Correspondence 0001193125-24-188752 from WeRide Inc. (WRD)
WeRide Inc.
Date: July 30, 2024 · CIK: 0001867729 · Accession: 0001193125-24-188752
AI Filing Summary & Sentiment
Referenced dates: July 24, 2024
Letter
VIA EDGAR Division of Corporation Finance Office of Technology 100 F Street, NE Washington, D.C. 20549 Re: WeRide Inc. (CIK No. 0001867729) Registration Statement on Form F-1
Dear Ms. Kessman, Mr. Littlepage, Ms. Graham and Mr. Kauten:
On behalf of our client, WeRide Inc., a foreign private issuer organized under the laws of the Cayman Islands (the “Company”), we submit to the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) this letter setting forth the Company’s responses to the comments contained in the Staff’s letter dated July 24, 2024 (the “Comment Letter”).
The Company filed a registration statement on Form F-1 (the “Registration Statement”) on July 26, 2024. Concurrently with the filing of the Registration Statement, the Company responded to certain comments in the Comment Letter. The Staff’s comments that were not addressed on July 26, 2024 are repeated below in bold and are followed by the Company’s responses. Capitalized terms used but not otherwise defined herein have the meanings set forth in the Registration Statement.
Securities and Exchange Commission
July 30, 2024
Page
The Company respectfully advises the Staff that the Company has revised its timetable. The Company plans to file an amendment to the Registration Statement containing the estimated price range and offering size on or about August 9, 2024, commence the road show for the proposed offering on or about August 12, 2024, and request that the Staff declare the effectiveness of the Registration Statement on or about August 15, 2024. The Company would appreciate the Staff’s timely assistance and support to the Company in meeting the proposed timetable for the offering.
Comments in Letter Dated July 24, 2024
General
7. Your responses to prior comments 10 and 11 are based on financial information through December 31, 2023. Please update your responses to provide financial information as of the end of the last preceding fiscal quarter. (See, e.g., Section 2(a)(41)(A) of the Act).
A. Prior comment 10 – Prior comment 20 requested a detailed legal analysis regarding whether the Company and each of its subsidiaries meet the definition of an “investment company” under Section 3(a)(1)(A) of the Investment Company Act of 1940, as amended (the “Act”). The Company’s response did not address its subsidiaries. Accordingly, we are reissuing prior comment 20 with respect to the Company’s subsidiaries.
Section 3(a)(1)(A) of the Act defines an “investment company” to include an issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities.
Because the Company (and each of its subsidiaries) does not hold itself out to be an investment company (as discussed in further detail below), the relevant consideration is whether the Company is engaged primarily in the business of investing, reinvesting, or trading in securities.
The determination of an issuer’s primary business engagement requires a fact-specific inquiry. Over the years, the SEC and the courts have developed a number of criteria to be used in determining whether a company is engaged primarily in a non-investment business. The relevant criteria are: (i) the company’s historical development; (ii) its public representations of policy; (iii) the activities of its officers and directors; (iv) the sources of its present income; and (v) the nature of its present assets (the “Tonopah Factors”).1
The following sections analyze the application of the five Tonopah Factors to the Company’s business.
Tonopah Mining Co. of Nev., 26 S.E.C. 426, 427 (1947); Certain Prima Facie Inv. Cos., Investment Company Act Release No. IC-10937, 18 S.E.C. Docket 948 (1979).
Securities and Exchange Commission
July 30, 2024
Page
Historical Development. The historical development of the Company and its subsidiaries evidences that the Company, through its subsidiaries, is primarily engaged in the autonomous driving business.
•
2017: The Company commenced business, and started to conduct closed-course and open-road autonomous driving test.
•
2018: The Company launched regular L4 autonomous driving trial operation in Guangzhou, China, being one of China’s first L4 autonomous driving testings on open road.
•
2019: The Company completed autonomous driving test in Silicon Valley and launched world’s first open-to-public fare-charging robotaxi services.
•
2020: The Company obtained a driverless testing permit in China, developed and launched world’s first purpose built robobus for open roads.
•
2021: The Company obtained a driverless testing permit in the US and an online ride-hailing license in China, began commercial production of its robobus and launched a robovan for intra-city logistics.
