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- IPO Report: Cheetah Mobile (CMCM)
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As filed with the Securities and Exchange Commission on April 25, 2014
Registration No. 333-194996
SECURITIES AND EXCHANGE COMMISSION
AMENDMENT NO. 2
THE SECURITIES ACT OF 1933
Cheetah Mobile Inc.
(Exact name of Registrant as specified in its charter)
(Translation of Registrant’s name into English)
|Cayman Islands||7372||Not Applicable|
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
12/F, Fosun International Center Tower
237 Chaoyang North Road
Chaoyang District, Beijing 100022
People’s Republic of China
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Law Debenture Corporate Services Inc.
4th Floor, 400 Madison Avenue
New York, New York10017
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Z. Julie Gao, Esq.
Edward Lam, Esq.
Will H. Cai, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
c/o 42/F, Edinburgh Tower
15 Queen’s Road Central
Li He, Esq.
Davis Polk & Wardwell LLP
c/o 18th Floor, The Hong Kong Club Building
3A Chater Road
Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
Chinese security software maker Cheetah Mobile files for U.S. IPO
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
CALCULATION OF REGISTRATION FEE
Title of each class of
securities to be registered
shares to be
Class A ordinary shares, par value US$0.000025 per share(1)
|(1)||American depositary shares issuable upon the deposit of the ordinary shares registered hereby have been registered under a separate registration statement on Form F-6 (Registration No.
333 -195489). Each American depositary share represents ten Class A ordinary shares.
|(2)||Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(a) under the Securities Act of 1933.|
|(3)||Includes 1,800,000 Class A ordinary shares that may be purchased by the underwriters pursuant to an over-allotment option. Also includes Class A ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public.
These Class A ordinary shares are not being registered for the purpose of sales outside the United States.
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.
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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where such offer or sale is not permitted.
PROSPECTUS (Subject to Completion)
Issued April 25, 2014
12,000,000 American Depositary Shares
Cheetah Mobile Inc.
REPRESENTING 120,000,000 CLASS A ORDINARY SHARES
Cheetah Mobile Inc., formerly known as Kingsoft Internet Software Holdings Limited, is offering 12,000,000 American depositary shares, or ADSs.
Each ADS represents ten of our Class A ordinary shares, par value US$0.000025 per share. This is our initial public offering and no public market exists for the ADSs or our shares. We anticipate that the initial public offering price will be between US$12.50 and US$14.50 per ADS.
Upon the completion of this offering, our outstanding share capital will consist of Class A ordinary shares and Class B ordinary shares.
Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to ten votes and is convertible into one Class A ordinary share at any time by the holder thereof.
Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. The Class B ordinary shares outstanding immediately after the completion of this offering will constitute approximately 88.6% of our total outstanding shares and 98.8% of the voting power, assuming the underwriters do not exercise their option to purchase additional ADSs.
Immediately after the completion of this offering, Kingsoft Corporation Limited will continue to be our controlling shareholder and will hold 7,407,407 Class A ordinary shares and 662,806,049 Class B ordinary shares, which together represent 53.6% of our aggregate voting rights, assuming the underwriters do not exercise their option to purchase additional ADSs. We will be a controlled company as defined in the New York Stock Exchange Listed Company Manual.
Our other existing shareholders, including our directors and executive officers and their affiliates, as well as our investors, TCH Copper Limited and Matrix Partners Funds, will hold a total of 562,650,603 Class B ordinary shares.
We are an “emerging growth company” under applicable U.S. federal securities laws and are eligible for reduced public company reporting requirements.
We have applied to list the ADSs on the New York Stock Exchange, or the NYSE, under the symbol “CMCM”.
Investing in the ADSs involves risks. See “Risk Factors” beginning on page 17.
PRICE $ AN ADS
Price to Public
We have granted the underwriters the right to purchase up to an additional 1,800,000 ADSs to cover over-allotments at the initial public offering price less the underwriting discount.
