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United States securities and exchange commission logo
March 31, 2023
Qingfeng Feng
Chief Executive Officer
Lotus Technology Inc.
No. 800 Century Avenue
Pudong District, Shanghai
People's Republic of China
Re: Lotus Technology
Inc.
Draft Registration
Statement on Form F-4
Submitted March 6,
2023
CIK No. 0001962746
Dear Qingfeng Feng:
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-4 submitted March 6, 2023
General
1. With a view toward
disclosure, please tell us whether your sponsor is, is controlled by, or
has substantial ties
with a non-U.S. person. Please also tell us whether anyone or any
entity associated with
or otherwise involved in the transaction, is, is controlled by, or has
substantial ties with a
non-U.S. person. If so, also include risk factor disclosure that
addresses how this fact
could impact your ability to complete your initial business
combination. For
instance, discuss the risk to investors that you may not be able to
complete an initial
business combination with a U.S. target company should the
transaction be subject
to review by a U.S. government entity, such as the Committee on
Qingfeng Feng
FirstName LastNameQingfeng Feng
Lotus Technology Inc.
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Foreign Investment in the United States (CFIUS), or ultimately
prohibited. Further,
disclose that the time necessary for government review of the
transaction or a decision to
prohibit the transaction could prevent you from completing an initial
business
combination and require you to liquidate. Disclose the consequences of
liquidation to
investors, such as the losses of the investment opportunity in a
target company, any price
appreciation in the combined company, and the warrants, which would
expire worthless.
2. We note the disclosure on pages 13-14 and elsewhere that there are
significant factual and
legal uncertainties as to whether the business combination will
qualify as a
reorganization. If tax counsel is unable to opine on the material tax
consequences, please
state this fact clearly. Please revise the cover page to provide a
prominent discussion of
the legal and factual uncertainties associated with the potential tax
consequences and
highlight that the business combination may be a taxable event for
U.S. holders.
3. Please expand your disclosure regarding the sponsor s ownership
interest in the target
company. Disclose the approximate dollar value of the interest based
on the transaction
value and recent trading prices as compared to the price paid.
4. We note the disclosure on page 18 and elsewhere about the provisions
in the articles
waiving the corporate opportunities doctrine. Please address this
potential conflict of
interest and whether it had an impact on your search for an
acquisition target.
5. We note the disclosure on page 18 and elsewhere that certain
shareholders have waived
their rights to liquidation dividends and conversion price
adjustments. Please describe any
considration provided in exchange for these agreements.
6. We note your disclosure on page 89 regarding Russia's invasion of
Ukraine. Please revise
your filing, as applicable, to provide more specific disclosure
related to the direct or
indirect impact that Russia's invasion of Ukraine and the
international response have had
or may have on your business. For additional guidance, please see the
Division of
Corporation Finance's Sample Letter to Companies Regarding Disclosures
Pertaining to
Russia s Invasion of Ukraine and Related Supply Chain Issues, issued
by the Staff in May
2022.
7. Please highlight the material risks to public warrant holders,
including those arising from
differences between private and public warrants. Clarify whether
recent common stock
trading prices exceed the threshold that would allow the company to
redeem public
warrants. Clearly explain the steps, if any, the company will take to
notify all
shareholders, including beneficial owners, regarding when the warrants
become eligible
for redemption.
Cover Page
8. Please expand the disclosure about "investors in LTC are not acquiring
equity interest in
any operating company but instead are acquiring interest in a Cayman
Islands holding
company" to, if applicable, explain whether the VIE structure is used
to replicate foreign
Qingfeng Feng
Lotus Technology Inc.
March 31, 2023
Page 3
investment in Chinese-based companies where Chinese law prohibits
direct foreign
investment in the operating companies. Also, revise the references to
the "value of the
securities of LTC to significantly decline" to also disclose the value
could become
worthless. In addition, expand your disclosure about authorities could
"disallow this
structure" to acknowledge that authorities could disallow this
structure, which would
likely result in a material change in your operations and/or value of
your ordinary shares,
including that it could cause the value of such securities to
significantly decline or become
worthless.
9. We note the disclosure that "Investors may never directly hold equity
interests in the
VIE." Please revise the disclosure to clarify that the investors will
never directly hold
equity interests in the VIE.
10. Provide prominent disclosure about the legal and operational risks
associated with being
based in or having the majority of the company s operations in
China. Your disclosure
should make clear whether these risks could result in a material
change in your operations
and/or the value of your ordinary shares or could significantly limit
or completely hinder
your ability to offer or continue to offer securities to investors and
cause the value of such
securities to significantly decline or be worthless. Your disclosure
should address how
recent statements and regulatory actions by China s government, such
as those related to
the use of variable interest entities and data security or
anti-monopoly concerns, has or
may impact the company s ability to conduct its business, accept
foreign investments, or
list on an U.S. or other foreign exchange. Your prospectus summary
should address, but
not necessarily be limited to, the risks highlighted on the prospectus
cover page.
