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            December 8, 2022

 

VIA EDGAR

 

Ms. Alyssa Wall 

Mr. Dietrich King
Ms. Nasreen Mohammed 

Mr. Joel Parker 

Division of Corporation Finance 

Office of Trade & Services 

Securities and Exchange Commission 

100 F Street, N.E. 

Washington, D.C. 20549

 

	Re:	Pinduoduo Inc.
		Form 20-F for the Fiscal Year Ended December 31, 2021
		Filed on April 25, 2022 (File No. 001-38591)

 

Dear Ms. Wall, Mr. King, Ms. Mohammed and Mr. Parker,

 

On behalf of our client, Pinduoduo Inc. (the “Company”), we set forth below the Company’s responses to the comments contained in the letter dated November 23, 2022 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2021 filed with the Commission on April 25, 2022 (the “2021 Form 20-F”). The Staff’s comments are repeated below in bold and are followed by the Company’s responses thereto. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the 2021 Form 20-F.

 

 

Division of Corporation Finance 

Office of Trade & Services 

Securities and Exchange Commission 

December 8, 2022 

Page 2

 

Form 20-F for the Year Ended December 31, 2021

 

Financial Information Related to Our VIE, page 9

 

1.

We acknowledge your response to comment 2 and note from your prior response that you did not present the WFOE column separately because you determined that Pinduoduo Inc. is the primary beneficiary, not the WFOE. While we do not conclude on your identification of the primary beneficiary, we believe that, in light of the fact that the WFOE receives the returns from the VIE, separate presentation of the WFOE in the consolidating schedule would provide investors with meaningful information about the economic relationship between the VIE and the WFOE, and the WFOE and its Cayman Islands parent, Pinduoduo Inc. Please revise to present the WFOE in a separate column, and present intercompany transactions in separate line items.

  

In response to the Staff’s comment, the Company respectfully proposes to revise the VIE financial schedules in its future Form 20-F filings per the blacklining shown below (with deletions shown in strikethrough and additions in underline), subject to such updates and adjustments to be made in connection with any material developments of the subject matter being disclosed:

 

“Financial Information Related to Our the VIE

 

The following table presents the condensed consolidating schedule of financial position for (i) Pinduoduo Inc., (ii) Hangzhou Weimi, a PRC subsidiary of the Company that has entered into contractual arrangements with the VIE, the VIE’s shareholders and, as applicable, their spouses, (iii) our the VIE and its subsidiaries, and (iv) the Company’s subsidiaries other than Hangzhou Weimi and other entities as of the dates or for the periods presented.

 

Selected Condensed Consolidated Statements of Income Information

 

		For the Year Ended December 31, 2021
		Pinduoduo Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated Total
		(RMB in millions)
Revenues			—				2,288,608				77,877,339				50,467,506				(36,683,514	)			93,949,939
Total costs and operating expenses			(649,171	)			(2,273,922	)			(62,977,072	)			(57,836,526	)			36,683,514				(87,053,177	)
Share of profit from subsidiaries, the VIE and subsidiaries of the VIE			9,579,738				—				—				—				(9,579,738	)			—
Net income / (loss)			7,768,670				43,461				15,169,180				(5,632,903	)			(9,579,738	)			7,768,670

 

 

Division of Corporation Finance 

Office of Trade & Services 

Securities and Exchange Commission 

December 8, 2022 

Page 3

 

		For the Year Ended December 31, 2020
		Pinduoduo  Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated Total
		(RMB in millions)
Revenues			—				1,101,213				51,351,861				21,614,790				(14,575,999	)			59,491,865
Total costs and operating expenses			(667,210	)			(1,332,403	)			(50,118,546	)			(31,330,030	)			14,575,999				(68,872,190	)
Share of profit from subsidiaries, the VIE and subsidiaries of the VIE			(5,996,484	)			—				—				—				5,996,484				—
Net (loss) / income			(7,179,742	)			(229,006	)			2,552,665				(8,320,143	)			5,996,484				(7,179,742	)

 

		For the Year Ended December 31, 2019
		Pinduoduo  Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated Total
		(RMB in millions)
Revenues			—				1,149,250				19,875,332				12,636,410				(3,519,106	)			30,141,886
Total costs and operating expenses			(670,724	)			(1,059,794	)			(24,309,403	)			(16,158,996	)			3,518,820				(38,680,097	)
Share of profit from subsidiaries, the VIE and subsidiaries of the VIE			(6,470,882	)			—				—				—				6,470,882				—
Net (loss) / income			(6,967,603	)			93,183				(3,611,656	)			(2,946,035	)			6,464,508				(6,967,603	)