•
2022: The Company commenced open-to-public driverless operation of its robobus, commenced commercial production and driverless operation of its robosweeper on open roads and entered into a strategic partnership with a leading Tier 1 supplier to the development of Advanced Driver Assistance Systems (ADAS) solutions.
•
2023: The Company further expanded its global autonomous driving footprint by obtaining autonomous driving permits in the UAE and Singapore. The Company commenced fare-charging services of its robobus in Guangzhou, China, and continued its scalable operation of robosweeper for city sanitation services.
•
2024: The Company successfully launched mass production of the ADAS solutions co-developed with the Tier 1 supplier. The solution is deployed on Cherry’s Exeed Sterra ES and ET models. The Company also launched a more compact robosweeper featuring a 400-liter tank capacity, which further enhances the Company’s robosweeper lineup.
The Company has now deployed autonomous driving vehicles and conducted autonomous driving R&D, tests and operations in over 30 cities of 7 countries around the world and has operated a self-driving robotaxi fleet for more than 1,700 days.
The Company has 420 issued patents and 611 pending patent applications globally as of June 30, 2024. The Company’s issued patents and patent applications cover its algorithms, embedded software, and a broad range of system level and component level aspects of autonomous technology.
Securities and Exchange Commission
July 30, 2024
Page
Public Representations. The Company has never held itself out to the public (or to investors) as an investment company or as being primarily engaged in the business of investing, reinvestment or trading in securities. The Company and its subsidiaries have been organized for the purpose of, and since inception, the Company has always stated that its business purpose is the development and implementation of autonomous driving technology.
As noted in the Registration Statement, the Company holds itself out as a global leader and a first mover in the autonomous driving industry that has achieved many first-of-its-kind milestones.
Similarly, the Company’s description of itself on its website states that:
•
The Company is a leading, commercial-stage global company that develops autonomous driving technologies from Level 2 to Level 4.
•
The Company is the only tech company in the world that holds autonomous driving permits in China, the US, the UAE and Singapore.
•
The Company is conducting autonomous driving R&D, tests and operations in over 30 cities of 7 countries around the world.
•
The Company has operated a self-driving fleet for more than 1,600 days.
The Company regularly provides press release updates regarding developments, achievements and key milestones related to the Company’s autonomous driving business.
Officers and Employees. The business activities of the officers and employees of the Company and its subsidiaries are and have historically been devoted almost exclusively to its business of autonomous driving technology. As of June 30, 2024, the Company (including its subsidiaries) had 2,227 employees, approximately 91% of whom are research and development staff, including engineers and autonomous driving scientists and data processing staff. As described in further detail in the Company’s response to prior comment 18, three employees of the Company and its subsidiaries are responsible for managing the capital preservation investments of the Company and its subsidiaries. Two of such employees devote approximately 10% of their time to such activities on average, and the other employee devotes approximately 5% of such employee’s time to such activities.
Sources of the Company’s Income
For the fiscal year ended December 31, 2023 and the six months ended June 30, 2024 (the most recent fiscal period for which financial information is available), the Company had total revenue of approximately RMB402 million and RMB150 million, total expense of approximately RMB1,944 million and RMB844 million, and a net operating loss of approximately RMB1,566 million and RMB699 million, respectively. The Company’s net income derived from its investment in securities for the fiscal year ended December 31, 2023 and the six months ended June 30, 2024 was approximately RMB175 million and RMB94 million. The Company’s income derived from its investment in securities consists of interest income and fair value changes of financial assets at fair value through profit or loss, and is not recorded in the total revenue according to accounting principles.
Securities and Exchange Commission
July 30, 2024
Page
For the fiscal year ended December 31, 2023 and the six months ended June 30, 2024, all of the Company’s expenses were related to the Company’s primary business of autonomous driving. For the fiscal year ended December 31, 2023 and the six months ended June 30, 2024, none of the Company’s expenses related to its investments in securities.
The Company is a rapidly growing early stage company engaged in extensive research and development activities in the emerging field of autonomous driving. The nature of the Company’s revenue and expenses clearly demonstrates that the Company is, and would be understood by investors to be, primarily engaged in the business of autonomous driving. The Company’s commercial success is based on the successful development, implementation and operation of autonomous driving technology, and is independent of any interest generated by the Company’s capital preservation investments.
