discussed in details in “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — The PRC government’s significant oversight over our business operation could result in a material adverse change in our operations and the value of our ADSs”, “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — PRC laws and regulations establish more complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China”, and “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — PRC laws and regulations establish more complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China — The heightened scrutiny over acquisition transactions by PRC tax authorities may have a negative impact on our business operations, our acquisition or restructuring strategy or the value of your investment in us”, which we believe would be sufficient for investors to evaluate the risks associated with investing in our ADSs.
Division of Corporation Finance
Office of Trade & Services
Page 4
Item 3. Key Information Our Corporate Structure, page 4
3.We note your proposed disclosure in response to comment 3. Please further revise to clarify that it is the PRC regulatory authorities that could disallow your holding company structure, rather than “any” regulatory authority. Please also state that disallowing your holding company structure would likely result in a material change in your operations, and include a cross reference to your detailed discussion of risks facing the company and the offering as a result of this structure.
Response: In response to the Staff’s comment, we propose to revise the referenced disclosure in the Form 20-F in future filings as follows, with the added disclosure underlined (newly added revisions in response to the Staff’s current round of comments are highlighted in bold) and the removed disclosure crossed out for ease of reference:
Page 4 of the Form 20-F
Our Corporate Structure
Dingdong (Cayman) Limited is not a Chinese operating company, but a Cayman Islands holding company with no material operations of its own. We conduct our operations through our subsidiaries located in mainland China, or PRC subsidiaries. Investors in the ADSs are not purchasing equity securities beneficial equity interests in Dingdong (Cayman) Limited, the of our PRC subsidiaries but instead are purchasing equity securities of a Cayman Islands holding company, rather than purchasing beneficial equity interests in any of our operating companies. This holding company structure involves unique risks to investors. As a holding company, Dingdong (Cayman) Limited may rely on dividends from its subsidiaries for cash requirements, including any payment of dividends to its shareholders. The ability of our subsidiaries to pay dividends or make distributions to Dingdong (Cayman) Limited may be restricted by laws and regulations applicable to them or the debt they incur on their own behalf or the instruments governing their debt. In addition, if the PRC regulatory authorities disallow this holding company structure or limit or hinder our ability to conduct our business through, receive dividends or distributions from, or transfer funds to, our PRC subsidiaries or list on a U.S. or other foreign exchange, our operations may be adversely affected, and the value of our securities could decline significantly or become worthless. See “Item 3. Key Information — Our Corporate Structure,” and “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — We principally rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have. Any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business or financial condition.”
4.We note your proposed disclosure in response to comment 4. Please amend your structure chart to disclose the remaining interest holder(s) in Shanghai Yushengbaigu Food Co., Ltd.
Division of Corporation Finance
Office of Trade & Services
Page 5
Response: In response to the Staff’s comments, we propose to revise the referenced diagram in the Form 20-F in future filings as follows, with the minority interest holders in Shanghai Yushengbaigu Food Co., Ltd. disclosed in details:
Cash Flows through Our Organization, page 5
5.We note your proposed disclosure in response to comment 7 only includes revisions to page 92. Please also include comparable revisions in this section
Response: We respectfully submit that our proposed edits on page 92 are already included in page 5 of the current Form 20-F, therefore, we believe no additional revisions are needed in this section.
6.We note your proposed disclosure in response to comment 8 and reissue our comment in part. Please make the applicable revisions to your summary risk factors as well.
Response: In response to the Staff’s comment, we propose to add the following risk factor heading in the Summary of Risk Factors in the Form 20-F in future filings, with the added disclosure underlined for ease of reference:
Summary of Risk Factors
……
•We principally rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have. Any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business or financial condition.
Division of Corporation Finance
Office of Trade & Services
Page 6
7.We note your proposed disclosure in response to comment 9 and reissue our comment in part. Disclose the source of your cash management policies (e.g., whether they are contractual in nature, pursuant to regulations, etc.). Ensure the disclosure appears in this section of your 20-F.
