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October 26, 2018
Yu Haifeng
Chairman of the Board and Chief Executive Officer
Puyi Inc.
42F, Pearl River Tower
No. 15 Zhujiang West Road, Zhujiang New Town, Tianhe, Guangzhou
Guangdong Province, People's Republic of China
Re: Puyi Inc.
Draft Registration Statement on Form F-1
Submitted October 1, 2018
CIK No. 0001750264
Dear Mr. Haifeng:
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.
Draft Registration Statement on Form F-1
General
1. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
Yu Haifeng
FirstName LastNameYu Haifeng
Puyi Inc.
Comapany NamePuyi Inc.
October 26, 2018
October 26, 2018 Page 2
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FirstName LastName
Prospectus Summary
Our Business, page 1
2. Please revise to provide context for your "significant growth in
recent years" by briefly
identifying the type(s) of, and reason(s) for, this growth (e.g. net
income, total assets,
additional business lines, etc.). Please further disclose that
revenues from your largest line
of business, wealth management services, decreased in FY 2018 compared
to FY 2017
and disclose the reason(s) for this change and whether you expect such
trends to persist in
FY 2019.
Risk Factors, page 10
3. We note your disclosure on page 6 that you elected to "opt in" to the
extended transition
period for complying with new or revised accounting standards under
Section 102(b)(1) of
the JOBS Act. Please revise to include a risk factor explaining that
this election allows
you to delay the adoption of new or revised accounting standards that
have different
effective dates for public and private companies until those standards
apply to private
companies, and as a result of this election, your financial statements
may not be
comparable to companies that comply with public company effective
dates. Include a
similar statement in your critical accounting policy disclosure.
Risks Related to Our Business and Industry, page 10
4. Please include a risk factor related to your reliance on a small
number of customers for a
majority of your revenues. In this regard we note your disclosure on
page 66 that five
companies were responsible for more than 70% of your net revenues in
each of your last
two fiscal years. Please further disclose whether you have entered
into any agreements
with these companies, briefly describing the material terms of these
agreements if so.
Risks Related to Our Corporate Structure
We rely on contractual arrangements with our variable interest entity..., page
25
5. We note that your contractual arrangements provide for the resolution
of disputes through
arbitration in China. Please revise your disclosure to state, if true,
that the arbitration
provisions relate to the claims arising out of the contractual
relationship created by the
VIE agreements, rather than claims under the US federal securities
laws and do not
prevent shareholders of the company from pursuing claims under the US
federal securities
laws.
Use of Proceeds, page 40
6. Please disclose the estimated net proceeds broken down into each
principal intended use
thereof pursuant to Item 4(a) of Part I of Form F-1 and Item 3(C) to
Part I of Form 20-F.
We also note your disclosure that you will only be able to use the
proceeds of this offering
in China through loans to your VIE and or loans or capital
contributions to your PRC
Yu Haifeng
FirstName LastNameYu Haifeng
Puyi Inc.
Comapany NamePuyi Inc.
October 26, 2018
October 26, 2018 Page 3
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FirstName LastName
subsidiaries. Please revise your second paragraph to distinguish
between the uses of
proceeds which may be accomplished by you or one of your offshore
intermediate holding
companies, and those uses of proceeds which would require loans or
capital contributions
to your affiliates in China. Please further disclose the maximum
amount that you will be
eligible to loan to your VIE and or PRC subsidiaries at the completion
of this offering, as
well as the maximum amount that you will be eligible to contribute as
capital to your PRC
subsidiaries. Please also disclose the status of and reasonably
expected timing for the
necessary PRC government registration, approval and filing
requirements related to the
foregoing.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
48
7. Please revise your MD&A to include a discussion of changes in
financial position for each
of the periods presented in your financial statements.
Major Factors Affecting Our Results of Operations
Product Mix, page 49
8. Please enhance your disclosure here and in your discussion of net
commission model vs.
gross commission model on page 52 to:
Describe in more detail the authoritative body or guidance requiring
privately raised
product providers in China to identify its funds products under
either a net commission
model or a gross commission model;
Describe, in more detail, when and how you determine which model to
use, including
the significant factors that influence your determination;
Include a enhanced discussion of the process for registering as
either net-commission
based funds or gross-commission based funds; and
Identify the third parties under the gross commission model.