It is anticipated that investors in the Company will receive a return based on the revenue generated by the Company’s autonomous driving business and not based primarily on any interest earned on the Company’s investment securities holdings. No reasonable investor would invest in the Company for the purpose of obtaining exposure to the Company’s investment securities holdings, which (as discussed in further detail below) are almost exclusively capital preservation investments intended to preserve the value of the Company’s capital for its use in the Company’s autonomous driving business. Rather, the rationale for an investor to invest in the Company would be to invest in a leading innovator in autonomous driving technology.
Nature of Present Assets
See the Company’s response to prior comment 11 below for a further discussion of the nature of the Company’s present assets.
The Company respectfully submits that the application of the Tonopah Factors evidences that the Company is not engaged primarily in the business of investing, reinvesting, or trading in securities but is engaged primarily in the business of autonomous driving.
B. Prior comment 11 – Prior comment 21 requested a detailed legal analysis regarding whether the Company and each of its subsidiaries meet the definition of an “investment company” under Section 3(a)(1)(C) of the Act. The Company’s response did not address its subsidiaries. Accordingly, we are reissuing prior comment 21 with respect to the Company’s subsidiaries.
Attached hereto as Appendix A is an organization chart showing each of the Company’s subsidiaries.
Attached hereto as Appendix B is an analysis of the Company (on a consolidated and unconsolidated basis) and each of its subsidiaries under the definition of “investment company” under Section 3(a)(1)(C), which defines “investment company” to include an issuer that “is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 per centum of the value of such issuer’s total assets (exclusive of Government securities and cash items) on an unconsolidated basis.”
Securities and Exchange Commission
July 30, 2024
Page
As set forth in further detail on Appendix B, as of June 30, 2024 (the most recent quarter end for which financial information is available), based solely on balance sheet assets, on an unconsolidated basis, approximately 47% of the Company’s total assets (exclusive of Government securities and cash items) consisted of investment securities (treating all of the Company’s time deposit holdings as investment securities). On a consolidated basis, based solely on balance sheet assets, as of June 30, 2024, approximately 69% of the Company’s total assets (exclusive of Government securities and cash items) consisted of investment securities (treating all of the Company’s time deposit holdings as investment securities).2
Although the Company fails to meet the 40% test under Section 3(a)(1)(C) based solely on balance sheet assets, the Company nonetheless does not meet the definition of investment company under the Act, by operation of Section 3(b)(1) of the Act. Section 3(b)(1) excludes from the definition of investment company “any issuer primarily engaged, directly or through a wholly-owned subsidiary or subsidiaries, in a business or businesses other than that of investing, reinvesting, owning, holding or trading in securities.” The determination of whether a company is an investment company under Section 3(b)(1) focuses on the company’s “primary” business engagement. Consequently, determination under Section 3(b)(1) of the Act that an issuer is actually engaged primarily in a business or businesses other than investing, reinvesting, owning, holding or trading in securities should be controlling, and such a determination requires close consideration of a company’s “total activities of all sorts.”3
The foregoing analysis reflects the Company’s balance sheet assets. However, the intellectual property of the Company and its subsidiaries that forms the heart of the Company’s autonomous driving business is not reflected on its balance sheet but has significant value. The Company has obtained an independent third party valuation of such intellectual property. Such valuation and the composition of the Company’s assets inclusive of such independently valued intellectual property is discussed below under “—Independently Valued Intellectual Property.”
