REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For |
the fiscal year ended |
or |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For |
the transition period from |
or |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of Each Class |
Trading Symbol |
Name of Each Exchange on Which Registered | ||
American depositary shares (each American depositary share representing eight Class A ordinary shares, par value US$0.000000625 per share ) |
BIDU |
The Nasdaq Stock Market LLC (The Nasdaq Global Select Market) | ||
Class A ordinary shares, par value US$0.000000625 per share * |
The Nasdaq Stock Market LLC (The Nasdaq Global Select Market) | |||
Class A ordinary shares, par value US$0.000000625 per share |
9888 |
The Stock Exchange of Hong Kong Limited |
* | Not for trading, but only in connection with the listing on The Nasdaq Global Select Market of American depositary shares. |
Accelerated filer ☐ | Non-accelerated filer ☐ |
Emerging growth company |
International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
1 |
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2 |
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2 |
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Item 1. |
2 |
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Item 2. |
3 |
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Item 3. |
3 |
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Item 4. |
85 |
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Item 4A. |
140 |
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Item 5. |
140 |
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Item 6. |
175 |
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Item 7. |
188 |
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Item 8. |
190 |
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Item 9. |
192 |
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Item 10. |
193 |
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Item 11. |
201 |
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Item 12. |
203 |
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207 |
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Item 13. |
207 |
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Item 14. |
207 |
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Item 15. |
207 |
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Item 16A. |
208 |
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Item 16B. |
208 |
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Item 16C. |
208 |
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Item 16D. |
208 |
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Item 16E. |
208 |
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Item 16F. |
209 |
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Item 16G. |
209 |
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Item 16H. |
209 |
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Item 16I. |
209 |
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210 |
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Item 17. |
210 |
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Item 18. |
210 |
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Item 19. |
210 |
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222 |
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F-1 |
• | “ADSs” refers to our American depositary shares, each ADSs representing eight Class A ordinary shares; |
• | “China” or “PRC” refers to the People’s Republic of China, and solely for the purpose of this annual report, excluding Taiwan, Hong Kong and Macau; |
• | “Class A ordinary shares” refers to Class A ordinary shares of the share capital of our company with a par value of US$0.000000625 each, conferring a holder of a Class A ordinary share one vote per share on all matters submitted for voting at general meetings of our company; |
• | “Class B ordinary shares” refers to Class B ordinary shares of the share capital of our company with a par value of US$0.000000625 each, conferring weighted voting rights in our company such that a holder of a Class B ordinary share is entitled to 10 votes per share on all matters submitted for voting at general meetings of our company; |
