SecProbe.io

United States securities and exchange commission logo
April 4, 2024
Junjie Zhang
Chief Executive Officer
Chagee Holdings Limited
15/F, IFS Building 2, Hongxing Road
Jinjiang District, Chengdu, Sichuan
People’s Republic of China, 610000
Re:Chagee Holdings Limited
Draft Registration Statement on Form F-1
Submitted March 6, 2024
CIK No. 0002013649
Dear Junjie Zhang:
            We have reviewed your draft registration statement and have the following comment(s).
            Please respond to this letter by providing the requested information and either submitting
an amended draft registration statement or publicly filing your registration statement on
EDGAR. If you do not believe a comment applies to your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your response.
            After reviewing the information you provide in response to this letter and your amended
draft registration statement or filed registration statement, we may have additional comments.
Draft Registration Statement on Form F-1 submitted March 6, 2024
Cover Page
1.Please consistently disclose on the cover page and throughout the prospectus whether you
intend to take advantage of any "controlled company" exemptions from exchange listing
requirements. In this regard, we note that you state in the prospectus summary, "If we rely
on these exemptions...," while you disclose on page 59 that "currently [you] intend to rely
on certain exemptions from corporate governance rules."
2.We note your statement that your structure, as a Cayman Islands holding company
conducting operations through subsidiaries located in China and elsewhere, involves
unique risks to investors. Please further 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 the securities you are registering for

 FirstName LastNameJunjie Zhang
 Comapany NameChagee Holdings Limited
 April 4, 2024 Page 2
 FirstName LastNameJunjie Zhang
Chagee Holdings Limited
April 4, 2024
Page 2
sale, including that it could cause the value of such securities to significantly decline or
become worthless. Provide a cross-reference to your detailed discussion of risks facing the
company and the offering as a result of this structure.
3.Where you discuss the legal and operational risks associated with being based in and
having a significant portion of your operations in China, revise to make clear whether
these risks could result in a material change in your operations and/or the value of the
securities you are registering for sale or could significantly limit or completely hinder
your ability to offer or continue to offer securities to investors and cause the value of such
securities to significantly decline or be worthless. Additionally, please elaborate on
how recent statements and regulatory actions by China's government "with respect to
matters such as cybersecurity, data privacy, antitrust and competition, foreign
investments, and overseas listings" have or may impact your ability to conduct your
business, accept foreign investments, or list on a U.S. or other foreign exchange. For
example, disclose, as you do elsewhere, that you have undergone cybersecurity review
with the Cyberspace Administration of China (CAC) and are required to undergo filing
procedures with the China Securities Regulatory Commission (CSRC) in connection with
this offering.
4.We note your disclosure that there were certain "cash transfers within [y]our group in
connection with the Restructuring." Please revise to quantify the amounts of any transfers,
dividends, or distributions that have been made to date between the holding company and
its subsidiaries and provide a cross-reference to the consolidated financial statements.
Additionally, discuss whether there are limitations on your ability to transfer cash between
you, your subsidiaries, or investors. Provide a cross-reference to your discussion of this
issue in the prospectus summary, summary risk factors, and risk factors sections, as well.
Also revise each discussion of cash transfers in the prospectus to clarify the identity of
"our company" and "us"; in this regard, we note that you define "our company" and "us"
as the holding company and subsidiaries, which does not provide adequate clarity in the
context of such discussion.
5.To the extent you have cash management policies that dictate how funds are transferred
between you, your subsidiaries, or investors, summarize the policies on your cover page
and in the prospectus summary, and disclose the source of such policies (e.g., whether
they are contractual in nature, pursuant to regulations, etc.); alternatively, state on the
cover page and in the prospectus summary that you have no such cash management
policies that dictate how funds are transferred. Provide a cross-reference on the cover page
to the discussion of this issue in the prospectus summary.
6.Please amend your disclosure to state here, in the prospectus summary, and in the
summary risk factors section, as you do on page 43, that to the extent cash in the
business is in the PRC/Hong Kong or a PRC/Hong Kong entity, the funds may not be
available to fund operations or for other use outside of the PRC/Hong Kong due to
interventions in or the imposition of restrictions and limitations on the ability of you
or your subsidiaries by the PRC government to transfer cash. On the cover page, provide