Siimes v. Giordano, Civ. No. 92-32, 1992 U.S. Dist. LEXIS 16235 (D.N.J. Oct. 8, 19
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CORRESP 1 filename1.htm CORRESP SKADDEN, ARPS, SLATE, MEAGHER & FLOM PARTNERS GEOFFREY CHAN * SHU DU * ANDREW L. FOSTER * CHI T. STEVE KWOK * EDWARD H.P. LAM ◆* HAIPING LI * RORY MCALPINE ◆ JONATHAN B. STONE * PALOMA P. WANG ◆ ◆ (ALSO ADMITTED IN ENGLAND & WALES) * (ALSO ADMITTED IN NEW YORK) 世達國際律師事務所 42/F, EDINBURGH TOWER, THE LANDMARK 15 QUEEN’S ROAD CENTRAL, HONG KONG TEL: (852) 3740-4700 FAX: (852) 3740-4727 www.skadden.com AFFILIATE OFFICES —————— BOSTON CHICAGO HOUSTON LOS ANGELES NEW YORK PALO ALTO WASHINGTON, D.C. WILMINGTON —————— BEIJING BRUSSELS FRANKFURT LONDON MUNICH PARIS SÃO PAULO SEOUL SHANGHAI SINGAPORE TOKYO TORONTO July 30, 2024 VIA EDGAR Ms. Inessa Kessman Mr. Robert Littlepage Ms. Marion Graham Mr. Jeff Kauten Division of Corporation Finance Office of Technology U.S. Securities and Exchange Commission 100 F Street, NE Washington, D.C. 20549 Re: WeRide Inc. (CIK No. 0001867729) Registration Statement on Form F-1 Dear Ms. Kessman, Mr. Littlepage, Ms. Graham and Mr. Kauten: On behalf of our client, WeRide Inc., a foreign private issuer organized under the laws of the Cayman Islands (the “Company”), we submit to the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) this letter setting forth the Company’s responses to the comments contained in the Staff’s letter dated July 24, 2024 (the “Comment Letter”). The Company filed a registration statement on Form F-1 (the “Registration Statement”) on July 26, 2024. Concurrently with the filing of the Registration Statement, the Company responded to certain comments in the Comment Letter. The Staff’s comments that were not addressed on July 26, 2024 are repeated below in bold and are followed by the Company’s responses. Capitalized terms used but not otherwise defined herein have the meanings set forth in the Registration Statement. Securities and Exchange Commission July 30, 2024 Page 2 The Company respectfully advises the Staff that the Company has revised its timetable. The Company plans to file an amendment to the Registration Statement containing the estimated price range and offering size on or about August 9, 2024, commence the road show for the proposed offering on or about August 12, 2024, and request that the Staff declare the effectiveness of the Registration Statement on or about August 15, 2024. The Company would appreciate the Staff’s timely assistance and support to the Company in meeting the proposed timetable for the offering. Comments in Letter Dated July 24, 2024 General 7. Your responses to prior comments 10 and 11 are based on financial information through December 31, 2023. Please update your responses to provide financial information as of the end of the last preceding fiscal quarter. (See, e.g., Section 2(a)(41)(A) of the Act). A. Prior comment 10 – Prior comment 20 requested a detailed legal analysis regarding whether the Company and each of its subsidiaries meet the definition of an “investment company” under Section 3(a)(1)(A) of the Investment Company Act of 1940, as amended (the “Act”). The Company’s response did not address its subsidiaries. Accordingly, we are reissuing prior comment 20 with respect to the Company’s subsidiaries. Section 3(a)(1)(A) of the Act defines an “investment company” to include an issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities. Because the Company (and each of its subsidiaries) does not hold itself out to be an investment company (as discussed in further detail below), the relevant consideration is whether the Company is engaged primarily in the business of investing, reinvesting, or trading in securities. The determination of an issuer’s primary business engagement requires a fact-specific inquiry. Over the years, the SEC and the courts have developed a number of criteria to be used in determining whether a company is engaged primarily in a non-investment business. The relevant criteria are: (i) the company’s historical development; (ii) its public representations of policy; (iii) the activities of its officers and directors; (iv) the sources of its present income; and (v) the nature of its present assets (the “Tonopah Factors”).1 The following sections analyze the application of the five Tonopah Factors to the Company’s business. 1 Tonopah Mining Co. of Nev., 26 S.E.C. 426, 427 (1947); Certain Prima Facie Inv. Cos., Investment Company Act Release No. IC-10937, 18 S.E.C. Docket 948 (1979). Securities and Exchange Commission July 30, 2024 Page 3 Historical Development. The historical development of the Company and its subsidiaries evidences that the Company, through its subsidiaries, is primarily engaged in the autonomous driving business. • 2017: The Company commenced business, and started to conduct closed-course and open-road autonomous driving test. • 2018: The Company launched regular L4 autonomous driving trial operation in Guangzhou, China, being one of China’s first L4 autonomous driving testings on open road. • 2019: The Company completed autonomous driving test in Silicon Valley and launched world’s first open-to-public fare-charging robotaxi