• | “DAU”, or daily active user, refers to the average number of mobile devices that launched our mobile apps at least once during a day within a specific period; |
• | “Hong Kong” or “HK” or “Hong Kong S.A.R.” are to the Hong Kong Special Administrative Region of the PRC; |
• | “Hong Kong Listing Rules” are to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended or supplemented from time to time; |
• | “Hong Kong Share Registrar” are to Computershare Hong Kong Investor Services Limited; |
• | “Hong Kong Stock Exchange” are to The Stock Exchange of Hong Kong Limited; |
• | “Main Board” are to the stock market (excluding the option market) operated by the Hong Kong Stock Exchange which is independent from and operated in parallel with the Growth Enterprise Market of the Hong Kong Stock Exchange; |
• | “MAU”, or monthly active user, refers to the number of mobile devices that launched our mobile apps during a given month; |
• | “our company” refers to Baidu, Inc.; |
• | “RMB” or “Renminbi” refers to the legal currency of China; |
• | “SFO” refers to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended or supplemented from time to time; |
• | “shares” or “ordinary shares” refers to our ordinary shares, which include both Class A ordinary shares and Class B ordinary shares; |
• | “user traffic” or “traffic” refers generally to page views of a website, with “page views” measuring the number of web pages viewed by internet users over a specified period of time except that multiple page views of the same page viewed by the same user on the same day are counted only once; |
• | “U.S. GAAP” refers to generally accepted accounting principles in the United States; |
• | “we,” “us,” “our,” or “Baidu” refers to Baidu, Inc., its subsidiaries, and, in the context of describing our operations and consolidated financial information, our consolidated affiliated entities in China, including, but not limited to, Beijing Baidu Netcom Science Technology Co., Ltd., or Baidu Netcom; |
• | “iQIYI” refers to iQIYI, Inc., a company incorporated in the Cayman Islands listed on Nasdaq under the symbol “IQ” and one of our subsidiaries; |
• | “$,” “dollars,” “US$” or “U.S. dollars” refers to the legal currency of the United States; and |
• | all discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding. |
• | our operations and business prospects; |
• | our business and operating strategies and our ability to implement such strategies; |
• | our ability to develop and manage our operations and business; |
• | competition for, among other things, capital, technology and skilled personnel; |
• | our ability to control costs; |
• | our ability to identify and conduct investments and acquisitions, obtain relevant regulatory approvals from governmental authorities, as well as integrate acquired target(s); |
• | changes to regulatory and operating conditions in the industry and geographical markets in which we operate; |
• | our dividend policy; and |
• | all other risks and uncertainties described in “Item 3.D. Key Information—Risk Factors.” |
Item 1. |
Identity of Directors, Senior Management and Advisers |
Item 2. |
Offer Statistics and Expected Timetable |
Item 3. |
Key Information |
• | receive the economic benefits that could potentially be significant to our consolidated affiliated entities in consideration for the services provided by our subsidiaries; |
• | exercise effective control over our consolidated affiliated entities; and |
• | hold an exclusive option to purchase all or part of the equity interests in our consolidated affiliated entities when and to the extent permitted by PRC law. |
A. |
Selected Financial Data |
Year Ended December 31, |
||||||||||||||||||||||||
2017 (1) |
2018 (2) |
2019 (2) |
2020 (2) |
2021 (2) |
||||||||||||||||||||
RMB |
RMB |
RMB |
RMB |
RMB |
US$ |
|||||||||||||||||||
(In millions, except per share and per ADS data) |
||||||||||||||||||||||||
Consolidated Statements of Comprehensive Income Data: |
||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Online marketing services |
73,146 | 81,912 | 78,093 | 72,840 | 80,695 | 12,663 | ||||||||||||||||||