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the ADSs to purchasers on or about , 2014.
|MORGAN STANLEY||J.P. MORGAN||CREDIT SUISSE|
|MACQUARIE CAPITAL||OPPENHEIMER & CO.|
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You should rely only on the information contained in this prospectus or in any related free-writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or in any related free writing prospectus.
We are offering to sell, and seeking offers to buy, the ADSs only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the ADSs.
We have not taken any action to permit a public offering of the ADSs outside the United States or to permit the possession or distribution of this prospectus outside the United States.
Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the ADSs and the distribution of the prospectus outside the United States.
Dealer Prospectus Delivery Obligation
Until , 2014 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade ADS, whether or not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
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The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and the related notes appearing elsewhere in this prospectus.
In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in the ADSs discussed under “Risk Factors,” before deciding whether to buy the ADSs.
Our mission is to make the internet and mobile experience speedier, simpler and safer for users worldwide. To achieve this mission, we have developed a platform that offers mission critical applications for our users and global content distribution channels for our business partners, both of which are powered by our proprietary cloud-based data analytics engines.
For our users, our diversified suite of mission critical applications optimizes internet and mobile system performance and provides real time protection against known and unknown security threats. We had 340.7 million monthly active users for all of our applications in February 2014.
Our mobile applications attracted 222.5 million monthly active users in March 2014. Our applications have been installed on 502.1 million mobile devices as of March 31, 2014. See “Conventions Which Apply To This Prospectus” for the definition of “monthly active users.”
Set forth below is a brief description of our core applications for users.
|•||Clean Master, which is a junk file cleaning, memory boosting and privacy protection application, had 237.3 million installations as of March 31, 2014, and 139.9 million monthly active users and 72.9 million average daily active users in March 2014.
See “Conventions Which Apply To This Prospectus” for the definition of “average daily active users.” According to App Annie Limited, or App Annie, an app store analytics and market intelligence provider, Clean Master was the No.1 application in the Tools category on Google Play by worldwide monthly downloads in March 2014. It was also the No. 3 mobile utility application in China in terms of monthly active users in February 2014, according to iResearch, a third party market research firm.
|•||CM Security, which is an anti-virus and security application for mobile devices on the Android platform, had 25.6 million installations as of March 31, 2014, and 23.0 million monthly active users and 11.5 million daily active users in March 2014. According to App Annie, CM Security was the No. 2 application in the Tools category on Google Play by worldwide monthly downloads in March 2014.|
|•||Battery Doctor, which is a power optimization application, had 201.7 million installations as of March 31, 2014, and 58.6 million monthly active users and 26.2 million average daily active users in March 2014. It was the fifth most downloaded productivity application on Google Play in March 2014, according to App Annie.
It was also the No. 1 mobile utility application in China in terms of monthly active users in February 2014, according to iResearch.
|•||Duba Anti-virus, which is an internet security application, had 124.1 million monthly active users and 48.4 million average daily active users in February 2014.
We are the second largest provider of internet security applications in China in terms of monthly active users in February 2014, according to iUser Tracker of iResearch.
|•||Cheetah Browser, which is our safe internet browser launched in June 2012 for PCs and June 2013 for mobile devices, had 46.3 million monthly active users and 15.6 million average daily active users in February 2014.|
|•||Photo Grid, which is a popular photo collage application, had 62.7 million installations as of March 31, 2014, and 25.2 million monthly active users and 3.3 million average daily active users in March 31, 2014. It ranked No. 1 in the Photography category on Google Play by monthly downloads in the United States in March 2014, according to App Annie.|
For our business partners, our platform provides them multiple user traffic entry points and global content distribution channels capable of delivering targeted content to hundreds of millions of people.
Our business partners share revenues with us and promote our products and services.
Cheetah Mobile Inc. Announces Pricing of Initial Public Offering
We have benefited significantly from our cooperation with over 380 online marketing business partners in 2013, including major Chinese internet companies Alibaba, Baidu and Tencent.