services. • 2020: The Company obtained a driverless testing permit in China, developed and launched world’s first purpose built robobus for open roads. • 2021: The Company obtained a driverless testing permit in the US and an online ride-hailing license in China, began commercial production of its robobus and launched a robovan for intra-city logistics. • 2022: The Company commenced open-to-public driverless operation of its robobus, commenced commercial production and driverless operation of its robosweeper on open roads and entered into a strategic partnership with a leading Tier 1 supplier to the development of Advanced Driver Assistance Systems (ADAS) solutions. • 2023: The Company further expanded its global autonomous driving footprint by obtaining autonomous driving permits in the UAE and Singapore. The Company commenced fare-charging services of its robobus in Guangzhou, China, and continued its scalable operation of robosweeper for city sanitation services. • 2024: The Company successfully launched mass production of the ADAS solutions co-developed with the Tier 1 supplier. The solution is deployed on Cherry’s Exeed Sterra ES and ET models. The Company also launched a more compact robosweeper featuring a 400-liter tank capacity, which further enhances the Company’s robosweeper lineup. The Company has now deployed autonomous driving vehicles and conducted autonomous driving R&D, tests and operations in over 30 cities of 7 countries around the world and has operated a self-driving robotaxi fleet for more than 1,700 days. The Company has 420 issued patents and 611 pending patent applications globally as of June 30, 2024. The Company’s issued patents and patent applications cover its algorithms, embedded software, and a broad range of system level and component level aspects of autonomous technology. Securities and Exchange Commission July 30, 2024 Page 4 Public Representations. The Company has never held itself out to the public (or to investors) as an investment company or as being primarily engaged in the business of investing, reinvestment or trading in securities. The Company and its subsidiaries have been organized for the purpose of, and since inception, the Company has always stated that its business purpose is the development and implementation of autonomous driving technology. As noted in the Registration Statement, the Company holds itself out as a global leader and a first mover in the autonomous driving industry that has achieved many first-of-its-kind milestones. Similarly, the Company’s description of itself on its website states that: • The Company is a leading, commercial-stage global company that develops autonomous driving technologies from Level 2 to Level 4. • The Company is the only tech company in the world that holds autonomous driving permits in China, the US, the UAE and Singapore. • The Company is conducting autonomous driving R&D, tests and operations in over 30 cities of 7 countries around the world. • The Company has operated a self-driving fleet for more than 1,600 days. The Company regularly provides press release updates regarding developments, achievements and key milestones related to the Company’s autonomous driving business. Officers and Employees. The business activities of the officers and employees of the Company and its subsidiaries are and have historically been devoted almost exclusively to its business of autonomous driving technology. As of June 30, 2024, the Company (including its subsidiaries) had 2,227 employees, approximately 91% of whom are research and development staff, including engineers and autonomous driving scientists and data processing staff. As described in further detail in the Company’s response to prior comment 18, three employees of the Company and its subsidiaries are responsible for managing the capital preservation investments of the Company and its subsidiaries. Two of such employees devote approximately 10% of their time to such activities on average, and the other employee devotes approximately 5% of such employee’s time to such activities. Sources of the Company’s Income For the fiscal year ended December 31, 2023 and the six months ended June 30, 2024 (the most recent fiscal period for which financial information is available), the Company had total revenue of approximately RMB402 million and RMB150 million, total expense of approximately RMB1,944 million and RMB844 million, and a net operating loss of approximately RMB1,566 million and RMB699 million, respectively. The Company’s net income derived from its investment in securities for the fiscal year ended December 31, 2023 and the six months ended June 30, 2024 was approximately RMB175 million and RMB94 million. The Company’s income derived from its investment in securities consists of interest income and fair value changes of financial assets at fair value through profit or loss, and is not recorded in the total revenue according to accounting principles. Securities and Exchange Commission July 30, 2024 Page 5 For the fiscal year ended December 31, 2023 and the six months ended June 30, 2024, all of the Company’s expenses were related to the Company’s primary business of autonomous driving. For