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United States securities and exchange commission logo
June 5, 2020
Wenxiu Zhong
Chief Executive Officer
Baosheng Media Group Holdings Ltd
Room 901, Block B
Jinqiu International Building, No. 6 Zhichun Road
Haidian District, Beijing, China
Re: Baosheng Media
Group Holdings Ltd
Draft Registration
Statement on Form F-1
Submitted May 6,
2020
File No. 377-03156
Dear Ms. Zhong:
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 submitted May 6, 2020
Prospectus Cover Page, page 2
1. Please briefly describe
the "additional items of value" you will be paying to the
underwriters in
connection with this offering.
Our Growth Strategies, page 5
2. Here and throughout
your filing, you refer to the importance of "authorized agency
status." In an
appropriate place in your filing, please define this term, including the steps
you must take to become
an "authorized agency" for a particular media company.
Wenxiu Zhong
FirstNameMedia Group Holdings Ltd
Baosheng LastNameWenxiu Zhong
Comapany NameBaosheng Media Group Holdings Ltd
June 5, 2020
Page 2
June 5, 2020 Page 2
FirstName LastName
The Offering, page 12
3. Please include your underwriter warrants and underlying shares, listed
in your fee table, in
your offering summary.
Risk Factors, page 14
4. Please include a risk factor discussing the material risks to your
business associated with
cybersecurity issues. See the Commission Statement and Guidance on
Public Company
Cybersecurity Disclosures, as well as CF Disclosure Guidance: Topic
No. 2 for more
information.
"Limitations on the availability of data and our ability to analyze such data .
.. .", page 20
5. We note your disclosure that "there is no assurance that the
government will not adopt
legislation that prohibits or limits collection of data on the
Internet and the use of such
data, or that third parties will not bring lawsuits against the media
or us relating to internet
privacy and data collection." In an appropriate place in your filing,
please describe any
current or impending data privacy regulations that have had or will
have an impact on
your business, if known.
"If our advertisers delay in settlement of our accounts receivable or if we are
unable to issue
invoices to our advertisers . . .", page 21
6. We note your disclosure on page 21 that you get paid from some of your
advertisers only
after they have been issued the VAT invoices in relation to your
services. However, your
issuance of VAT invoices has been subject to the control of invoice
amount at the Horgos
tax bureau in 2018. On page 16, you disclose that you attributed the
substantial growth of
your gross accounts receivable partly to the temporary delay and
suspension of issuance of
tax invoices by the relevant government authority of Horgos since
April 2018, rendering
you being unable to invoice your advertisers for their advertising
spend, and effectively
lengthening the actual collection periods of the receivables due from
the affected
advertisers. Please disclose the reason(s) why the government
authority of
Horgos temporarily delayed and suspended the issuance of tax invoices.
Further, tell us
how and the timing of when you are able to factor this delay in
invoice and related
payment into your determination of the provision and related allowance
for doubtful
accounts receivable. Finally, please disclose in MD&A the impact to
your liquidity this
matter caused, especially as it relates to 2018. In this regard,
please discuss your reason
for $19.4 million of borrowings from third parties in 2018.
"Labor Contract Law and other labor-related laws in the PRC may adversely
affect our business
and our results of operations.", page 30
7. We note your disclosure that "[you] cannot assure [investors] that
[you] have complied or
will be able to comply with all labor-related law and regulations . .
.. including those
relating to obligations to make social insurance payments and
contribute to the housing
Wenxiu Zhong
FirstNameMedia Group Holdings Ltd
Baosheng LastNameWenxiu Zhong
Comapany NameBaosheng Media Group Holdings Ltd
June 5, 2020
Page 3
June 5, 2020 Page 3
FirstName LastName
provident fund." Please clarify why you do not currently know whether
you are in
compliance with the regulations. If you are not currently in
compliance with these
regulations, please affirmatively state the same, and disclose the
extent to which you are
liable for payments and any fines or penalties related to
non-compliance.