  

Selected Condensed Consolidated Balance Sheets Information

 

		As of December 31, 2021
		Pinduoduo  Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated  Total
		(RMB in thousands)
Current assets:
Cash and cash equivalents			2,269				1,033				2,430,440				3,992,973				—				6,426,715
Restricted cash			—				—				59,402,079				215,177				—				59,617,256
Short-term investments			—				—				12,306,340				74,210,278				—				86,516,618
Amounts due from Group companies(1)			—				1,239,992				40,425,872				29,829,301				(71,495,165	)			—
Others			390				9,393				6,198,116				2,140,680				—				8,348,579
Total current assets			2,659				1,250,418				120,762,847				110,388,409				(71,495,165	)			160,909,168

 

 

Division of Corporation Finance

Office of Trade & Services

Securities and Exchange Commission

December 8, 2022

Page 4

 

		As of December 31, 2021
		Pinduoduo  Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated  Total
		(RMB in thousands)
Non-current assets:
Other non-current assets			—				—				5,300,938				11,125,028				—				16,425,966
Investments in subsidiaries, our the VIE and its subsidiaries(2)			86,252,341				2,000				—				1,579,309				(87,833,650	)			—
Others			674,057				9,690				2,581,092				609,745				—				3,874,584
Total non-current assets			86,926,398				11,690				7,882,030				13,314,082				(87,833,650	)			20,300,550
Total assets			86,929,057				1,262,108				128,644,877				123,702,491				(159,328,815	)			181,209,718
Current liabilities:
Payable to merchants			—				—				61,947,517				562,197				—				62,509,714
Merchant deposits			—				—				13,360,409				217,143				—				13,577,552
Amounts due to Group companies(1)			—				1,315,756				27,978,153				123,501,613				(152,795,522	)			—
Others			24,607				191,953				12,619,600				4,806,288				—				17,642,448
Total current liabilities			24,607				1,507,709				115,905,679				129,087,241				(152,795,522	)			93,729,714
Non-current liabilities
Convertible bonds			11,788,907				—				—				—				—				11,788,907
Others			996				75				324,285				251,194				—				576,550
Total non-current liabilities			11,789,903				75				324,285				251,194				—				12,365,457
Total liabilities			11,814,510				1,507,784				116,229,964				129,338,435				(152,795,522	)			106,095,171

 

		As of December 31, 2020
		Pinduoduo  Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated  Total
		(RMB in thousands)
Current assets:
Cash and cash equivalents			6,566				9,168				3,593,192				18,812,263				—				22,421,189
Restricted cash			—				45,000				52,148,852				228,595				—				52,422,447
Short-term investments			5,840,247				—				7,026,442				51,684,405				—				64,551,094
Amounts due from Group companies(1)			—				999,964				9,932,418				14,699,309				(25,631,691	)			—
Others			359				38,340				8,788,524				1,301,925				—				10,129,148
Total current assets			5,847,172				1,092,472				81,489,428				86,726,497				(25,631,691	)			149,523,878
Non-current assets:
Other non-current assets			—				5,005				4,380,476				2,889,824				—				7,275,305
Investments in subsidiaries, our the and its subsidiaries(2)			67,814,679				2,000				—				1,616,265				(69,432,944	)			—
Others			1,276,751				23,967				654,790				153,923				—				2,109,431

 

 

Division of Corporation Finance

Office of Trade & Services

Securities and Exchange Commission

December 8, 2022

Page 5

 

		As of December 31, 2020
		Pinduoduo  Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated  Total
		(RMB in thousands)
Total non-current assets			69,091,430				30,972				5,035,266				4,660,012				(69,432,944	)			9,384,736
Total assets			74,938,602				1,123,444				86,524,694				91,386,509				(95,064,635	)			158,908,614
Current liabilities:
Payable to merchants			—				—				53,417,259				416,722				—				53,833,981
Merchant deposits			—				—				10,926,319				—				—				10,926,319
Amounts due to Group companies(1)			—				1,068,463				9,759,506				92,224,226				(103,052,195	)			—
Others			327,004				334,083				14,809,044				3,651,646				—				19,121,777
Total current liabilities			327,004				1,402,546				88,912,128				96,292,594				(103,052,195	)			83,882,077
Non-current liabilities
Convertible bonds			14,432,792				—				—				—				—				14,432,792
Others			2,918				10,034				366,834				38,071				—				417,857
Total non-current liabilities			14,435,710				10,034				366,834				38,071				—				14,850,649
Total liabilities			14,762,714				1,412,580				89,278,962				96,330,665				(103,052,195	)			98,732,726