Set forth below is a brief description of our core platform products for business partners.
|•||Duba.com personal start page, which aggregates popular online resources and provides users quick access to most of their online destinations, had 51.7 million monthly active users in February 2014, according to iResearch.|
|•||Cheetah personalized recommendation engine, which recommends targeted content and services for users of our Cheetah Browser, had 46.3 million monthly active users in February 2014.|
|•||Game centers, through which we have published over 570 games as of March 31, 2014.|
|•||Mobile app stores, which include our Mobile Assistant application stores in China and other in-app application stores, have offered approximately one million third party mobile applications as of March 31, 2014.|
|•||Kingmobi mobile advertising network, which helps advertisers effectively reach their target audience through our mobile applications.|
Our proprietary cloud-based data analytics engines are the core of our platform.
For our users, the data analytics engines perform real time analysis of mobile applications, program files and websites on their devices for behavior that may impair system performance or impose security risks.
For our business partners, the data analytics engines help create user interest graphs according to a number of dimensions such as online shopping, gaming and frequently used applications, thus facilitating targeted content delivery.
Although substantially all of our applications are free to our users, our massive user base has created ample monetization opportunities for us and our business partners. We generate revenues from our online marketing services by referring traffic from our platform to e-commerce companies and search engine providers and by selling advertisements.
We generated 73.8% and 81.7% of our revenues from online marketing services in 2012 and 2013, respectively. We also generate revenues by providing internet value-added services, or IVAS, currently mainly from online games.
We have achieved significant growth in recent years.
Our revenues increased from RMB140.1 million in 2011 to RMB287.9 million in 2012, representing a 105.6% growth, and to RMB749.9 million (US$123.9 million) in 2013, representing a 160.5% growth.
Our net income was RMB62.0 million (US$10.2 million) in 2013, a 530.0% increase over our net income of RMB9.8 million in 2012, compared to a net loss of RMB30.2 million in 2011.
We believe the following competitive strengths have contributed to our growth and created significant barriers to entry for our competitors:
|•||massive, highly engaged and fast-growing global user base;|
|•||diversified suite of mission critical applications for users;|
|•||continuous R&D and innovation focused on optimizing user experience;|
|•||cloud-based data analytics engines enhancing platform performance;|
|•||proven monetization model driven by platform products and extensive network of business partners; and|
|•||experienced management team with strategic vision and a proven execution track record.|
We aim to make the internet and mobile experience speedier, simpler and safer for users worldwide.
Cheetah mobile ipo prospectus
To achieve this mission, we intend to:
|•||further grow our mobile user base;|
|•||deepen our global penetration;|
|•||enhance monetization capabilities; and|
|•||pursue strategic investment and acquisition opportunities.|
The global mobile internet industry is developing rapidly with the continuous enhancement of infrastructure, and the increasing use of smartphones and other mobile devices which have become more affordable. According to IDC, an independent market research firm, global mobile internet users totaled approximately 1.0 billion in 2012, representing a 36.5% increase over the user base in 2009, and are expected to reach approximately 2.3 billion in 2017, representing a five-year CAGR of 15.8%.
The Android operating system has become the world’s most commonly used operating system for smartphones. According to IDC, Android-based smartphones are expected to have approximately 78.6% market share of global smartphone shipments in 2013, compared with 15.2% market share for iOS-based smartphones and other mobile devices, and are well positioned to maintain a strong leadership position for the foreseeable future.
Mobile apps have become a popular means of engaging end users and delivering digital content and services.
According to App Annie, there were more than 1.1 million apps available on Google Play worldwide and 1.0 million apps available in the Apple App Store as of December 31, 2013. This massive amount of mobile apps creates a challenge for efficient application discovery and distribution in app stores.
The lack of application discovery capability calls for an industry wide solution, and gradually alternative application discovery and distribution channels emerge and become popular, including recommendation engines of super apps and mobile browsers.
Kingsoft Subsidiary Cheetah Mobile Files for IPO on the NYSE
There are only eight non-game applications with over 50 million cumulative downloads on Google Play worldwide in the second half of 2013, including Facebook, WhatsApp and Clean Master.
