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United States securities and exchange commission logo
September 16, 2021
Yanzhuan Zheng
Chief Financial Officer
Microvast Holdings, Inc.
12603 Southwest Freeway, Suite 210
Stafford, Texas 77477
Re: Microvast Holdings,
Inc.
Registration
Statement on Form S-1
Filed August 20,
2021
File No. 333-258978
Dear Mr. Zheng:
We have limited our review of your registration statement to
those issues we have
addressed in our 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 amending your registration
statement and providing the
requested information. 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 any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-1 filed August 20, 2021
Prospectus Cover Page, page ii
1. Please disclose
prominently on the prospectus cover page that you are not a Chinese
operating company but a
Delaware holding company with operations conducted by your
subsidiaries and
through contractual arrangements with a variable interest entity (VIE)
based in China and that
this structure involves unique risks to investors. Explain whether
the VIE structure is
used to replicate foreign investment in Chinese-based companies
where Chinese law
prohibits direct foreign investment in the operating companies, and
disclose that investors
may never directly 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 value of your
ordinary shares including that it could cause the value of such
Yanzhuan Zheng
FirstName LastNameYanzhuan Zheng
Microvast Holdings, Inc.
Comapany 16,
September NameMicrovast
2021 Holdings, Inc.
September
Page 2 16, 2021 Page 2
FirstName LastName
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.
2. Provide prominent disclosure about the 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 ordinary shares 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
the use of variable interest entities and 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.
3. Clearly disclose how you will refer to the holding company,
subsidiaries, and VIEs 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.
Prospectus Summary, page 3
4. Disclose clearly that the company uses a structure that involves a VIE
based in China and
what that entails and provide early in the summary a diagram of the
company s corporate
structure, including who the equity ownership interests are of each
entity. Describe all
contracts and arrangements through which you purport to obtain
economic rights and
exercise control that results in consolidation of the VIE s
operations and financial results
into your financial statements. Identify clearly the entity in which
investors are purchasing
their interest and the entity(ies) in which the company s operations
are conducted.
Describe the relevant contractual agreements between the entities and
how this type of
corporate structure may affect investors and the value of their
investment, including how
and why the contractual arrangements may be less effective than direct
ownership and that
the company may incur substantial costs to enforce the terms of the
arrangements.
Disclose the uncertainties regarding the status of the rights of the
Cayman Islands holding
company with respect to its contractual arrangements with the VIE, its
founders and
owners, and the challenges the company may face enforcing these
contractual agreements
due to uncertainties under Chinese law and jurisdictional limits.
5. 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.
Yanzhuan Zheng
FirstName LastNameYanzhuan Zheng
Microvast Holdings, Inc.
Comapany 16,
September NameMicrovast
2021 Holdings, Inc.
September
Page 3 16, 2021 Page 3
FirstName LastName
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 ordinary shares. 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.
6. Disclose each permission that you, your subsidiaries or your VIEs are
required to obtain
from Chinese authorities to operate and issue these securities to
foreign investors. State
whether you, your subsidiaries, or VIEs are covered by permissions
requirements from the
CSRC, CAC or any other entity that is required to approve of the VIE
s operations, and
state affirmatively whether you have received all requisite
permissions and whether any
permissions have been denied.
7. Provide a clear description of how cash is transferred through your
organization. Disclose
your intentions to distribute earnings or settle amounts owed under
the VIE agreements.
Quantify any cash flows and transfers of other assets by type that
have occurred between
the holding company, its subsidiaries, and consolidated VIEs, and
direction of transfer.
Quantify any dividends or distributions that a subsidiary or
consolidated VIE have 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 businesses,
including subsidiaries and/or consolidated VIEs, to the parent company
and U.S. investors
as well as the ability to settle amounts owed under the VIE
agreements.
8. We note that the consolidated VIEs constitute a material part of your
consolidated
financial statements. Please provide in tabular form condensed
consolidating schedule -
depicting the financial position, cash flows and results of operations
for the parent, the
consolidated variable interest entities, and any eliminating
adjustments separately - as of
the same dates and for the same periods for which audited consolidated
financial
statements are required. Highlight the financial statement information
related to the
variable interest entity and parent, so an investor may evaluate the
nature of assets held
by, and the operations of, entities apart from the variable interest
entity, which includes
the cash held and transferred among entities.
9. 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
Yanzhuan Zheng
Microvast Holdings, Inc.
September 16, 2021
Page 4
securities. If the PCAOB has been or is currently unable to inspect
your auditor, revise
your disclosure to so state.
Risk Factors, page 16
10. Revise your risk factors to acknowledge that if the PRC government
determines that the
contractual arrangements constituting part of your VIE structure do
not comply with PRC
regulations, or if these regulations change or are interpreted
differently in the future, your
shares may decline in value or become worthless if you are unable to
assert your
contractual control rights over the assets of your PRC subsidiaries
that conduct all or
substantially all of your operations.
11. 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 ordinary shares.
Also, given recent
statements by the Chinese government indicating an intent to exert
more oversight and
control over offerings that are conducted overseas and/or foreign
investment in
Chinabased 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 securities to significantly decline or be
worthless.
12. 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 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 have been issued by the CAC to date.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
Please contact Sherry Haywood, Staff Attorney at (202) 551-3345 or Asia
Timmons-
Pierce, Special Counsel at (202) 551-3754 with any questions.
FirstName LastNameYanzhuan Zheng Sincerely,
Comapany NameMicrovast Holdings, Inc.
Division of
Corporation Finance
September 16, 2021 Page 4 Office of
Manufacturing
FirstName LastName