Response: In response to the Staff’s comments, we propose to add the following in the Form 20-F in future filings, with the newly added revisions in response to the Staff’s current round of comment highlighted in bold for ease of reference:
We have established stringent controls and procedures for cash flows within our organization with reference to applicable regulations. Each transfer of cash among our Cayman Islands holding company and our subsidiaries is subject to different levels of internal approval. To effect a cash transfer, a number of steps are needed, including but not limited to the issuance of payment receipt, inspection of the invoice, and payment execution. A single employee is not permitted to complete the whole process of a cash transfer, but rather only a limited portions. Only the finance department is authorized to make cash transfers, which is subject to tiered approval procedures. Within the finance department, the roles of invoice issuance, payment execution, record keeping, and auditing are segregated to minimize risk.
Permissions Required from the PRC Authorities for Our Operations, page 5
8.We note your proposed disclosure in response to comment 10 that no requisite licenses and permits have been denied, except for which has been disclosed in the risk factor “Any lack of requisite approvals, licenses, permits or filings or failure to comply with any requirements of PRC laws, regulations and policies may materially and adversely affect our daily operations and hinder our growth” on page 18 of your 20-F. Please identify which permits have been denied or are incomplete in this section. In addition, in regards to your entire discussion of required permissions and approvals, describe the consequences to you and your investors if you or your subsidiaries: (i) do not receive or maintain such permissions or approvals, (ii) inadvertently conclude that such permissions or approvals are not required, or (iii) applicabl
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CORRESP 1 filename1.htm CORRESP November 24, 2023 VIA CORRESPONDENCE Division of Corporation Finance Office of Trade & Services Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Attn: Mr. Scott Stringer and Mr. Joel Parker Re: Dingdong (Cayman) Ltd Form 20-F for Fiscal Year Ended December 31, 2022 Filed March 22, 2023 File No. 001-40533 Dear Mr. Stringer and Mr. Parker: This letter sets forth the response of Dingdong (Cayman) Limited (the “Company”) to the comments contained in the letter dated October 27, 2023, from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s responses to the Staff’s comment letter dated September 29, 2023 with respect to the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2022 (the “Form 20-F”). For ease of review, we have set forth below each of the numbered comments of the Staff’s letter and our responses thereto. Further, we will include the revisions proposed in our responses to the Staff’s comments in future annual report filings with the Commission, after the Staff’s completion of its review of our responses. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the Form 20-F. Response Dated September 29, 2023 Introduction, page 1 1.We note your proposed disclosure and response to comment 1 that you intend to revise certain “China” or “PRC” references to “mainland China” to the extent the context requires throughout the Form 20-F in future filings. Please provide your proposed revisions. Response: We respectfully submit that we propose to revise the referenced disclosure in the Form 20-F in future filings as follows, with the added disclosure underlined for your ease of reference. Given the large amount of “China” mentioned throughout the Form 20-F, the following is a non-exhaustive list of examples for illustration purposes only. Page 9 The e-commerce industry in mainland China, in particular the fresh grocery e-commerce industry, is intensely competitive. We compete for users, orders, products and third-party suppliers. Our current or potential competitors include (i) other fresh grocery e-commerce Division of Corporation Finance Office of Trade & Services Page 2 players in mainland China, (ii) traditional e-commerce and other Internet companies in mainland China, and (iii) major traditional retailers in mainland China that are moving into fresh grocery e-commerce and physical retail stores and supermarkets. See “Item 4. Information on the Company—B. Business Overview—Competition.” Page 19 As the online retail industry is still evolving in mainland China, new laws and regulations may be adopted from time to time and regulators may interpret existing laws and regulations differently from what they do now to require additional licenses and permits other than those we currently have, and to address new issues that arise from time to time. Page 22 We rely on proper operation and maintenance of our mobile platform and internet infrastructure and telecommunications networks in mainland China. Any malfunction, capacity constraint or operation interruption may have an adverse impact on our business. Currently, all of our sales of products are generated online through Dingdong Fresh, our mobile app and mini-programs. Therefore, the satisfactory performance, reliability and availability of our mobile platform are critical to our success and our ability to attract and retain users. Our business depends on the performance and reliability of the internet infrastructure in mainland China……If we are unable to enter into and renew agreements with these providers