"Regulation and censorship of information disseminated through the Internet in
China may
adversely affect our business . . .", page 30
8. We note your disclosure that "[t]he PRC government has prohibited the
dissemination of
information through the Internet that it deems to be in violation of
PRC laws and
regulations," and "[i]t may be difficult to determine the type of
content that may result in
liability to [you]." Please enhance your disclosure to briefly
describe the steps you take, if
any, to ensure that your ad content does not violate these
regulations.
"You may have difficulty effecting service of legal process and enforcing
judgment against us
and our management.", page 36
9. We note your disclosure that shareholders may have difficulty serving
and enforcing
judgments against you. Please enhance this risk factor disclosure, or
provide additional
risk factor disclosure, detailing the other limitations on shareholder
rights, if any, due to
your status as an exempted Cayman Islands holding company with
substantially all of
your assets and some of the assets of your directors and executive
officers located in the
PRC. For example, please disclose any limitations related to obtaining
information
needed for shareholder investigations or litigation outside of the PRC
or otherwise with
respect to foreign entities.
"Recently introduced economic substance legislation of the Cayman Islands may
adversely
impact us or our operations.", page 42
10. We note your disclosure that you are not a "relevant entity" because
you are "an entity that
is tax resident outside the Cayman Islands." However, you disclose on
page 44 that you
have chosen to incorporate in the Cayman Islands due to, among other
things, a favorable
tax system. Please amend your disclosure to clarify what it means to
be "tax resident
outside the Cayman Islands," and explain how you satisfy this
requirement. Alternatively,
please revise your registration statement for consistency.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Our Service Categories, page 51
11. We note your disclosure here and throughout your registration
statement that you earn
rebates and incentives from media or their authorized agencies for
procuring advertisers to
place ads with them. We also note your disclosure on page 52 that
rebates and incentives
from publishers are "usually calculated with reference to the
advertising spend of the
advertisers and are closely correlated to the gross billing from
advertisers." Please explain
how you calculate rebates with reference to advertising spend, and
make conforming
Wenxiu Zhong
FirstNameMedia Group Holdings Ltd
Baosheng LastNameWenxiu Zhong
Comapany NameBaosheng Media Group Holdings Ltd
June 5, 2020
Page 4
June 5, 2020 Page 4
FirstName LastName
changes to the disclosure beginning on page 88 of your filing.
Factors Affecting Our Results of Operations and Trend Information, page 52
12. We note your disclosure that "[you] earn revenue mainly from (i)
rebates and incentives
from publishers for procuring advertisers to place ads with them . . .
and (ii) the net fees
from advertisers." Please briefly describe your other sources of
revenue.
Gross Billing and Media Costs, page 52
13. You define gross billing as "the actual dollar amount of advertising
spend of [y]our
advertisers, net of any rebates and discounts given to the
advertisers." Please clarify
whether the "rebates" excluded from net billing are those given by you
to advertisers,
those given by media to advertisers, or both. Also, throughout your
filing, please clearly
differentiate between the "rebates" you recognize as revenue and the
"rebates" given to
advertisers.
Results of Operations for the Years Ended December 31, 2019 and 2018, page 54
14. Please revise your discussion to quantify all significant factors
causing variances between
periods. For example, on page 55, you explain that the $5,786,546
increase in net rebates
and incentives earned from publishers was due to an increase of
$2,138,394 in revenues
generated by your top 5 customers, leaving $3,648,162 of the increase
not discussed.
Similarly, there is no quantification of the components of the
decrease in net fees earned
from advertisers due to less net fee-based contracts, versus the
effect of increasing media
costs due to competition. With respect to revenues broken out between
SEM and Non-
SEM services, you do not provide the reasons for the relative
increases. On page 57 you
disclose that selling expenses decreased by $39,388, which was
primarily due to a
decrease of $14,676 in business travel expenses which only comprises
37% of the change,
leaving 63% of the change unidentified, and you do not explain why
business travel
expenses decreased. In short, please ensure you provide a reason(s)
for each of the factors
cited in any material revenue or expense variation. Revise your
discussion here and
elsewhere in your document as necessary. Refer to Item 303(a) of
Regulation S-K and
MD&A Release No. 33-8350 for guidance.