Others |
11,663 | 20,365 | 29,320 | 34,234 | 43,798 | 6,873 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total revenues |
84,809 | 102,277 | 107,413 | 107,074 | 124,493 | 19,536 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating costs and expenses: |
||||||||||||||||||||||||
Cost of revenues |
43,062 | 51,744 | 62,850 | 55,158 | 64,314 | 10,092 | ||||||||||||||||||
Selling, general and administrative |
13,128 | 19,231 | 19,910 | 18,063 | 24,723 | 3,879 | ||||||||||||||||||
Research and development |
12,928 | 15,772 | 18,346 | 19,513 | 24,938 | 3,914 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total operating costs and expenses |
69,118 | 86,747 | 101,106 | 92,734 | 113,975 | 17,885 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating profit |
15,691 | 15,530 | 6,307 | 14,340 | 10,518 | 1,651 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other income (loss), net |
5,592 | 11,795 | (6,647 | ) | 8,750 | 260 | 40 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
21,283 | 27,325 | (340 | ) | 23,090 | 10,778 | 1,691 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income taxes |
2,995 | 4,743 | 1,948 | 4,064 | 3,187 | 500 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
18,288 | 22,582 | (2,288 | ) | 19,026 | 7,591 | 1,191 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Less: Net loss attributable to non-controlling interests |
(13 | ) | (4,991 | ) | (4,345 | ) | (3,446 | ) | (2,635 | ) | (414 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income attributable to Baidu, Inc. |
18,301 | 27,573 | 2,057 | 22,472 | 10,226 | 1,605 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | VAT is presented in cost of revenues rather than net against revenues in accordance with the legacy revenue accounting standard (ASC 605). |
(2) | VAT is presented as net against revenues rather than in cost of revenues in accordance with the new revenue accounting standard (ASC 606). |
As of December 31, |
||||||||||||||||||||||||
2017 |
2018 |
2019 |
2020 |
2021 |
||||||||||||||||||||
RMB |
RMB |
RMB |
RMB |
RMB |
US$ |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Consolidated Balance Sheets Data: |
||||||||||||||||||||||||
Cash and cash equivalents |
11,084 | 27,638 | 33,443 | 35,782 | 36,850 | 5,783 | ||||||||||||||||||
Restricted cash |
252 | 2,189 | 996 | 758 | 10,821 | 1,697 | ||||||||||||||||||
Short-term investments, net (1) |
89,381 | 111,626 | 112,924 | 126,402 | 143,243 | 22,478 | ||||||||||||||||||
Total assets (2) |
251,728 |
297,566 |
301,316 |
332,708 |
380,034 |
59,636 |
||||||||||||||||||
Short-term loans |
1,244 | 3,046 | 2,618 | 3,016 | 4,168 | 654 | ||||||||||||||||||
Long-term loans, current portion |
10 | 84 | 737 | 7,427 | 2 | — | ||||||||||||||||||
Long-term loans |
6,701 | 7,456 | 7,804 | — | 12,629 | 1,982 | ||||||||||||||||||
Notes payable, current portion |
6,500 | 6,871 | 5,219 | — | 10,505 | 1,648 | ||||||||||||||||||
Notes payable |
29,111 | 42,735 | 38,090 | 48,408 | 43,120 | 6,766 | ||||||||||||||||||
Convertible senior notes, current portion |
— | — | — | 4,752 | — | — | ||||||||||||||||||
Convertible senior notes |
— | 4,712 | 12,297 | 11,927 | 12,652 | 1,985 | ||||||||||||||||||
Total liabilities |
121,356 |
121,814 |
128,501 |
140,865 |
156,082 |
24,492 |
||||||||||||||||||
Total Baidu, Inc. shareholders’ equity |
115,346 |
162,897 |
163,599 |
182,696 |
211,459 |
33,183 |
(1) | We adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments 2016-13”) on January 1, 2020, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. |
(2) | We adopted ASU No. 2016-02: Leases Right-of-use non-current) for operating leases are presented on the face of the consolidated balance sheets as of December 31, 2019, 2020 and 2021, while the consolidated balance sheet data as of December 31, 2017 and 2018 have been prepared in accordance with ASC Topic 840, Leases |
Year Ended December 31, |
||||||||||||||||||||||||
2017 |
2018 |
2019 |
2020 |
2021 |
||||||||||||||||||||
RMB |
RMB |
RMB |
RMB |
RMB |
US$ |
|||||||||||||||||||
(In millions) |
||||||||||||||||||||||||
Consolidated Cash Flow Data: |
||||||||||||||||||||||||
Net cash provided by operating activities |