on acceptable terms, or if any of our existing agreements with such providers are terminated as a result of our breach or otherwise, our ability to provide our services to our users could be adversely affected. Access to internet in mainland China is maintained through state-owned telecommunications carriers under administrative control, and we obtain access to end-user networks operated by such telecommunications carriers and internet service providers to give users access to our mobile platform…… Page 28 Risks Relating to Doing Business in mainland China Changes in mainland China’s economic, political or social conditions or government policies could materially and adversely affect our business and results of operations. Substantially all of our operations are conducted in mainland China. Accordingly, our results of operations, financial condition, and prospects are influenced by economic, political, and legal developments in mainland China. Mainland China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange, and allocation of resources. The PRC government exercises significant control over mainland China’s economic growth through strategically allocating resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to 2 Division of Corporation Finance Office of Trade & Services Page 3 particular industries or companies. While the PRC economy has experienced significant growth over the past decades, that growth has been uneven across different regions and between economic sectors and may not continue… Furthermore, any adverse changes in the policies of the PRC government or in the laws and regulations in mainland China could have a material adverse effect on mainland China’s overall economic growth…… 2.We note your proposed disclosure in response to comment 2 and reissue our comment. Revise to discuss the applicable laws and regulations in Hong Kong and/or Macau, as applicable, as well as the related risks and consequences. Disclose how regulatory actions related to data security or anti-monopoly concerns in Hong Kong/Macau have or may impact the company’s ability to conduct its business, accept foreign investment or list on a U.S./foreign exchange. Include risk factor disclosure explaining whether there are laws/regulations in Hong Kong/Macau that result in oversight over data security, how this oversight impacts the company’s business and the ability to offer securities, and to what extent the company believes that it is compliant with the regulations or policies that have been issued. In this regard, we note your proposed disclosure references the Law of PRC on Safeguarding National Security in Hong Kong but does not discuss the related risks and consequences, including how it could impact the company's business or ability to offer securities. With respect to regulatory actions related to data security or anti-monopoly concerns, your proposed disclosure only seems to address laws applicable in mainland China, rather than Hong Kong. Response: We respectfully submit that we did not nor do we currently have any Macau entity, and our Hong Kong subsidiary is only an intermediary holding entity which conducts no business operations. There had been no revenues generated by our Hong Kong subsidiary, nor do we expect it to contribute any revenues in the future. Our operations had been and will continue to be mainland China-focused. Therefore, we do not believe any regulatory actions related to data security or anti-monopoly concerns in Hong Kong or Macau would have or may impact our ability to conduct our business, accept foreign investments, or list on a U.S./foreign exchange. Furthermore, risks related to data security or anti-monopoly concerns and foreign investments have been discussed in details in “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — The PRC government’s significant oversight over our business operation could result in a material adverse change in our operations and the value of our ADSs”, “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — PRC laws and regulations establish more complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China”, and “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — PRC laws and regulations establish more complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China — The heightened scrutiny over acquisition transactions by PRC tax authorities may have a negative impact on our business operations, our acquisition or restructuring strategy or the value of your investment in us”, which we believe would be sufficient for investors to evaluate the risks associated with investing in our ADSs. 3 Division of Corporation Finance Office of Trade & Services Page 4 Item 3. Key Information Our Corporate Structure, page 4 3.We note your proposed disclosure in response to comment 3. Please further revise to clarify that it is the PRC regulatory authorities that could disallow your holding company structure, rather than “any” regulatory authority. Please also state that disallowing your holding company structure would likely result in a material change in your operations, and include a cross reference to your detailed discussion of risks facing the company and the offering as a result of this structure. Response: In response to the Staff’s comment, we propose to revise the referenced disclosure in the Form 20-F in future filings as follows, with the added disclosure underlined (newly added revisions in response to the Staff’s current round of comments are highlighted in bold) and the removed disclosure crossed out for ease