 FirstName LastNameJunjie Zhang
 Comapany NameChagee Holdings Limited
 April 4, 2024 Page 3
 FirstName LastNameJunjie Zhang
Chagee Holdings Limited
April 4, 2024
Page 3
cross-references to these other discussions. Additionally, given the inclusion of Hong
Kong in this statement on page 43, please confirm whether and to what extent you have
operations in Hong Kong, entities in your organizational structure organized under the
laws of Hong Kong, and/or directors and officers located in Hong Kong.
Prospectus Summary, page 1
7.Here and in the risk factor section, where you discuss Mr. Zhang's ownership of total
voting power following the offering, revise to disclose, if true, that he will have the ability
to determine the outcome of matters requiring shareholder approval.
Effectively Managed Teahouse Network, page 3
8.Please balance your discussion of net revenues and net income by discussing your
historical losses and working capital deficits. For example, we note that your net loss in
fiscal 2022 and net working capital deficit as of December 31, 2022 are not
acknowledged.
Market Opportunities, page 3
9.Please explain in this section how you define the "freshly-made tea drinks market" and
how it is distinguishable from other segments of the tea drinks industry in China.
Summary of Risk Factors
Risks Relating to Doing Business in China, page 5
10.Please revise your description of the significant regulatory, liquidity, and enforcement
risks associated with your corporate structure and operations in China to specifically
discuss risks arising from the legal system in China, including risks and uncertainties
regarding the enforcement of laws and that rules and regulations in China can change
quickly with little advance notice; and the risk that the Chinese government may intervene
or influence your operations at any time, or may exert more control over offerings
conducted overseas and/or foreign investment in China-based issuers, which could result
in a material change in your operations and/or the value of the securities you are
registering for sale. For each summary risk factor, please provide a cross-reference to the
relevant individual detailed risk factor heading. In this regard, we note that this section
cross-references only page numbers.
Recent Regulatory Developments
PRC CSRC Filing and Reporting Requirements, page 6
11.We note your disclosure that you are subject to filing requirements with the CSRC in
connection with this offering, pursuant to the Overseas Listing Filing Rules. Please revise
to include as penalties of non-compliance warnings, required revision of filings, and
fines.

 FirstName LastNameJunjie Zhang
 Comapany NameChagee Holdings Limited
 April 4, 2024 Page 4
 FirstName LastNameJunjie Zhang
Chagee Holdings Limited
April 4, 2024
Page 4
Implications of the Holding Foreign Companies Accountable Act, page 7
12.Where you discuss that trading in your securities may be prohibited if the PCAOB
determines that it cannot inspect or investigate completely your auditor for two
consecutive years, please revise to further disclose that as a result, an exchange may
determine to delist your securities. Additionally, please revise here, on the cover page, and
in your risk factors to reflect that the Holding Foreign Companies Accountable Act was
amended by the Consolidated Appropriations Act, 2023.
Permissions Required from the PRC Authorities for Our Operations and This Offering, page 8
13.Disclose each permission or approval that you or your subsidiaries are required to obtain
from Chinese authorities to operate your business and to offer the securities being
registered to foreign investors. State whether you or your subsidiaries are covered by
permissions requirements from any governmental agency, other than the CSRC and CSC,
that is required to approve your operations. State affirmatively whether you and your
subsidiaries have received all requisite permissions or approvals and whether any
permissions or approvals have been denied. Revise your statement that your PRC
subsidiaries "have obtained all material requisite licenses and permits...that are necessary
for their business operations" so that it is not qualified by materiality. Lastly, we note your
disclosure regarding consequences if you inadvertently conclude that any permission or
approval is not required. Expand this discussion to describe consequences to you and your
investors if you or your subsidiaries do not receive or maintain requisite permissions or
approvals or if applicable laws, regulations, or interpretations change and you are required
to obtain such permissions or approvals in the future.
14.Please clarify whether you have relied upon an opinion of counsel with respect to each
conclusion regarding permissions and approvals from Chinese authorities to operate your
business and to offer the securities being registered to foreign investors. For example, you
state that your PRC legal counsel has "advised [you]" with respect to the conclusion that
you are not required to obtain permissions and approvals aside from those disclosed, but it
is unclear whether this advice constitutes a formal opinion and whether you are relying on
counsel's opinion with respect to the affirmative conclusion that you "have obtained all
material requisite licenses and permits" from PRC regulatory authorities for your business
operations in China. If you are not relying upon an opinion of counsel with respect to any
such conclusions, state as much and explain why such an opinion was not
obtained. Further, revise to name your PRC counsel wherever they are referenced.
Our History and Corporate Structure, page 8
15.Revise the diagram of the company's corporate structure to identify clearly the entity in
which investors are purchasing their interest and the entity(ies) in which the company's
operations are conducted, as well as the entities/persons that own Chagee Holdings
Limited. Also relocate this section so that the diagram is provided early in the prospectus
summary. Additionally, please affirmatively state, if true, that you do not use a variable