Revenues, page 54
15. Please define "average billing per advertiser," including the relevant
time period for which
you measure this metric.
Operating Activities, page 60
16. We note your disclosure that you generally grant a credit term of up
to 180 days to
advertisers. On page 90, you disclose that media generally grants you
credit for up to 60
days for settlement of payments on acquisition of ad inventory on
behalf of your
advertisers. Please discuss in liquidity the effect of your grant of a
credit term of up to
Wenxiu Zhong
FirstNameMedia Group Holdings Ltd
Baosheng LastNameWenxiu Zhong
Comapany NameBaosheng Media Group Holdings Ltd
June 5, 2020
June 5, 2020 Page 5
Page 5
FirstName LastName
180 days to your advertisers, while you are granted credit only for up
to 60 days by media
for settlement of payments on the acquisition of ad inventory on
behalf of your
advertisers. In this regard, you may want to explain the interplay
between prepayments,
media deposits, and advertiser deposits on your liquidity in your
discussion, if relevant.
Charge Model Analysis, page 68
17. Please briefly describe the "further action[s] to become a qualified
lead for sale," and
define "qualified lead."
Display Advertising Market, page 70
18. Please briefly define "programmatic purchase."
Market Size Breakdown of Online Advertising Market by Media Type (China),
2014-2023E,
page 70
19. In your narrative disclosure, please briefly define each of the sub
categories of the online
advertising market listed in your table on page 70. In this regard, we
note that you
describe the search engine advertising market and the social media
advertising market, but
we were unable to find descriptions of the other sub categories listed
in the table.
Building our own network of KOLs to further develop our social marketing
services , page 82
20. We note your disclosure that "[you] intend to build [y]our own network
of KOLs across
multiple social media platforms with various target audiences to offer
a wide array of
choices for [y]our advertisers with diverse social marketing needs,"
and your discussion of
the key elements of your KOL-related development plan. Please enhance
your disclosure
to provide the estimated time frame for the development of your KOL
network.
As a related matter, we note your disclosure that "managing and
popularizing KOL
accounts will require upfront expenditure and ongoing operations
costs." Please disclose,
if you are able, an estimate of the upfront expenditure and ongoing
operations costs, and
when you expect to begin incurring these expenditures and costs.
Our Media, page 86
21. We note the following disclosure related to media deposits: "certain
media may require
their authorized agencies to place deposits as payment security and/or
to signify their
commitment in procuring certain minimum amount of ad inventory
purchases and/or
advertising spend. Certain media may also require deposits to be paid
before running
advertising campaigns of relevant advertisers, which typically will be
refunded following
completion of the campaign. From time to time we may pay such deposits
on behalf of our
advertisers for our own as well as our advertisers' ease of
administrative management. In
such cases, depending on the background of such advertisers and our
relationship with
them, we may or may not require our advertisers to place deposits to
us on a back-to-back
Wenxiu Zhong
FirstNameMedia Group Holdings Ltd
Baosheng LastNameWenxiu Zhong
Comapany NameBaosheng Media Group Holdings Ltd
June 5, 2020
Page 6
June 5, 2020 Page 6
FirstName LastName
basis." Please disclose whether and to what extent your current
agreements with media
companies require these deposits, and the circumstances under which
you typically pay
such deposits.
Payment Cycle, page 90
22. You disclose that "[f]or [y]our non-SEM services, given the variety of
types and nature of
media and service providers involved, credit terms granted to [you] by
these media (or
other advertising service providers) for settlement of payments on
acquisition of
advertising services and ad inventory are more diverse, which may
range from
prepayments to 180 days." Please disclose the typical or most common
credit terms
granted to you by media, if estimable. Please also disclose the
typical credit terms for
rebates and incentives from media (or their authorized agencies) in
your written contracts
with media.