 

		As of December 31, 2019
		Pinduoduo  Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated  Total
		(RMB in thousands)
Current assets:
Cash and cash equivalents			661,714				7,360				2,816,894				2,282,218				—				5,768,186
Restricted cash			—				45,000				27,528,793				3,878				—				27,577,671
Short-term investments			6,157,221				—				6,560,665				22,570,941				—				35,288,827
Amounts due from Group companies(1)			—				58,554				3,337,273				5,410,374				(8,806,201	)			—
Others			17,906				185,001				3,706,618				457,254				—				4,366,779
Total current assets			6,836,841				295,915				43,950,243				30,724,665				(8,806,201	)			73,001,463
Non-current assets:
Other non-current assets			—				5,001				60,306				437,813				—				503,120
Investments in subsidiaries, our the VIE and its subsidiaries(2)			21,053,370				2,000				—				1,728,056				(22,783,426	)			—
Others			1,994,292				40,872				480,602				36,987				—				2,552,753
Total non-current assets			23,047,662				47,873				540,908				2,202,856				(22,783,426	)			3,055,873
Total assets			29,884,503				343,788				44,491,151				32,927,521				(31,589,627	)			76,057,336
Current liabilities:
Payable to merchants			—				—				29,657,227				269,261				—				29,926,488
Merchant deposits			—				—				7,840,912				—				—				7,840,912

 

 

Division of Corporation Finance

Office of Trade & Services

Securities and Exchange Commission

December 8, 2022

Page 6

 

		As of December 31, 2019
		Pinduoduo  Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated  Total
		(RMB in thousands)
Amounts due to Group companies(1)			—				60,015				5,393,858				32,157,330				(37,611,203	)			—
Others			23,566				317,684				6,518,860				1,140,296				—				8,000,406
Total current liabilities			23,566				377,699				49,410,857				33,566,887				(37,611,203	)			45,767,806
Non-current liabilities
Convertible bonds			5,206,682				—				—				—				—				5,206,682
Others			7,389				26,219				382,673				19,701				—				435,982
Total non-current liabilities			5,214,071				26,219				382,673				19,701				—				5,642,664
Total liabilities			5,237,637				403,918				49,793,530				33,586,588				(37,611,203	)			51,410,470

 

Selected Condensed Consolidated Cash Flows Information

 

		For the Year Ended December 31, 2021
		Pinduoduo Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated Total
		(RMB in thousands)
Net cash generated from/ (used in) operating activities(3)			82,074				(150,891	)			34,365,025				(5,513,197	)			—				28,783,011
Net cash used in investing activities			(91,170	)			(270,312	)			(26,828,581	)			(33,008,291	)			24,635,989				(35,562,365	)
Net cash generated from/ (used in) financing activities			318				368,069				(1,445,969	)			23,838,417				(24,635,989	)			(1,875,154	)

 

		For the Year Ended December 31, 2020
		Pinduoduo Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated Total
		(RMB in thousands)
Net cash generated from/ (used in) operating activities(3)			735,231				(452,435	)			29,379,799				(1,465,968	)			—				28,196,627
Net cash used in investing activities			(52,266,859	)			(224,486	)			(11,802,074	)			(40,595,102	)			66,530,620				(38,357,901	)
Net cash generated from financing activities			50,892,970				678,729				7,818,632				58,939,285				(66,530,620	)			51,798,996

 

 

Division of Corporation Finance 

Office of Trade & Services 

Securities and Exchange Commission 

December 8, 2022 

Page 7

 

		For the Year Ended December 31, 2019
		Pinduoduo Inc. (Primary beneficiary of the VIE)				Subsidiaries Hangzhou Weimi*				VIE and Its  Subsidiaries				Other Subsidiaries of Pinduoduo Inc.**				Eliminations				Consolidated Total
		(RMB in thousands)
Net cash generated from/ (used in) operating activities(3)			259,409				(204,738	)			11,139,572				3,626,733				—				14,820,976
Net cash (used in)/ generated from investing activities			(20,241,566	)			181,675				(5,249,046	)			(27,021,846	)			24,011,105				(28,319,678	)
Net cash generated from financing activities			14,960,585				21,190				4,546,481				20,337,580				(24,011,105	)			15,854,731

 

Notes:

 

*        Represents Hangzhou Weimi, a PRC subsidiary of the Company that has entered into contractual arrangements with the VIE, the VIE’s shareholders and, as applicable, their spouses. These contractual arrangements enable us to direct the activities of and derive economic benefits from the VIE and its subsidiaries. For more information, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with the VIE and Its Shareholders.”