Such applications are commonly referred to as “super apps.” Super apps are ideal channels for application distribution because they have a combination of critical factors that enable an application to identify its potential audience in a targeted way. We believe the global mobile internet industry is still at an early stage and is poised for significant growth and monetization opportunities.
In China, the numbers of internet users is expected to continue to grow in the foreseeable future.
According to the China Internet Network Information Center, or CNNIC, a not-for-profit organization, the number of internet users in China reached 618 million as of December 31, 2013, making China the largest internet market in the world based on the number of users.According to iResearch, the number of internet users in China is expected to increase to approximately 850 million in 2017. Meanwhile, the mobile internet population in China has grown substantially.
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According to CNNIC, the number of mobile internet users in China reached 500 million as of December 31, 2013 and is expected to increase to 745 million in 2017, representing a four-year CAGR of
10.5%. As Chinese users have continued to embrace the internet, mobile devices and internet and mobile applications, they have encountered an increasingly complex internet experience.
As a result, the internet security and system optimization market in China has grown significantly over the past five years, reaching 493 million users, or 80% of the online population in 2013.
Established internet companies are likely to benefit from the increasing user traffic migration from internet to mobile internet due to multiple competitive advantages in establishing and growing their mobile internet presence, including recognized brand names, large and loyal user base, robust technology infrastructure, as well as proven monetization capabilities and strong connections with other business partners.
Therefore, established internet companies are well positioned to offer their products services on both internet and mobile internet platforms to serve their large and loyal user base and monetize their user base.
Our ability to achieve our goal and execute our strategies is subject to risks and uncertainties, including but not limited to those relating to our ability to:
|•||retain or continue to grow our user base and maintain our level of user engagement;|
|•||achieve continued growth in, or successful monetization of, our mobile business operations;|
|•||maintain our relationships with our significant business partners;|
|•||compete effectively in various aspects of our business; and|
|•||successfully penetrate international markets.|
In addition, we face risks and uncertainties related to our compliance with applicable PRC regulations and policies, particularly those risks and uncertainties associated with our control over our variable interest entities, which is based on contractual arrangements rather than equity ownership.
Please see “Risk Factors” and other information included in this prospectus for a detailed discussion of the above and other challenges and risks.
Our principal executive offices are located at 12/F, Fosun International Center Tower, No. 237 Chaoyang North Road, Chaoyang District, Beijing 100022, People’s Republic of China. Our telephone number at this address is +86-10-6292-7779. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
Our agent for service of process in the United States is Law Debenture Corporate Services Inc., of 4th Floor, 400 Madison Avenue, New York, New York10017.
Investors should contact us for any inquiries through the address and telephone number of our principal executive offices. Our website is http://www.ijinshan.com. The information contained on our website is not a part of this prospectus.
Corporate History and Structure
Our company was incorporated in Cayman Islands in July 2009 by Kingsoft Corporation Limited, or Kingsoft Corporation, a company listed on the Hong Kong Stock Exchange (Stock Code: 3888).
In August 2009, we established our wholly owned subsidiary in Hong Kong, Kingsoft Internet Security Software Corporation Limited, and renamed it as Cheetah Technology Corporation Limited, or Cheetah Technology, in September 2012. Subsequent to our incorporation, Kingsoft Corporation initiated a series of restructuring transactions in
2009 and 2010.
As a result of this restructuring, Zhuhai Juntian Electronic Technology Co., Ltd., or Zhuhai Juntian, an entity previously wholly owned by Kingsoft Corporation that was incorporated in China, became wholly and directly owned by Cheetah Technology in December 2009.
Beijing Kingsoft Internet Security Software Co., Ltd., or Beijing Security, was incorporated in November 2009 in China as a wholly and directly owned subsidiary of Zhuhai Juntian.