32,828 | 35,967 | 28,458 | 24,200 | 20,122 | 3,158 | ||||||||||||||||||
Net cash used in investing activities |
(76,949 | ) | (34,460 | ) | (19,974 | ) | (27,552 | ) | (31,444 | ) | (4,934 | ) | ||||||||||||
Net cash provided by (used in) financing activities |
44,557 | 15,082 | (3,873 | ) | 5,665 | 23,396 | 3,671 | |||||||||||||||||
Net increase in cash, cash equivalents and restricted cash |
120 | 18,491 | 4,612 | 2,101 | 11,131 | 1,747 |
For the Year Ended December 31, 2021 |
||||||||||||||||||||
Baidu, Inc. |
Subsidiaries |
Consolidated Affiliated Entities and their subsidiaries |
Eliminations |
Consolidated Total |
||||||||||||||||
RMB |
||||||||||||||||||||
(In millions) |
||||||||||||||||||||
Revenue |
— | 83,428 | 61,380 | (20,315 | ) | 124,493 | ||||||||||||||
Net (loss) income |
(2,245 | ) | 10,082 | (220 | ) | (26 | ) | 7,591 |
For the Year Ended December 31, 2020 |
||||||||||||||||||||
Baidu, Inc. |
Subsidiaries |
Consolidated Affiliated Entities and their subsidiaries |
Eliminations |
Consolidated Total |
||||||||||||||||
RMB |
||||||||||||||||||||
(In millions) |
||||||||||||||||||||
Revenue |
— | 69,425 | 52,666 | (15,017 | ) | 107,074 | ||||||||||||||
Net (loss) income |
(2,082 | ) | 19,083 | 2,091 | (66 | ) | 19,026 |
For the Year Ended December 31, 2019 |
||||||||||||||||||||
Baidu, Inc. |
Subsidiaries |
Consolidated Affiliated Entities and their subsidiaries |
Eliminations |
Consolidated Total |
||||||||||||||||
RMB |
||||||||||||||||||||
(In millions) |
||||||||||||||||||||
Revenue |
— | 72,172 | 51,988 | (16,747 | ) | 107,413 | ||||||||||||||
Net (loss) income |
(1,530 | ) | 2,228 | (2,950 | ) | (36 | ) | (2,288 | ) |
As of December 31, 2021 |
||||||||||||||||||||
Baidu, Inc. |
Subsidiaries |
Consolidated Affiliated Entities and their subsidiaries |
Eliminations |
Consolidated Total |
||||||||||||||||
RMB |
||||||||||||||||||||
(In millions) |
||||||||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
11,448 | 22,523 | 2,879 | — | 36,850 | |||||||||||||||
Short-term investments, net |
6,499 | 133,758 | 2,986 | — | 143,243 | |||||||||||||||
Accounts receivable, net |
— | 2,491 | 7,490 | — | 9,981 | |||||||||||||||
Others |
61 | 15,106 | 8,074 | — | 23,241 | |||||||||||||||
Total current assets |
18,008 |
173,878 |
21,429 |
— |
213,315 |
|||||||||||||||
Fixed assets, net |
199 | 13,923 | 8,905 | — | 23,027 | |||||||||||||||
Intangible assets, net |
— | 75 | 1,614 | — | 1,689 | |||||||||||||||
Licensed copyrights, net |
— | 4,969 | 2,289 | — | 7,258 | |||||||||||||||
Produced content, net |
— | 525 | 10,426 | — | 10,951 | |||||||||||||||
Long-term investments, net |
— | 44,334 | 22,998 | — | 67,332 | |||||||||||||||
Investments in subsidiaries and consolidated affiliated entities and their subsidiaries (1) |
13,014 | 24,096 | 106 | (37,216 | ) | — | ||||||||||||||
Operating lease right-of-use |
— | 4,989 | 7,076 | — | 12,065 | |||||||||||||||
Others |
— | 33,700 | 10,697 | — | 44,397 | |||||||||||||||
Total non-current assets |
13,213 |
126,611 |
64,111 |
(37,216 |
) |
166,719 |
||||||||||||||
Amounts due from the entities within Baidu (2) |
6,116 |
22,516 |
— |
(28,632 |
) |
— |
||||||||||||||
Total assets |
37,337 |
323,005 |
85,540 |
(65,848 |
) |
380,034 |
||||||||||||||
Liabilities |
||||||||||||||||||||
Accounts payable and accrued liabilities |
712 | 22,320 | 18,352 | — | 41,384 | |||||||||||||||
Customer deposits and deferred revenue |
— | 7,656 | 6,050 | — | 13,706 | |||||||||||||||
Operating lease liabilities |
— | 243 | 2,619 | — | 2,862 | |||||||||||||||
Others |
10,450 | 2,515 | 3,571 | — | 16,536 | |||||||||||||||
Total current liabilities |
11,162 |
32,734 |
30,592 |
— |
74,488 |
|||||||||||||||
Operating lease liabilities |
— | 316 | 5,253 | — | 5,569 | |||||||||||||||
Others |
55,748 | 19,244 | 1,033 | — | 76,025 | |||||||||||||||
Total non-current liabilities |
55,748 |
19,560 |
6,286 |
— |
81,594 |
|||||||||||||||
Amounts due to the entities within Baidu (2) |
— |
— |
28,632 |
(28,632 |
) |
— |
||||||||||||||
Total liabilities |
66,910 |
52,294 |
65,510 |
(28,632 |
) |
156,082 |
As of December 31, 2020 |
||||||||||||||||||||
Baidu, Inc. |
Subsidiaries |