 

**     Represents all of the Company’s subsidiaries other than Hangzhou Weimi.

 

(1)     Represents the elimination of the intercompany balances among Pinduoduo Inc., our subsidiaries, Hangzhou Weimi, the Company’s subsidiaries other than Hangzhou Weimi, and our the VIE and its subsidiaries.

 

(2)     Represents the elimination of the investments in our subsidiaries, Hangzhou Weimi, the Company’s subsidiaries other than Hangzhou Weimi and our the VIE and its subsidiaries.

 

(3)     For the years ended December 31 2019, 2020 and 2021, cash paid by our the VIE and its subsidiaries to our subsidiaries Hangzhou Weimi, primarily for service fees, was RMB759.1 RMB636.8 million, RMB1,717.5 RMB935.1 million and RMB5,016.5 RMB2,714.2 million (US$787.2 US$425.9 million), respectively.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations, page 50

 

2.

We note your response to comment 3 and reissue comment in part. Please discuss the impact of pricing changes on your revenues. For example, you present average transaction services revenue as a percentage of GMV increased from 0.35% in 2020 to 0.58% in 2021. Please clarify if the changes in prices attributed to such an increase.

 

In response to the Staff’s comment, the Company respectfully submits that the increase in average transaction services as a percentage of GMV was primarily the result of the Company providing more value-added services to merchants, whose demand for more diverse value-added services under different consumption scenarios increased with the growth of their businesses. For example, merchants can choose our value-added services to achieve faster deliveries, a better understanding of consumer demands or improvements in other business areas. As such, the overall increase in the Company’s blended transaction service fee rate was thus primarily the result of the Company providing more of these value-added services to merchants, which was in turn mainly driven by the increases in both GMV and the diversity of transactions executed on the Company’s platform. The Company undertakes to disclose the foregoing more clearly in its future Form 20-F filings, subject to such updates and adjustments to be made in connection with any material developments of the subject matter being disclosed.

 

 

Division of Corporation Finance 

Office of Trade & Services 

Securities and Exchange Commission 

December 8, 2022 

Page 8

 

Item 4. Information on the Company
Business Overview
Regulation, page 62

 

3.

We note your response to comment 1. Please also discuss the regulations applicable to you in Hong Kong. Currently, your disclosure discusses the regulations that affect your business and operations in China, excluding Hong Kong. Please refer to Item 4(B)(8) of Form 20-F.

 

The Company respectfully submits that its operations in Hong Kong primarily consist of the entry from time to time by HongKong Walnut Street Limited, a Hong Kong-incorporated subsidiary of the Company, into agreements with certain merchants and suppliers for offshore merchandise and procurement. These Hong Kong operations are not material to the Company’s business as a whole. Similarly, the Company is not aware of any regulations applicable to its Hong Kong operations that have a material effect on the Company’s business as a whole. On the basis of the foregoing, the Company respectfully submits that a discussion of the regulations applicable to it in Hong Kong is not necessary under Item 4(B)(8) of Form 20-F and would not be meaningful to investors.

 

General

 

4.

We note your response to comment 8. Please confirm that in future filings you will disclose that you do not have cash management policies that dictate how funds are transferred among the referenced constituents of the company.

 

In response to the Staff’s comment, the Company undertakes to revise the disclosure in its future Form 20-F filings to disclose that it does not have cash management policies that dictate how funds are transferred among the referenced constituents of the Company.

 

*          *          *

 

 

Division of Corporation Finance 

Office of Trade & Services 

Securities and Exchange Commission 

December 8, 2022 

Page 9

 

If you have any additional questions or comments regarding the 2021 Form 20-F, please contact the undersigned at +86 21 6193 8225 or yuting.wu@skadden.com.

 

		Very truly yours,
		/s/ Yuting Wu
		Yuting Wu

 

cc:

Lei Chen, Chairman of the Board of Directors and Chief Executive Officer, Pinduoduo Inc. Jianchong Zhu, General Counsel, Pinduoduo Inc. Franky Liu, Partner, Ernst & Young Hua Ming LLP