Beike Internet (Beijing) Security Technology Co., Ltd, or Beike Internet, was incorporated in April 2009 and subsequently became a subsidiary of a variable interest entity of Kingsoft Corporation in August 2010. Beike Internet became one of our VIEs in January 2011 through restructuring.
In October 2010, we acquired 100% equity interest in Conew.com Corporation, which was incorporated in the British Virgin Islands. As part of the acquisition, we acquired 100% equity interest in Conew Network Technology (Beijing) Co., Ltd., or Conew Network, and obtained effective control over Beijing Conew Technology Development Co., Ltd., or Beijing Conew, one of our VIEs, through contractual arrangements.
Conew Network was incorporated in China in March 2009, and Beijing Conew was incorporated in China in December 2005. Beijing Conew offered internet security services starting in May 2010 but has been dormant since our acquisition of Conew.com corporation.
Our other three VIEs, namely, Beijing Kingsoft Network Technology Co., Ltd., or Beijing Network, Beijing Antutu Technology Co., Ltd., or Beijing Antutu, and Guangzhou Kingsoft Network Technology Co., Ltd., or Guangzhou Network, were incorporated in China in July 2012, June 2013, and September 2013, respectively.
Suzhou Jiangduoduo Technology Co., Ltd., a subsidiary of Beike Internet, was incorporated in China in January 2014.
Due to certain restrictions under PRC laws on foreign ownership and investment in value-added telecommunications services in China, we conduct our operations in China principally through contractual arrangements with our VIEs in China and their respective shareholders.
Each of our VIEs and their respective shareholders entered into contractual arrangements with either Beijing Security or Conew Network, our wholly owned subsidiaries.
See “Corporate History and Structure—Corporate Structure—Contractual Arrangements with Our VIEs” for details. The VIEs contributed 16.2%, 65.3% and 91.0% of our total consolidated revenues for the years ended December 31, 2011, 2012 and 2013, respectively.
Our contractual arrangements with each of our VIEs and their shareholders enable us to:
|•||exercise effective control over our VIEs;|
|•||receive substantially all of the economic benefits of our VIEs in consideration for the services provided by Beijing Security and Conew Network, our wholly owned subsidiaries in China; and|
|•||have an exclusive option to purchase all of the equity interests in our VIEs, when and to the extent permitted under PRC law, regulations or legal proceedings.|
The following diagram illustrates our corporate structure as of the date of this prospectus:
|Notes: (1)||See “Principal Shareholders” for the other beneficial owners of our company.
Cheetah Mobile IPO on NYSE raises $168m
|(2)||We exercise effective control over Beijing Network through contractual arrangements with Beijing Network and Mr. Ming Xu and Mr. Wei Liu , who own 50% and 50% of the equity interest in Beijing Network, respectively.|
|(4)||We exercise effective control over Beijing Antutu through contractual arrangements with Beijing Antutu and Mr.
Ming Xu and Mr. Wei Liu, who own 50% and 50% of the equity interest in Beijing Antutu, respectively.
|(5)||We exercise effective control over Beike Internet through contractual arrangements with Beike Internet and Mr.
Sheng Fu and Ms.
Weiqin Qiu, who own 35% and 65% of the equity interest in Beike Internet, respectively.
|(6)||We exercise effective control over Guangzhou Network through contractual arrangements with Guangzhou Network and Mr. Ming Xu and Ms. Weiqin Qiu, who own 50% and 50% of the equity interest in Guangzhou Network, respectively.|
|*||Formerly known as Kingsoft Internet Software Holdings Limited.|
Our Dual Class Share Structure
Upon completion of this offering, we will have a dual class ordinary share structure.
Our ordinary shares will be divided into Class A ordinary shares and Class B ordinary shares. All of our outstanding ordinary shares prior to this offering will be re-designated as Class B ordinary shares and all of our outstanding preferred shares will be automatically converted into Class B ordinary shares immediately prior to the completion of this offering. All share-based compensation awards, including restricted shares, regardless of grant dates, will entitle holders to purchase Class A ordinary shares once the vesting and exercise conditions on such share-based compensation awards are met.