 FirstName LastNameJunjie Zhang
 Comapany NameChagee Holdings Limited
 April 4, 2024 Page 5
 FirstName LastName
Junjie Zhang
Chagee Holdings Limited
April 4, 2024
Page 5
interest entity (VIE) structure. Finally, in appropriate places, including the diagram, please
disclose the identity of any wholly foreign-owned enterprises within your organization.
Cash Flows through Our Organization, page 9
16.We note your disclosure that there were certain "cash transfers within [y]our group"
during the year ended December 31, 2022 and the nine months ended September 30, 2023.
Please revise to quantify any cash flows and transfers of other assets by type that have
occurred between the holding company and its subsidiaries, and the direction of transfer.
Provide cross-references to the consolidated financial statements. Describe any
restrictions on foreign exchange and your ability to transfer cash between entities, across
borders, and to U.S. investors. Describe any restrictions and limitations on your ability to
distribute earnings from the company, including your subsidiaries, to the parent company
and U.S. investors.
Conventions which Apply to This Prospectus, page 11
17.Please tell us whether unfulfilled, cancelled, and/or returned orders, and value-added taxes
are included in the gross merchandise value (GMV) measure. If so, revise the description
to state as such and to include the unfulfilled, cancelled, and/or returned order amounts
and value-added tax amounts in total for periods presented wherever GMV is disclosed. In
addition, tell us the amounts of shipping charges included in the GMV for the periods
presented.
Our Summary Consolidated Financial and Operating Data
Key Operating Data, page 18
18.We note that certain of your performance metrics, such as same store GMV growth, take
into consideration your overseas locations, while others, such as average monthly GMV
per teahouse, do not. Please provide narrative disclosure highlighting this difference.
Additionally, where you present quantified performance metrics elsewhere in the
prospectus, including pages 2 and 95, revise to indicate which metrics include overseas
operations and which exclude them.
Risk Factors
Risks Relating to Our Business and Industry
Our limited operating history may not be indicative..., page 20
19.Please revise to acknowledge that the "rapid growth" referenced here was concentrated in
fiscal 2023 and identify any material factors that contributed to the pace of your expansion
in such period. In this regard, we note from page 105 that between commencing
operations in 2017 and December 31, 2022, 1,087 teahouses were opened, then in fiscal
2023 the number of teahouses more than tripled.

 FirstName LastNameJunjie Zhang
 Comapany NameChagee Holdings Limited
 April 4, 2024 Page 6
 FirstName LastName
Junjie Zhang
Chagee Holdings Limited
April 4, 2024
Page 6
We may not be successful in operating the company-owned and franchised..., page 24
20.You state here that you "directly manage" 129 franchised teahouses in addition to 39
company-owned teahouses, but this figure is not provided elsewhere in the filing. Please
revise throughout to consistently disclose that you manage a total of 168 teahouses,
encompassing both owned and franchised stores. Clarify whether operational data
presented as applicable to you, such as the number of employees disclosed on page 115,
takes company-operated, franchised teahouses into account.
Overall Tightening of the Labor Market..., page 36
21.You disclose on page 37 that you have not made full contributions to social insurance
system and other employee benefits for your employees. Please disclose the amounts not
contributed to date. Please tell us whether you have accrued for all liabilities related
to social insurance system and other employee benefits for all periods presented. If not,
tell us the amounts and periods for which you are under-accrued and why you have not
accrued for all your social insurance system and other employee benefits liabilities.
Risks Relating to Doing Business in China, page 39
22.Given the Chinese government’s significant oversight and discretion over the conduct and
operations of your business, please revise to describe any material impact that
intervention, influence, or control by the Chinese government has or may have on your
business or on the value of your securitie