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United States securities and exchange commission logo
October 6, 2021
Jack Kong
Chairman
Nano Labs Ltd
30th Floor Dikaiyinzuo
No. 29, East Jiefang Road
Hangzhou, Zhejiang
People's Republic of China
Re: Nano Labs Ltd
Confidential Draft
Registration Statement on Form F-1
Submitted September
9, 2021
File No. 377-05474
Dear Mr. Kong:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by 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 our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Nano Labs Ltd, F-1
Prospectus Cover Page, page i
1. Provide prominent
disclosure about legal and operational risks associated with being
based in or having the
majority of the company's operations in China. Your disclosure
should make clear
whether these risks could result in a material change in your operations
and/or the value of
your ADSs, or could significantly limit or completely hinder your
ability to offer or
continue to offer securities to investors and cause the value of such
securities to
significantly decline or be worthless. Your disclosure should address how
recent statements and
regulatory actions by China's government, such as those related to
Jack Kong
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Nano Labs LastNameJack Kong
Ltd
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data security or anti-monopoly concerns, has or may impact the
company's ability to
conduct its business, accept foreign investments, or list on an U.S.
or other foreign
exchange. Your prospectus summary should address, but not necessarily
be limited to, the
risks highlighted on the prospectus cover page.
2. Please disclose prominently on the prospectus cover page that you are
not a Chinese
operating company but a Cayman Islands holding company with operations
conducted by
your subsidiaries based in China and that this structure involves
unique risks to investors.
Disclose that investors may never directly hold equity interests in
the Chinese operating
company. Your disclosure should acknowledge, if true, that Chinese
regulatory
authorities could disallow this structure, which would likely result
in a material change in
your operations and/or value of your ADSs, including that it could
cause the value of such
securities to significantly decline or become worthless. Provide a
cross-reference to your
detailed discussion of risks facing the company and the offering as a
result of this
structure.
3. Clearly disclose how you will refer to the holding company and
subsidiaries when
providing the disclosure throughout the document so that it is clear
to investors which
entity the disclosure is referencing and which subsidiaries or
entities are conducting the
business operations. Refrain from using terms such as we or
our when describing
activities or functions of a subsidiary. Disclose clearly the entity
(including the domicile)
in which investors are purchasing their interest.
Prospectus Summary, page 1
4. In your summary of risk factors, disclose the risks that your
corporate structure and being
based in or having the majority of the company's operations in China
poses to investors.
In particular, describe the significant regulatory, liquidity, and
enforcement risks with
cross-references to the more detailed discussion of these risks in the
prospectus. For
example, specifically discuss risks arising from the legal system in
China, including risks
and uncertainties regarding the enforcement of laws and that rules and
regulations in
China can change quickly with little advance notice; and the risk that
the Chinese
government may intervene or influence your operations at any time, or
may exert more
control over offerings conducted overseas and/or foreign investment in
China-based
issuers, which could result in a material change in your operations
and/or the value of
your ADSs. Acknowledge any risks that any actions by the Chinese
government to exert
more oversight and control over offerings that are conducted overseas
and/or foreign
investment in China-based issuers could significantly limit or
completely hinder your
ability to offer or continue to offer securities to investors and
cause the value of such
securities to significantly decline or be worthless.
5. Disclose each permission that you or your subsidiaries are required to
obtain from Chinese
authorities to operate and issue these securities to foreign
investors. State whether you or
your subsidiaries are covered by permissions requirements from the
CSRC, CAC, or any
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other entity that is required to approve of operations, and state
affirmatively whether you
have received all requisite permissions and whether any permissions
have been denied.
6. Provide a clear description of how cash is transferred through your
organization. Disclose
your intentions to distribute earnings or settle amounts owed under
agreements. Quantify
any cash flows and transfers of other assets by type that have
occurred between the
holding company and its subsidiaries, and direction of transfer.
Quantify any dividends or
distributions that a subsidiary has made to the holding company and
which entity made
such transfer, and their tax consequences. Similarly, quantify
dividends or distributions
made to U.S. investors, the source, and their tax consequences.
Describe any restrictions
on foreign exchange and your ability to transfer cash between
entities, across borders, and
to U.S. investors. Describe any restrictions and limitations on your
ability to distribute
earnings from your business, including subsidiaries, to the parent
company and U.S.
investors, as well as the ability to settle amounts owed under
agreements.
7. Clearly disclose how you will refer to the holding company and
subsidiaries when
providing the disclosure throughout the document so that it is clear
to investors which
entity the disclosure is referencing and which subsidiaries or
entities are conducting the
business operations. Refrain from using terms such as "we" or "our"
when describing
activities or functions of a VIE. Disclose clearly the entity
(including the domicile) in
which investors are purchasing their interest.
