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February 13, 2019
Yi Duan
Chief Executive Officer
Fangdd Network Group Ltd.
18/F, Unit B2, Kexing Science Park
15 Keyuan Road, Technology Park
Nanshan District, Shenzhen, 518057
People's Republic of China
Re: Fangdd Network Group Ltd.
Draft Registration Statement on Form F-1
Submitted December 20, 2018
CIK No. 0001750593
Dear Mr. Duan:
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.
Form F-1 Filed December 20, 2018
General
1. Please provide us with copies of any graphics, maps, photographs, and
related captions or
other artwork including logos that you intend to use in the prospectus.
Such graphics and
pictorial representations should not be included in any preliminary
prospectus distributed
to prospective investors prior to our review.
Yi Duan
FirstName LastNameYi Ltd.
Fangdd Network Group Duan
Comapany NameFangdd Network Group Ltd.
February 13, 2019
February 13, 2019 Page 2
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FirstName LastName
Summary
Our Marketplace, page 3
2. Please expand your definition of "gross merchandise value" to state
clearly how you
calculate it.
3. We note that your closed-loop GMV and commission-based GMV were the
same in 2016
and 2017. Please advise us as to why these metrics were the same, and
why both provide
useful information to investors.
Risk Factors
"We may fail to compete effectively with existing and new industry players . .
..,", page 16
4. Please revise your disclosure, where applicable, to provide an
estimate of the number of
competitors in your industry, and your competitive position, if known.
To the extent any
of your competitors are dominant in your top markets, please revise to
describe in
additional detail.
Capitalization, page 57
5. Please revise your capitalization table to reflect the total
capitalization of the company
rather than the total liabilities, mezzanine equity and deficit.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
72
6. Please revise your discussion of net income to include discussion of
your continuing loss
from operations. Your disclosure should also include a discussion of
government grants
received during the period, the relevant terms of those grants, and
whether such grants are
expected to continue in the future.
7. Tell us how you considered the need to include obligations created by
your sales
commitment arrangements in your contractual obligations table on page
81. Reference is
made to Item 303(a)(5) of Regulation S-K.
8. Please explain further why you believe closed-loop GMV per employee is
a useful metric
for investors.
Extensive and Verified Online Property Database and Listings, page 102
9. We note your disclosure on page 103 that "[y]our listings span more
than 100 urban
centers and satellite cities in China" and that you have "engag[ed]
with the top 100
developers in China." Please expand your discussion of the geographic
location of your
listings.
Yi Duan
FirstName LastNameYi Ltd.
Fangdd Network Group Duan
Comapany NameFangdd Network Group Ltd.
February 13, 2019
February 13, 2019 Page 3
Page 3
FirstName LastName
Business
Marketplace Participants, page 105
10. Please revise your disclosure here, and throughout your document, to
clarify whether
revenue has been generated from non-closed-loop agents. In that
regard, we note that
closed-loop GMV is equal to commission-based GMV, which seems to
indicate that
commissions have been generated solely from closed-loop transactions.
Our Marketplace, page 105
11. Please provide support for the following claims made in this section:
You have established business relationships with "most of the top
100 developers in
China as of December 31, 2017;"
You typically receive "preferable terms from developers, including
pricing,
commission payment period and commission rate;"
You "have obtained new property listings with favorable terms,
including competitive
property prices and exclusive selling rights."
Mobile Applications and Websites, page 107
12. We note your disclosure that "[i]in the first six months of 2018,
[y]our websites and
mobile applications attracted 14.7 million unique visitors." Please
tell us what
consideration was given to separately disclosing the number of unique
visitors who visit
your website from those who use your mobile applications. If you do
not believe separate
disclosure would be meaningful or material, please tell us why.
Additionally, to the extent
possible, please revise your disclosure to discuss, where applicable,
what percentage of
monthly unique visitors resulted in a revenue generating event.
13. Please tell us how you ensure that a user who visits your website and
uses a mobile
application, or visits your website or uses your mobile applications
multiple times is not
counted more than once.
Intellectual Property, page 112
14. We note that you own 2 registered patents, 44 registers copyrights,
and 211 registered
trademarks in China and 9 registered domain names as of the date of
the prospectus.
Please revise to describe any relevant expiration dates and the
importance of each to your
business. Refer to Item 4.B.6 of Form 20-F.
Description of American Depositary Shares
Amendment and Termination, page 153
15. The description of the ADSs indicates that you may amend or terminate
the deposit
agreement without consent. Please explain the circumstances under
which you may
Yi Duan
FirstName LastNameYi Ltd.
Fangdd Network Group Duan
Comapany NameFangdd Network Group Ltd.
February 13, 2019
February 13, 2019 Page 4
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FirstName LastName
exercise this right, and include corresponding risk factor disclosure.
Notes to the Consolidated Financial Statements
(l) Deposits with real estate developers, page F-16
16. Please provide us with a more detailed discussion of your Sales
Commitment
Arrangements. In your response, please address the following:
Clarify for us how you account for deposits made with the developer
under these
arrangements. In this regard, we note that the required deposit
varies over the course
of the agreement. Explain to us whether the entire deposit is
accrued at the time the
agreement is executed, or if deposits are recorded as paid.
Explain to us when you recognize revenue under these arrangements.
Your response
should include a discussion of how your ongoing obligation to
purchase unsold
properties impacts the timing of revenue recognition. Cite any
relevant accounting
literature in your response.
Tell us how you determined your collaborative arrangements with
funding partners fall
within the scope of ASC Topic 808. Your response should include,
but not be limited
to, a discussion of how you considered the guidance in ASC Topic
808-10-15-
8 through 808-10-15-9.
(r) Revenue, page F-19
17. We note that you recognize commission revenue from sales of primary
properties and
rentals of secondary properties, as well as Sales Incentive Income,
when the sales and
purchase agreement or rental agreement is ratified and required down
payments are made.
Please tell us if there are any circumstances in which this entire
commission or sales
incentive amount may become no longer due in full after this point.
For example, would
there be any reduction in the full commission or sales incentive
amount due to you if the
purchaser does not complete the acquisition of the property.
18. Please provide us with a detailed analysis supporting your conclusion
that commission
income should be recognized on a gross rather than net basis. Your
analysis should
include a summary of the terms of your contracts with property sellers
and agents, and a
discussion of the performance obligations contained therein. Reference
is made to ASC
Topic 606-10-55-36 through 606-10-55-40.
Exhibit Index, page II-4
19. If you are not in a position to file your legal and tax opinions with
the next amendment,
please provide a draft copy for our review.
20. We note that you intend to file the form of employment agreement for
your executive
officers as Exhibit 10.3, even though you disclose on page 129 that
you have entered into
employment agreements with each of your executive officers. Please
file complete copies
of such executed agreements as exhibits to the registration statement.
Yi Duan
Fangdd Network Group Ltd.
February 13, 2019
Page 5
You may contact Eric Mcphee, Staff Accountant, at 202-551-3693 or
Robert
Telewicz, Accounting Branch Chief, at 202-551-3438 if you have questions
regarding comments
on the financial statements and related matters. Please contact Joshua Lobert,
Staff Attorney, at
202-551-7150 or Sonia Barros, Assistant Director, at 202-551-3655 with any
other questions.
Sincerely,
FirstName LastNameYi Duan
Division of
Corporation Finance
Comapany NameFangdd Network Group Ltd.
Office of Real
Estate and
February 13, 2019 Page 5 Commodities
FirstName LastName