Freezing Order, page 104
23. You disclose that, pursuant to the Freezing Order, as of April 21,
2020, the following
assets of Beijing Baosheng were frozen: 100% equity interest in Horgos
Baosheng; 100%
equity interest in Kashi Baosheng; cash in the amount of RMB
19,568,057 in a bank
account at Bank of Hangzhou; and cash in the amount of RMB 611,511 in
a bank account
at Bank of China. While you discuss on page 58 the impact of the
Freezing Order on your
liquidity with respect to Beijing Baosheng's bank accounts, it does
not appear that you
discuss the impact of the Freezing Order on your liquidity related to
the freezing of
Beijing Baosheng's equity interests in Horgos Baoshent and Kashi
Baosheng.
Considering your disclosure that "if a company's equity interest is
frozen by a court order,
the company's shareholders may be restricted in: (a) transferring or
pledging the equity
interest, (b) receiving dividends from the company," and that you rely
on dividends from
your subsidiaries to meet your cash needs, please amend your MD&A
disclosure to
discuss the impact of the frozen equity interests on your financial
condition and results of
operations.
History of Share Capital, page 120
24. Please provide the price and terms of consideration for each of the
issuances disclosed in
the table. See Item 10.A.6. of Form 20-F.
Revenue Recognition, page F-11
25. You disclose two sources of revenues from your operations, rebates and
incentives earned
from publishers and net fees earned from advertisers. The total of
such fees are broken
out between SEM services and Non-SEM services at the bottom of page
F-12. You
further disclose that that fees earned from advertisers are recognized
net of the cost of
purchase ad inventories and services because you are not a principal
in these arrangements
since you do obtain control of ad inventories or advertised services.
It is unclear to
Wenxiu Zhong
Baosheng Media Group Holdings Ltd
June 5, 2020
Page 7
us how you present rebates and incentives earned from publishers.
Please clarify how you
present rebates and incentives and explain to us your basis for net or
gross presentation.
Please also explain to us why such revenues are recognized at the
point of delivery as
opposed to some other time frame. In this regard, providing a
background description of
how rebates and incentives are earned from publishers may be helpful
to our
understanding your business, including the significant terms and
performance obligations
of your agreements with these advertisers and media. Please ensure
your
response describes for us:
the services promised to your customer(s);
whether the services represent one or multiple performance
obligations; and
when the performance obligation(s) is satisfied.
We may have further comment.
Note 2. Summary of Significant Accounting Policies
Value added taxes, page F-13
26. Were are unclear on your policy for VAT as disclosed in this footnote
and whether VAT
related cash flows are reflected in the statements of income. Please
review and consider
revising this footnote to clarify. In this regard, you may want to
clarify how gross receipts
and net revenues are reflected in the financial statement captions, if
at all.
Notes to Consolidated Financial Statements
Note 11. Equity
Cash dividends, page F-22
27. Please disclose in your discussion of liquidity how you plan to pay
dividends payable at
December 31, 2020. If you plan to pay them out of your proceeds from
this offering,
update your Use of Proceeds disclosure on page 45 for consistency. We
may have further
comment.
Exhibit Index, page II-8
28. We note that you intend to file the tax opinion of Dentons LLP as
Exhibit 8.1 to your
FirstName LastNameWenxiu Zhong
registration statement. If this is a short form tax opinion, please
confirm that you will
Comapany NameBaosheng Media Groupthe disclosure in the tax consequences section
of the
clearly disclose in your filing that Holdings Ltd
June 5,prospectus is the opinion of Dentons LLP.
2020 Page 7
FirstName LastName
Wenxiu Zhong
FirstNameMedia Group Holdings Ltd
Baosheng LastNameWenxiu Zhong
Comapany NameBaosheng Media Group Holdings Ltd
June 5, 2020
Page 8
June 5, 2020 Page 8
FirstName LastName
You may contact Patrick Kuhn at (202) 551-3308 or James Allegretto at
(202) 551-
3849 if you have questions regarding comments on the financial statements and
related
matters. Please contact Katherine Bagley at (202) 551-2545 or Lilyanna Peyser
at (202) 551-
3222 with any other questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services
cc: Ying Li