Consolidated Affiliated Entities and their subsidiaries |
Eliminations |
Consolidated Total |
||||||||||||||||
RMB |
||||||||||||||||||||
(In millions) |
||||||||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
4,079 | 29,355 | 2,348 | — | 35,782 | |||||||||||||||
Short-term investments, net |
— | 119,472 | 6,930 | — | 126,402 | |||||||||||||||
Accounts receivable, net |
— | 2,517 | 6,151 | — | 8,668 | |||||||||||||||
Others |
78 | 3,852 | 8,560 | — | 12,490 | |||||||||||||||
Total current assets |
4,157 |
155,196 |
23,989 |
— |
183,342 |
|||||||||||||||
Fixed assets, net |
192 | 12,338 | 4,978 | — | 17,508 | |||||||||||||||
Intangible assets, net |
— | 523 | 1,499 | — | 2,022 | |||||||||||||||
Licensed copyrights, net |
— | 5,442 | 993 | — | 6,435 | |||||||||||||||
Produced content, net |
— | 426 | 6,130 | — | 6,556 | |||||||||||||||
Long-term investments, net |
— | 57,141 | 19,092 | — | 76,233 | |||||||||||||||
Investments in subsidiaries and consolidated affiliated entities and their subsidiaries (1) |
8,471 | 22,051 | 1,615 | (32,137 | ) | — | ||||||||||||||
Operating lease right-of-use |
— | 3,344 | 6,460 | — | 9,804 | |||||||||||||||
Others |
— | 23,091 | 7,717 | — | 30,808 | |||||||||||||||
Total non-current assets |
8,663 |
124,356 |
48,484 |
(32,137 |
) |
149,366 |
||||||||||||||
Amounts due from the entities within Baidu (2) |
— |
23,446 |
— |
(23,446 |
) |
— |
||||||||||||||
Total assets |
12,820 |
302,998 |
72,473 |
(55,583 |
) |
332,708 |
||||||||||||||
Liabilities |
||||||||||||||||||||
Accounts payable and accrued liabilities |
649 | 21,704 | 14,363 | — | 36,716 | |||||||||||||||
Customer deposits and deferred revenue |
— | 6,635 | 5,991 | — | 12,626 | |||||||||||||||
Operating lease liabilities |
— | 298 | 2,068 | — | 2,366 | |||||||||||||||
Others |
6,453 | 7,595 | 2,629 | — | 16,677 | |||||||||||||||
Total current liabilities |
7,102 |
36,232 |
25,051 |
— |
68,385 |
|||||||||||||||
Operating lease liabilities |
— | 317 | 4,376 | — | 4,693 | |||||||||||||||
Others |
48,408 | 18,236 | 1,143 | — | 67,787 | |||||||||||||||
Total non-current liabilities |
48,408 |
18,553 |
5,519 |
— |
72,480 |
|||||||||||||||
Amounts due to the entities within Baidu (2) |
3,854 |
— |
19,592 |
(23,446 |
) |
— |
||||||||||||||
Total liabilities |
59,364 |
54,785 |
50,162 |
(23,446 |
) |
140,865 |
(1) | It represents the elimination of the investment in our subsidiaries and consolidated affiliated entities and their subsidiaries. |
(2) | It represents the elimination of intercompany balances among Baidu, Inc., our subsidiaries and consolidated affiliated entities and their subsidiaries. |
For the Year Ended December 31, 2021 |
||||||||||||||||||||
Baidu, Inc. |
Subsidiaries |
Consolidated Affiliated Entities and their subsidiaries |
Eliminations |
Consolidated Total |
||||||||||||||||
RMB |
||||||||||||||||||||
(In millions) |
||||||||||||||||||||
Net cash (used in)/provided by operating activities |
(1,853 | ) | 17,717 | 4,121 | 137 | 20,122 | ||||||||||||||
Net cash (used in)/provided by investing activities |
(16,183 | ) | (24,971 | ) | (7,551 | ) | 17,261 | (31,444 | ) | |||||||||||
Net cash provided by/(used in) financing activities |
25,628 | 11,167 | 3,999 | (17,398 | ) | 23,396 |
For the Year Ended December 31, 2020 |
||||||||||||||||||||
Baidu, Inc. |
Subsidiaries |
Consolidated Affiliated Entities and their subsidiaries |
Eliminations |
Consolidated Total |
||||||||||||||||
RMB |
||||||||||||||||||||
(In millions) |
||||||||||||||||||||
Net cash (used in)/provided by operating activities |
(1,912 | ) | 21,346 | 4,616 | 150 | 24,200 | ||||||||||||||
Net cash provided by/(used in) investing activities |
5,921 | (26,396 | ) | (8,382 | ) | 1,305 | (27,552 | ) | ||||||||||||
Net cash (used in)/provided by financing activities |
(1,757 | ) | 5,018 | 3,859 | (1,455 | ) | 5,665 |
For the Year Ended December 31, 2019 |
||||||||||||||||||||
Baidu, Inc. |
Subsidiaries |
Consolidated Affiliated Entities and their subsidiaries |
Eliminations |
Consolidated Total |
||||||||||||||||
RMB |
||||||||||||||||||||
(In millions) |
||||||||||||||||||||
Net cash (used in)/provided by operating activities |
(1,720 | ) | 28,413 | 1,649 | 116 | 28,458 | ||||||||||||||