Holders of Class A and Class B ordinary shares will have the same rights, including dividend rights, except that holders of Class A ordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled to ten votes per share, and Class B ordinary shares may be converted into the same number of Class A ordinary shares by the holders thereof at any time, while Class A ordinary shares cannot be converted into Class B ordinary shares under any circumstances.
Upon the transfer of any Class B ordinary share, such Class B ordinary share will be automatically and immediately converted into one Class A ordinary share. Each ADS being sold in this offering represents ten Class A ordinary shares.
See “Description of Share Capital—Ordinary Shares” for more details regarding our Class A ordinary shares and Class B ordinary shares.
After the completion of this offering, Kingsoft Corporation will continue to retain a majority of our aggregate voting rights due to its equity interests in our company and our dual-class share structure. Kingsoft Corporation will hold 7,407,407 Class A ordinary shares and 662,806,049 Class B ordinary shares, representing 53.5% of our aggregate voting rights, immediately after the completion of this offering, assuming (i) the underwriters do not exercise their option to purchase additional ADSs and (ii) we will issue and sell a total of 37,037,037 Class A ordinary shares through the Concurrent Private Placement, which number of shares has been calculated based on the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus.
Our directors are not subject to a term of office and hold office until such time as they resign or are removed from office by ordinary resolutions or the unanimous written consent of all shareholders. After the completion of this offering, we will be a controlled company as defined in the NYSE Listed Company Manual, and we intend to rely on the “controlled company” exemption from the corporate governance requirements of NYSE.
IPO Report: Cheetah Mobile (CMCM)
Implications of Being an Emerging Growth Company
As a company with less than US$1.0 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies.
These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards.
However, we have elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.
We will remain an emerging growth company until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenues of at least US$1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the previous three-year period, issued more than US$1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of the ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter.
Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
The following information assumes that the underwriters will not exercise their option to purchase additional ADSs in the offering, unless otherwise indicated.
|We currently estimate that the initial public offering price will be between US$12.50 and US$14.50 per ADS.|
ADSs offered by us
|We have granted to the underwriters an option, which is exercisable within 30 days from the date of this prospectus, to purchase up to 1,800,000 additional ADSs.|
Concurrent Private Placement
|Concurrently with, and subject to, the completion of this offering, we will issue and sell to Kingsoft Corporation Limited, Xiaomi Ventures Limited and Baidu Holdings Limited US$10 million, US$20 million and US$20 million of our Class A ordinary shares, respectively, at a price per share equal to the initial public offering price adjusted to reflect the ADS-to-ordinary share ratio (the “Concurrent Private Placement”).
Our proposed Concurrent Private Placement is being made pursuant to an exemption from registration with the U.S. Securities and Exchange Commission under Regulation S promulgated under the Securities Act. Under the subscription agreement executed on April 25, 2014, the completion of this offering is the only substantive closing condition precedent for this private placement.
Each of Kingsoft Corporation Limited, Xiaomi Ventures Limited and Baidu Holdings Limited has agreed with the underwriters not to, directly or indirectly, sell, transfer or dispose of any Class A ordinary shares acquired in the private placement for a period of 180 days after the date of this prospectus, subject to certain exceptions.
Ordinary shares outstanding immediately after this offering
|1,382,493,689 ordinary shares (or 1,400,493,689 ordinary shares if the underwriters exercise their over-allotment option in full) will be outstanding immediately upon the completion of this offering, comprised of (i) 157,037,037 Class A ordinary shares, par value US$0.000025 per share (or 175,037,037 Class A ordinary shares in total if the underwriters exercise their over-allotment option in full to purchase additional ADSs), assuming that we will|
|issue and sell a total of 37,037,037 Class A ordinary shares through the Concurrent Private Placements, which number of shares has been calculated based on an initial public offering price of US$13.50 per ADS,|
|the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus and (ii) 1,225,456,652 Class B ordinary shares, par value US$0.000025 per share.