11. Clearly disclose how you will refer to the holding company,
subsidiaries, and VIEs, if
applicable, when providing the disclosure throughout the document so
that it is clear to
investors which entity the disclosure is referencing and which
subsidiaries or entities are
conducting the business operations. Refrain from using terms such as
we or our when
describing activities or functions of a VIE, if applicable.
12. Provide a description of how cash is transferred through your
organization and disclose
your intentions to distribute earnings. State whether any transfers,
dividends, or
distributions have been made to date between the holding company and
its subsidiaries, or
to investors, and quantify the amounts where applicable. Also,
disclose here and in the
prospectus summary whether you have cash management policies and
procedures that
dictate how funds are transferred, and if so, describe these policies
and procedures.
13. Please disclose on your cover page that following the business
combination you will be a
"controlled company" within the meaning of NASDAQ rules and the
controlling
FirstName LastNameQingfeng Feng
shareholders' anticipated total voting power. Also disclose on the cover
page that you will
Comapany
be a NameLotus Technology
"foreign private Inc.the related exemptions on which you
will be entitled to
issuer" and
March rely.
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FirstName LastName
Qingfeng Feng
FirstName LastNameQingfeng Feng
Lotus Technology Inc.
Comapany
March NameLotus Technology Inc.
31, 2023
March4 31, 2023 Page 4
Page
FirstName LastName
Industry and Market Data, page 3
14. We note your disclosure that information in the proxy
statement/prospectus is based on
information obtained from industry publications, and reports and
forecasts and that you
have not independently verified the accuracy or completeness of any
such information.
This disclosure appears to imply a disclaimer of responsibility for
this information in the
proxy statement/prospectus. Please either revise this section to
remove such implication or
specifically state that you are liable for all information in the
proxy statement/prospectus.
15. Please clarify whether you commissioned any of the third-party data
presented in your
proxy statement/prospectus. To the extent that you commissioned any
such data, please
provide the consent of the third party in accordance with Rule 436.
Questions and Answers about the Business Combination, page 10
16. We note the disclosure on page 14 that "there are significant factual
and legal
uncertainties as to whether the Business Combination will qualify as a
reorganization
within the meaning of Section 368(a) of the Code." Please revise the
disclosure on page
14 to briefly describe the "significant factual and legal
uncertainties."
What interests does the Sponsor have in the Business Combination?, page 17
17. Please revise the response to this question and elsewhere in the
prospectus, as appropriate,
to clarify if the Sponsor and its affiliates can earn a positive rate
of return on their
investment, even if other shareholders experience a negative rate of
return in the post-
business combination company.
Corporate History and Structure of Lotus Tech, page 26
18. Please ensure that the diagram on page 27 is legible.
Cash and Asset Flows through Lotus Tech's Organization, page 30
19. Please revise this section to provide a clear description of how cash
is transferred through
your organization. Disclose your intentions to distribute earnings or
settle amounts owed
under the VIE agreements. Quantify any cash flows and transfers of
other assets by type
that have occurred between the holding company, its subsidiaries, and
the consolidated
VIEs, and direction of transfer. Quantify any dividends or
distributions that a subsidiary or
consolidated VIE have made to the holding company and which entity
made such transfer,
and their tax consequences. Similarly quantify dividends or
distributions made to U.S.
investors, the source, and their tax consequences. Your disclosure
should make clear if no
transfers, dividends, or distributions have been made to date.
Describe any restrictions on
foreign exchange and your ability to transfer cash between entities,
across borders, and to
U.S. investors. Describe any restrictions and limitations on your
ability to distribute
earnings from the company, including your subsidiaries and/or the
consolidated VIEs, to
the parent company and U.S. investors as well as the ability to settle
amounts owed under
Qingfeng Feng
FirstName LastNameQingfeng Feng
Lotus Technology Inc.
Comapany
March NameLotus Technology Inc.
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the VIE agreements.
Risks Relating to our Corporate Structure, page 44
20. We note your disclosure on page 44 about risks relating to your
corporate structure and
risks relating to doing business in China. In your summary of risk
factors, disclose the
risks that your corporate structure and being based in or having the
majority of the
company s operations in China poses to investors. In particular,
describe the significant
regulatory, liquidity, and enforcement risks with cross-references
from each summary risk
factor to the more detailed discussion of these risks in the
prospectus. For example,
specifically discuss risks arising from the legal system in China,
including risks and
uncertainties regarding the enforcement of laws and that rules and
regulations in China
can change quickly with little advance notice; and the risk that the
Chinese government
may intervene or influence your operations at any time, or may exert
more control over
offerings conducted overseas and/or foreign investment in China-based
issuers, which
could result in a material change in your operations and/or the value
of the securities.
Acknowledge any risks that any actions by the Chinese government to
exert more
oversight and control over offerings that are conducted overseas
and/or foreign investment
in China-based issuers could significantly limit or completely hinder
your ability to offer
or continue to offer securities to investors and cause the value of
such securities to
significantly decline or be worthless.
We are dependent on suppliers, many of whom are our single source suppliers,
page 74
21. We note your disclosure that "many of the components used in our
vehicles are purchased
from a single source, which exposes us to multiple potential sources
of delivery failure or
component shortages." Please update the risk factor to disclose, if
applicable, that recent
supply chain disruptions have impacted your operations.