Net cash provided by/(used in) investing activities |
12,870 | (19,817 | ) | (4,829 | ) | (8,198 | ) | (19,974 | ) | |||||||||||
Net cash (used in)/provided by financing activities |
(11,494 | ) | (4,065 | ) | 3,604 | 8,082 | (3,873 | ) |
B. |
Capitalization and Indebtedness |
C. |
Reasons for the Offer and Use of Proceeds |
D. |
Risk Factors |
• | If we fail to retain existing customers or attract new customers for our online marketing services, our business, results of operations and growth prospects could be seriously harmed; |
• | Our business and results of operations could continue to be materially and adversely affected by the challenging macroeconomic environment impacting online marketing demand; |
• | Our business depends on a strong brand, and if we are unable to maintain and enhance our brand, our business and results of operations may be harmed; |
• | We face risks associated with our proposed acquisition of YY Live and its online live streaming business; |
• | We face significant competition and may suffer from loss of users and customers as a result; |
• | If our expansions into new businesses are not successful, our results of operation and growth prospects may be materially and adversely affected; |
• | We have experienced slowdowns and declines in our revenues, and we may sustain net loss from time to time, and we may experience downward pressure on our operating and profit margins in the future; |
• | Our business is subject to complex and evolving Chinese and international laws and regulations, including those regarding data privacy and cybersecurity. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, penalties, changes to our business practices, increased cost of operations, damages to our reputation and brand, or declines in user growth or engagement, or otherwise harm our business; and |
• | We have been and may again be subject to legal proceedings, claims and investigations and could be adversely impacted by unfavorable results of legal proceedings and investigations. |
• | Our company is a Cayman Islands holding company with no equity ownership in our consolidated affiliated entities and we conduct our operations in China through (i) our PRC subsidiaries and (ii) our consolidated affiliated entities with which we have maintained contractual arrangements. Investors in our Class A ordinary shares or the ADSs thus are not purchasing equity interest in our consolidated affiliated entities in China but instead are purchasing equity interest in a Cayman Islands holding company. If the PRC government deems that our contractual arrangements with our consolidated affiliated entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company in the Cayman Islands, our consolidated affiliated entities, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with our consolidated affiliated entities and, consequently, significantly affect the financial performance of our consolidated affiliated entities and our company as a group; |
• | Our contractual arrangements with our consolidated affiliated entities in China and the individual nominee shareholders may not be as effective in providing control over these entities as direct ownership; and |
• | We are in the process of registering the pledges of equity interests by nominee shareholders of some of our consolidated affiliated entities, and we may not be able to enforce the equity pledges against any third parties who acquire the equity interests in good faith in the relevant consolidated affiliated entities before the pledges are registered. |
• | Changes in China’s economic, political or social conditions or government policies could have a material and adverse effect on our business and results of operations; |
• | The approval of and/or filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing; |
• | Uncertainties with respect to the PRC legal system could adversely affect us; |
• | We may be adversely affected by the complexity, uncertainties and changes in PRC regulations of internet and related business and companies; |
• | The PRC government’s significant oversight over our business operation could result in a material adverse change in our operations and the value of our ADSs; |