of reference: Page 4 of the Form 20-F Our Corporate Structure Dingdong (Cayman) Limited is not a Chinese operating company, but a Cayman Islands holding company with no material operations of its own. We conduct our operations through our subsidiaries located in mainland China, or PRC subsidiaries. Investors in the ADSs are not purchasing equity securities beneficial equity interests in Dingdong (Cayman) Limited, the of our PRC subsidiaries but instead are purchasing equity securities of a Cayman Islands holding company, rather than purchasing beneficial equity interests in any of our operating companies. This holding company structure involves unique risks to investors. As a holding company, Dingdong (Cayman) Limited may rely on dividends from its subsidiaries for cash requirements, including any payment of dividends to its shareholders. The ability of our subsidiaries to pay dividends or make distributions to Dingdong (Cayman) Limited may be restricted by laws and regulations applicable to them or the debt they incur on their own behalf or the instruments governing their debt. In addition, if the PRC regulatory authorities disallow this holding company structure or limit or hinder our ability to conduct our business through, receive dividends or distributions from, or transfer funds to, our PRC subsidiaries or list on a U.S. or other foreign exchange, our operations may be adversely affected, and the value of our securities could decline significantly or become worthless. See “Item 3. Key Information — Our Corporate Structure,” and “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in China — We principally rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have. Any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business or financial condition.” 4.We note your proposed disclosure in response to comment 4. Please amend your structure chart to disclose the remaining interest holder(s) in Shanghai Yushengbaigu Food Co., Ltd. 4 Division of Corporation Finance Office of Trade & Services Page 5 Response: In response to the Staff’s comments, we propose to revise the referenced diagram in the Form 20-F in future filings as follows, with the minority interest holders in Shanghai Yushengbaigu Food Co., Ltd. disclosed in details: Cash Flows through Our Organization, page 5 5.We note your proposed disclosure in response to comment 7 only includes revisions to page 92. Please also include comparable revisions in this section Response: We respectfully submit that our proposed edits on page 92 are already included in page 5 of the current Form 20-F, therefore, we believe no additional revisions are needed in this section. 6.We note your proposed disclosure in response to comment 8 and reissue our comment in part. Please make the applicable revisions to your summary risk factors as well. Response: In response to the Staff’s comment, we propose to add the following risk factor heading in the Summary of Risk Factors in the Form 20-F in future filings, with the added disclosure underlined for ease of reference: Summary of Risk Factors …… •We principally rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have. Any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business or financial condition. 5 Division of Corporation Finance Office of Trade & Services Page 6 7.We note your proposed disclosure in response to comment 9 and reissue our comment in part. Disclose the source of your cash management policies (e.g., whether they are contractual in nature, pursuant to regulations, etc.). Ensure the disclosure appears in this section of your 20-F. Response: In response to the Staff’s comments, we propose to add the following in the Form 20-F in future filings, with the newly added revisions in response to the Staff’s current round of comment highlighted in bold for ease of reference: We have established stringent controls and procedures for cash flows within our organization with reference to applicable regulations. Each transfer of cash among our Cayman Islands holding company and our subsidiaries is subject to different levels of internal approval. To effect a cash transfer, a number of steps are needed, including but not limited to the issuance of payment receipt, inspection of the invoice, and payment execution. A single employee is not permitted to complete the whole process of a cash transfer, but rather only a limited portions. Only the finance department is authorized to make cash transfers, which is subject to tiered approval procedures. Within the finance department, the roles of invoice issuance, payment execution, record keeping, and auditing are segregated to minimize risk. Permissions Required from the PRC Authorities for Our Operations, page 5 8.We note your proposed disclosure in response to comment 10 that no requisite licenses and permits have been denied, except for which has been disclosed in the risk factor “Any lack of requisite approvals, licenses, permits or filings or failure to comply with any requirements of PRC laws, regulations and policies may materially and adversely affect our daily operations and hinder our growth” on page 18 of your 20-F. Please identify which permits have been denied or are incomplete in this section. In addition, in regards to your entire discussion of required permissions and approvals, describe the consequences to you and your investors if you or your subsidiaries: (i) do not receive or maintain such permissions or approvals, (ii) inadvertently conclude that such permissions or approvals are not required, or (iii) applicabl