Covenants of LCAA, page 152
22. We note the disclosure in item (f) on page 153 about the extension
until March 15, 2024.
Please expand the appropriate section to disclose the number and
percentage of
shareholders who redeemed their shares in connection with the votes to
approve the
extension.
Background of the Business Combination, page 163
23. Please revise your disclosure throughout this section to discuss in
greater detail the
negotiations and discussions between the parties. For example, discuss
how the parties
determined an equity valuation of $5.5 billion as disclosed at the
bottom of page 170. As
another example, discuss in greater detail the "feedback from
representatives of Geely and
Etika" mentioned on page 171.
24. We note that you state that the disclosure in this section is a brief
description of LCAA s
formation, LCAA s previous engagements with business combination
targets other than
Qingfeng Feng
Lotus Technology Inc.
March 31, 2023
Page 6
LTC, and its negotiations with, and evaluation of, LTC. Please revise
to clarify that you
have described all material contacts between the parties during the
past two years.
25. Please expand the appropriate section to discuss the material terms of
the put option
agreements mentioned on page 171.
Information about Lotus Tech, page 213
26. Please describe your "strategic relationship" with LVMH. Please
discuss the material
terms of such relationship and file any agreements as exhibits to the
proxy
statement/prospectus.
Eletre, page 217
27. We note that as of January 31, 2023, you have received over 5,000
orders for Eletre
globally. Please balance this statement with the disclosure in Risk
Factors on page 70 that
orders may be cancelled despite their deposit payment and online
confirmation.
Unaudited Pro Forma Condensed Combined Financial Information, page 283
28. We note your disclosure on page nine which states that LCAA must have
net tangible
assets of at least $5,000,001 upon consummation of the business
combination and LCAA
may not consummate the business combination if immediately prior to or
upon
consummation, the net tangible assets are below the $5,000,001
threshold. You further
state that unless LTC elects to waive the minimum available cash
condition, the maximum
redemption scenario cannot occur.
As such, it appears you should modify your pro forma presentation and
other disclosures
to present a maximum redemption scenario that contemplates the trust
having $5,000,001
of remaining funds in order to consummate the merger, or otherwise
explain to us why
your current presentation presents a realistic scenario that will
allows the merger to
proceed.
Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined
Balance
Sheet, page 293
29. With regard to note (A), we note your adjustment assumes proceeds from
the Merger
Financing investors. We also note your disclosure elsewhere that it
appears such terms
have not yet been confirmed. Please tell us and disclose if there are
existing signed
agreements regarding these proceeds. To the extent you do not have such
arrangements in
place, please revise your disclosures remove the pro forma effect of
these adjustments.
FirstName LastNameQingfeng Feng
30. With regard to note (C), please explain to us and in your disclosure,
the source of funds
Comapany NameLotus
that will be used Technology Inc.underwriting commissions assuming
maximum
to pay deferred
March redemptions.
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Lotus Technology Inc.
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31. With regard to note (I), revise to show the computation of the
540,342,225 LTC ordinary
shares. Additionally, revise similar disclosures throughout your
document.
Unaudited Pro Forma Condensed Combined Financial Information
Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined
Statements
of Operations, page 294
32. Regarding pro forma adjustment (CC), please explain why you believe
this adjustment is
appropriate. It appears you are adjusting the historical results of
LCAA, for an amount
which is unrelated to the merger transaction and the resulting
transaction accounting
adjustments. Please refer to SEC Release No. 33-10786 and Rule
11-02(a)(6)(i)(B) of
Regulation S-X for guidance.
Note (k) Intangible Assets, page F-53
33. We note your disclosure states you acquired license plates and a
trademark license (Lotus
trademark). We further note you believe the acquired assets have an
indefinite life.
Please tell us the details of the contractual arrangement regarding
these acquired
intangibles. It is unclear whether you have rights to the intangibles
for a specified
contractual term or if you have full rights to the assets and all the
obligations associated
with maintaining the intangibles. We note on page F-62, you have
non-exclusive features
to the trademark license, which indicates others are the primary owner
of the
trademark(s).
Lotus Technology Inc. Financial Statements
Notes to the Financial Statements
Related Party Transactions, page F-77
34. We note your disclosure which states you received a "non-exclusive,
perpetual,
irrevocable and non-sublicensable license for the electric automotive
chassis and
autonomous driving technology platform (the Geely License)" for
US$888,165. We
further note your disclosure which states the Geely License has no
alternative future use
and therefore the cost of the license has been expensed as research
and development.
Please explain why you concluded the license has no future use and
should be expensed
rather than capitalized.
Exhibits
35. Please revise the exhibit index to clarify which exhibit is related to
the " " footnote at the
bottom of page II-4.
Qingfeng Feng
FirstName LastNameQingfeng Feng
Lotus Technology Inc.
Comapany
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March8 31, 2023 Page 8
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You may contact Kevin Stertzel at 202-551-3723 or Melissa Gilmore at
202-551-3777 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Thomas Jones at 202-551-3602 or Erin Purnell at 202-551-3454 with any
other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Manufacturing
cc: Shu Du, Esq.