• | Any failure or perceived failure by us to comply with the enacted Anti-Monopoly Guidelines for Internet Platforms and other anti-monopoly laws and regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have an adverse effect on our business, financial condition and results of operations; |
• | It may be difficult for overseas regulators to conduct investigation or collect evidence within China; |
• | The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections; and |
• | Our ADSs will be prohibited from trading in the United States under the HFCA Act in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or as early as 2023 if proposed changes to the law are enacted. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. |
• | The trading price of our ADSs and/or our Class A ordinary shares has been and is likely to continue to be volatile regardless of our operating performance; |
• | We adopt different practices as to certain matters as compared with many other companies primarily listed on the Hong Kong Stock Exchange; |
• | Substantial future sales or perceived potential sales of our Class A ordinary shares and/or ADSs in the public market could cause the price of our Class A ordinary shares and/or ADSs to decline; and |
• | The different characteristics of the capital markets in Hong Kong and the U.S. may negatively affect the trading prices of our Class A ordinary shares and/or ADSs. |
• | difficulties associated with developing and maintaining a larger user base with demographic characteristics attractive to online marketing customers and maintaining and increasing user engagement; |
• | increased competition and potential re-allocation of marketing budgets and downward pressure on online marketing prices, for example, resulting from an oversupply of advertising inventory released into the market; |
• | higher customer acquisition costs due in part to the limited experience of small to medium-sized enterprises, or SMEs, with the internet as a marketing channel or due to competition; |
• | decreased use of our search and paid click because search queries are increasingly being undertaken via voice-activated smart devices, apps, social media or other online platforms; |
• | ineffectiveness of our online marketing delivery, tracking and reporting systems; |
• | decreased use of internet or online marketing in China; and |
• | tightened regulatory environment in China’s internet and mobile internet space. |
• | the online live streaming business is based on a relatively new business model in a relatively new market in which user demand may change or decrease substantially; |
• | challenges in the integration of operations and systems and in managing the expanded operations of a larger and more complex company; |
• | challenges in achieving anticipated business opportunities and growth prospects from combining YY Live with the rest of our businesses; |
• | rules and measures governing online live streaming businesses and hosts are complex and evolving, and we may not be able to navigate such complex regulatory environment or to respond to future changes in regulatory environment in an effective and timely manner; |
• | we may face significant risks related to the content and communications on YY Live, as a majority of the communications on YY Live are conducted in real time, and we are unable to verify the sources of all information posted thereon or examine the content generated by users before it is posted; |
• | the revenue model for online live streaming may not remain effective, and we may not be able to retain existing users, attract new users, keep users engaged and attract more paying users; |
• | we may not be able to retain or attract popular talents such as performers, channel managers, professional game players, commentators and hosts for our live streaming platform or these talents may fail to draw fans or participants; and |
• | unanticipated additional costs and expenses resulting from integrating into our business additional personnel, operations, products, services, technology, internal controls and financial reporting responsibilities. |