the fiscal year ended December 31, 2023 and the six months ended June 30, 2024, none of the Company’s expenses related to its investments in securities. The Company is a rapidly growing early stage company engaged in extensive research and development activities in the emerging field of autonomous driving. The nature of the Company’s revenue and expenses clearly demonstrates that the Company is, and would be understood by investors to be, primarily engaged in the business of autonomous driving. The Company’s commercial success is based on the successful development, implementation and operation of autonomous driving technology, and is independent of any interest generated by the Company’s capital preservation investments. It is anticipated that investors in the Company will receive a return based on the revenue generated by the Company’s autonomous driving business and not based primarily on any interest earned on the Company’s investment securities holdings. No reasonable investor would invest in the Company for the purpose of obtaining exposure to the Company’s investment securities holdings, which (as discussed in further detail below) are almost exclusively capital preservation investments intended to preserve the value of the Company’s capital for its use in the Company’s autonomous driving business. Rather, the rationale for an investor to invest in the Company would be to invest in a leading innovator in autonomous driving technology. Nature of Present Assets See the Company’s response to prior comment 11 below for a further discussion of the nature of the Company’s present assets. The Company respectfully submits that the application of the Tonopah Factors evidences that the Company is not engaged primarily in the business of investing, reinvesting, or trading in securities but is engaged primarily in the business of autonomous driving. B. Prior comment 11 – Prior comment 21 requested a detailed legal analysis regarding whether the Company and each of its subsidiaries meet the definition of an “investment company” under Section 3(a)(1)(C) of the Act. The Company’s response did not address its subsidiaries. Accordingly, we are reissuing prior comment 21 with respect to the Company’s subsidiaries. Attached hereto as Appendix A is an organization chart showing each of the Company’s subsidiaries. Attached hereto as Appendix B is an analysis of the Company (on a consolidated and unconsolidated basis) and each of its subsidiaries under the definition of “investment company” under Section 3(a)(1)(C), which defines “investment company” to include an issuer that “is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 per centum of the value of such issuer’s total assets (exclusive of Government securities and cash items) on an unconsolidated basis.” Securities and Exchange Commission July 30, 2024 Page 6 As set forth in further detail on Appendix B, as of June 30, 2024 (the most recent quarter end for which financial information is available), based solely on balance sheet assets, on an unconsolidated basis, approximately 47% of the Company’s total assets (exclusive of Government securities and cash items) consisted of investment securities (treating all of the Company’s time deposit holdings as investment securities). On a consolidated basis, based solely on balance sheet assets, as of June 30, 2024, approximately 69% of the Company’s total assets (exclusive of Government securities and cash items) consisted of investment securities (treating all of the Company’s time deposit holdings as investment securities).2 Although the Company fails to meet the 40% test under Section 3(a)(1)(C) based solely on balance sheet assets, the Company nonetheless does not meet the definition of investment company under the Act, by operation of Section 3(b)(1) of the Act. Section 3(b)(1) excludes from the definition of investment company “any issuer primarily engaged, directly or through a wholly-owned subsidiary or subsidiaries, in a business or businesses other than that of investing, reinvesting, owning, holding or trading in securities.” The determination of whether a company is an investment company under Section 3(b)(1) focuses on the company’s “primary” business engagement. Consequently, determination under Section 3(b)(1) of the Act that an issuer is actually engaged primarily in a business or businesses other than investing, reinvesting, owning, holding or trading in securities should be controlling, and such a determination requires close consideration of a company’s “total activities of all sorts.”3 2 The foregoing analysis reflects the Company’s balance sheet assets. However, the intellectual property of the Company and its subsidiaries that forms the heart of the Company’s autonomous driving business is not reflected on its balance sheet but has significant value. The Company has obtained an independent third party valuation of such intellectual property. Such valuation and the composition of the Company’s assets inclusive of such independently valued intellectual property is discussed below under “—Independently Valued Intellectual Property.” 3 Siimes v. Giordano, Civ. No. 92-32, 1992 U.S. Dist. LEXIS 16235 (D.N.J. Oct. 8, 19