8. Disclose that trading in your securities may be prohibited under the
Holding Foreign
Companies Accountable Act if the PCAOB determines that it cannot
inspect or fully
investigate your auditor, and that as a result an exchange may
determine to delist your
securities. If the PCAOB has been or is currently unable to inspect
your auditor, revise
your disclosure to so state.
Risk Factors, page 14
9. In light of recent events indicating greater oversight by the
Cyberspace Administration of
China over data security, particularly for companies seeking to list
on a foreign exchange,
please revise your disclosure (page 39-40) to explain how this
oversight impacts your
business and your offering and to what extent you believe that you are
compliant with the
regulations or policies that you have been issued by the CAC to date.
10. Given the Chinese government's significant oversight and discretion
over the conduct of
your business, please revise to separately highlight the risk that the
Chinese government
may intervene or influence your operations at any time, which could
result in a material
change in your operations and/or the value of your ADSs. Also, given
recent statements
by the Chinese government indicating tan intent to exert more
oversight and control over
offerings that are conducted overseas and/or foreign investment in
China-based issuers,
acknowledge the risk that any such action could significantly limit or
completely hinder
your ability to offer or continue to offer securities to investors and
cause the value of such
Jack Kong
FirstName
Nano Labs LastNameJack Kong
Ltd
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securities to significantly decline or be worthless.
ADS Holders may not be entitled to a jury trial, page 57
11. In this risk factor, you say that ADS holders waive the right to a
jury trial, including with
respect to claims under the federal securities laws. Your disclosure
on page 59 indicates
and ADS holders and the depositary may elect to have any claim settled
by arbitration.
Similarly, your disclosure on page 154 indicates that any lawsuit must
be brought in state
or federal court in New York. Please reconcile.
12. Regarding the waiver of jury trial, arbitration and choice of forum in
state or federal court
in New York, please revise to state clearly whether each provision
applies to claims
arising under the federal securities laws. In that regard, we note
that Section 27 of the
Exchange Act creates exclusive federal jurisdiction over all suits
brought to enforce any
duty or liability created by the Exchange Act or the rules and
regulations thereunder, and
Section 22 of the Securities Act creates concurrent jurisdiction for
federal and state courts
over all suits brought to enforce any duty or liability created by the
Securities Act or the
rules and regulations thereunder. If the provision applies to
Securities Act claims, please
also revise your prospectus to state that there is uncertainty as to
whether a court would
enforce such provision and that investors cannot waive compliance with
the federal
securities laws and the rules and regulations thereunder. If this
provision does not apply to
actions arising under the Securities Act or Exchange Act, please also
ensure that the
exclusive forum provision in the governing documents states this
clearly, or tell us how
you will inform investors in future filings that the provision does
not apply to any actions
arising under the Securities Act or Exchange Act.
Use of Proceeds, page 63
13. Please revise to describe in more detail the intended use of proceeds
referenced in the
second bullet. For example, do you intend to transition from the
fabless business model
described in this submission? Are the amount of proceeds you intend to
devote to this
purpose or will you require additional capital?
Board of Directors, page 124
14. Please revise to state clearly the home country practices on which you
intend to rely. In
this regard, we note the disclosure on page 53 that you intend to rely
on "some" of those
exemptions. Also, we note the disclosure on the prospectus cover page
that you will be a
"controlled company" following this offering. If so, please revise to
describe the
exemptions from corporate governance on which you will be entitled to
rely and the
related risks to investors.
Transactions with Certain Related Parties, page 128
15. Please revise to clarify the purpose of the borrowings from your
affiliates. Please also
update the disclosure in this section to be as of the most recent
practicable date.
Jack Kong
Nano Labs Ltd
October 6, 2021
Page 5
General
16. Provide more information on the certifications mentioned on Page 21, and
specifically,
whether you paid for the control certifications, or if they were acquired
via independent
third party inspection.
17. We note the disclosure that you are a foreign private issuer offering
voting securities in
the United States. Please tell us how you will determine whether more
than 50 percent of
its outstanding voting securities are owned of record by U.S. residents
for purposes of
satisfying the foreign private issuer definition.
You may contact Effie Simpson at 202-551-3346 or Jean Yu at 202-551-3305
if you have
questions regarding comments on the financial statements and related matters.
Please contact
Erin Donahue at 202-551-6001 or Geoffrey Kruczek at 202-551-3641 with any other
questions.
Sincerely,
FirstName LastNameJack Kong
Division of
Corporation Finance
Comapany NameNano Labs Ltd
Office of
Manufacturing
October 6, 2021 Page 5
cc: Dan Ouyang
FirstName LastName