The 157,037,037 Class A ordinary shares and 1,225,456,652 Class B ordinary shares outstanding immediately after the completion of this offering will represent 11.4% and 88.6% of our total outstanding shares, respectively, and 1.3% and 98.7% of our total voting power, respectively.
ADSs outstanding immediately after this offering
|12,000,000 ADSs (or 13,800,000 ADSs if the underwriters exercise their over-allotment option in full)|
|Each ADS represents 10 Class A ordinary shares, par value US$0.000025 per share.
The ADSs may be evidenced by ADRs.
|The depositary will hold the Class A ordinary shares underlying your ADSs. You will have rights as provided in the deposit agreement. If we declare dividends on our ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our Class A ordinary shares, after deducting its fees and expenses.|
|You may turn in your ADSs to the depositary in exchange for Class A ordinary shares.
The depositary will charge you fees for such an exchange.
|We may amend or terminate the deposit agreement for any reason without your consent. If you continue to hold your ADSs, you agree to be bound by the deposit agreement as amended.|
|To better understand the terms of the ADSs, you should carefully read the section in this prospectus entitled “Description of American Depositary Shares.” You should also read the deposit agreement entered into among us, the depositary and all registered holders and indirect holders and beneficial owners of ADSs, which is filed as an exhibit to the registration statement that includes this prospectus.|
|The Bank of New York Mellon|
Use of proceeds
|We plan to use the net proceeds we receive from this offering and the Concurrent Private Placement to penetrate selected international markets, invest in technology, infrastructure and research and development capabilities, expand and strengthen our sales and marketing activities, and for other general corporate purposes, including working capital needs and potential acquisitions.|
|See “Use of Proceeds” for additional information.|
|We declared a special dividend of RMB17.7 million to Kingsoft Corporation in November 2009, which was fully paid in 2013.
In addition, we declared a special dividend of RMB43.1 million in August 2011 to Kingsoft Corporation, which was fully paid in 2011. We currently have no plan to declare or pay any dividends in the near future on our shares. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
|We, all of our directors and executive officers, our existing shareholders and certain holders of our restricted shares have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our ordinary shares or ADSs representing our ordinary shares or securities convertible into or exercisable or exchangeable for the ADSs or our ordinary shares for a period of 180 days after the date of this prospectus.
See “Underwriting” for more information.
|We have applied to list the ADSs on the NYSE under the symbol “CMCM”.|
Payment and settlement
|The underwriters expect to deliver the ADSs against payment therefor through the facilities of The Depository Trust Company, or DTC, on , 2014.|
Directed share program
|At our request, the underwriters have reserved for sale, at the initial public offering price, up to 1,000,000 ADSs offered by this prospectus to some of our directors, officers, employees, business associates and related persons.|
|See “Risk Factors” and other information included in this prospectus for a discussion of risks that you should carefully consider before investing in the ADSs.|
The number of ordinary shares that will be outstanding immediately after this offering:
|•||assumes re-designation or conversion of all our outstanding ordinary shares and preferred shares as of the date of this prospectus into 1,225,456,652 Class B ordinary shares immediately upon the completion of this offering;|
|•||assumes no exercise of the underwriters’ over-allotment option;|
|•||excludes 187,043,383 Class A ordinary shares reserved for future issuance under our 2013 equity incentive plan and 2014 restricted shares plan; and|
|•||excludes ADSs and Class A ordinary shares that Kingsoft Corporation intends to provide to its eligible shareholders to meet the “assured entitlement” requirement pursuant to Practice Note 15 which Kingsoft Corporation is subject to.|
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated statements of comprehensive income data for the years ended December 31, 2011, 2012 and 2013 and the summary consolidated balance sheets data as of December 31, 2012 and 2013 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States, or U.S.
GAAP. Our historical results for any period are not necessarily indicative of results to be expected for any future period. You should read the following summary financial information in conjunction with the consolidated financial statements, the related notes and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.