9. Please enhance your disclosure to better describe the underlying
factors causing the shift
from the gross commission model to the net commission model and
whether you consider
this a trend that will continue in the future.In addition, please
include a more detailed
discussion of the impact this shift has had, and is expected to have,
on revenue, costs of
sales, other operating expenses and gross margin.
Operating Costs and Expenses, page 50
10. Please enhance your disclosure to describe the "directly sales model"
referred to on page
50 or revise as necessary to identify the appropriate sales model
(e.g., gross commission
model vs. net commission model).In addition, please explain in more
detail why the
increase in the number of privately raised funds distributed through
this model caused a
decrease in operating costs and expenses as a percentage of revenue,
address whether this
Yu Haifeng
FirstName LastNameYu Haifeng
Puyi Inc.
Comapany NamePuyi Inc.
October 26, 2018
October 26, 2018 Page 4
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FirstName LastName
represents a trend that will continue, and if so, the anticipated
impact on your financial
statements.
Key Components of Results of Operations
Net Revenues
Asset Management Services, page 53
11. Please revise to include a roll forward, for all periods presented, of
assets under
management (AUM) showing the beginning balance, gross inflows, gross
outflows,
market appreciation/deprecation, new funds established,
acquisitions/dispositions of
existing funds, etc., to arrive at an ending AUM balance. Please
disaggregate the AUM
roll forwards by the fund categories, type, products, etc., if
meaningful to understand your
business. Please identify significant trends or concentrations within
a particular fund
category and/or investor type to understand significant trends in your
AUM and discuss
the causal factors for the trends. Refer to Item 303(a)(3) of
Regulation SK.
12. We note your disclosure on page 57 that management fees are based on a
range up to 2%
of committed capital. For all periods presented, please quantify the
weighted average
management fee rate and, if relevant, include a discussion of any
significant trends in your
average fee rates.
Business, page 83
13. Please disclose the material terms of your engagement with seed
clients (e.g. the
incentives offered, whether and how incentives vary, the party
responsible for paying or
providing these incentives, frequency of any payment, term of any
engagement, etc.).
Please also disclose the retention rate of your seed clients and the
standard that you apply,
if any, to determine whether a seed client is still actively
collaborating as a part of your
sales model.
Our Services, page 88
14. Please revise to expand your disclosure regarding your products. In
particular, please
revise to include:
The number of clients of each of the products by type,
differentiating between seed
clients and other clients;
A more detailed description of the fees generated by type that
specifically states the
percentages or amounts charged; and
Information regarding the historical performance of your products.
Wealth Management Services
Products Distributed Offline-Privately Raised Products, page 90
15. Please revise to clarify what TMT stands for and to include enhanced
disclosure
describing PIPE transactions.
Yu Haifeng
Puyi Inc.
October 26, 2018
Page 5
16. We note your disclosure on page 91 that you distributed three QDII funds
since August
2017. Please revise to define QDII and to include a significantly
enhanced discussion of
the program, your involvement in the program, and any relevant
contractual arrangements,
risks, or regulations associated with QDII funds.
Sales and Marketing, page 94
17. We note each seed client brought in approximately four new clients on
average as of FYE
2018. Please also disclose the average number of new clients brought in
by your seed
clients as of FYE 2016 and FYE 2017 and make corresponding revisions to
your
Management's Discussion and Analysis of Financial Condition and Results
of Operations
for your last three fiscal years in order to demonstrate the change in
this metric. In this
regard we note your disclosure on page 48 that you expect that the
average number of new
clients brought in by each seed client will continue to be a key factor
affecting your
revenue growth. Please also disclose the maximum number of new clients
attributable to
a single seed client, or a similar metric of your choosing, in order to
demonstrate the
relative importance of certain seed clients to your business compared to
your average seed
clients.
You may contact William Schroeder, Staff Accountant, at (202) 551-3294
or Benjamin
Phippen, Staff Accountant, at (202) 551-3697 if you have questions regarding
comments on the
financial statements and related matters. Please contact Christopher Dunham,
Staff Attorney, at
(202) 551-3783 or Erin Purnell, Staff Attorney, at (202) 551-3454 with any
other questions.
Sincerely,
FirstName LastNameYu Haifeng
Division of
Corporation Finance
Comapany NamePuyi Inc.
Office of Financial
Services
October 26, 2018 Page 5
cc: Kefei Li, Esq.
FirstName LastName