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PARTNERS CHRISTOPHER W. BETTS WILL H. CAI ^ GEOFFREY CHAN * CHI T. STEVE KWOK * EDWARD H.P. LAM ¨* HAIPING LI * RORY MCALPINE ¨ CLIVE W. ROUGH ¨ JONATHAN B. STONE * ^ (ALSO ADMITTED IN CALIFORNIA) ¨ (ALSO ADMITTED IN ENGLAND & WALES) * (ALSO ADMITTED IN NEW YORK)
REGISTERED FOREIGN LAWYERS Z. JULIE GAO (CALIFORNIA) BRADLEY A. KLEIN (ILLINOIS) | SKADDEN, ARPS, SLATE, MEAGHER & FLOM 世達國際律師事務所
42/F, EDINBURGH TOWER, THE LANDMARK 15 QUEEN’S ROAD CENTRAL, HONG KONG
TEL: (852) 3740-4700 FAX: (852) 3740-4727 www.skadden.com
March 13, 2018 | AFFILIATE OFFICES
BOSTON CHICAGO HOUSTON LOS ANGELES NEW YORK PALO ALTO WASHINGTON, D.C. WILMINGTON
BEIJING BRUSSELS FRANKFURT LONDON MOSCOW MUNICH PARIS SÃO PAULO SEOUL SHANGHAI SINGAPORE TOKYO TORONTO |
VIA EDGAR
Mr. Jeff Kauten
Ms. Folake Ayoola
Mr. Stephen Krikorian
Ms. Morgan Youngwood
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
U. S. A.
Re: Bilibili Inc.
Registration Statement on Form F-1 (File No. 333-223405)
Dear Mr. Kauten, Ms. Ayoola, Mr. Krikorian and Ms. Youngwood:
On behalf of our client, Bilibili Inc., a foreign private issuer organized under the laws of the Cayman Islands (the “Company”), we submit to the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) this letter setting forth the Company’s response to the Staff’s request that was previously communicated to the Company’s U.S. counsel verbally.
The Company respectfully advises the Staff that an estimated initial public offering price range for marketing purposes will not be established until shortly before the filing of an amendment to the Registration Statement containing the preliminary prospectus for the offering on March 16, 2018. However, in response to the Staff’s request for an estimated price range for the offering, the Company has estimated a preliminary indicative price range with reference to the preliminary indicative valuation provided by the underwriters of this offering, which was in turn derived from the information provided by the Company and current market conditions. The estimated preliminary indicative price range is subject to change, which may result from variations in market conditions and other developments. Such developments may not be within the control of, or foreseeable by, the Company. Accordingly, there is no assurance that the estimated price range to be included on the front cover of the preliminary prospectus will correspond to, or that the final offering price will fall within, this estimated preliminary indicative range. The Company currently estimates the preliminary indicative price range for this offering to be between US$10.00 and US$12.00 per ordinary share, with a mid-point of US$11.00 per ordinary share.
A detailed description of the valuation method used and the factors contributing to the changes in the fair value of the ordinary shares of the Company between November 3, 2014 and December 31, 2017 is set forth on pages 92 to 95 of the Registration Statement on Form F-1 filed on March 2, 2018. The Company respectfully advises the Staff that the increase in the fair value of the ordinary shares of the Company from US$6.94 per ordinary share as of December 31, 2017 to US$11.00 per ordinary share, the estimated mid-point of the preliminary indicative price range for this offering, was primarily attributable to the following factors:
· The public filing of the registration statement relating to this offering on March 2, 2018 reduced the uncertainties associated with the Company’s initial public offering, and significantly lowered the discount for lack of marketability from 10.0% as of December 31, 2017 to 0.0% upon the completion of this offering;
· The Company achieved significant growth in active users to 76.4 million average monthly active users in the first two months of 2018 from 71.8 million in the fourth quarter of 2017;
· As the Company developed a longer track record in achieving revenue growth target successfully, the Company further reduced its discount rate;
· As the Company progressed further towards this offering, the Company increased its estimated probability of a successful initial public offering. As the Company’s preferred shares would be automatically converted into and re-designated as ordinary shares upon the completion of this offering, the increase in the estimated probability of initial public offering’s success results in an allocation of a higher portion of the Company’s business enterprise value to ordinary shares; and
· The impending launch of this offering, which will provide the Company with additional capital, enhances its ability to access capital markets to grow business and raise its profile.
The Company respectfully advises the Staff that in determining the fair value of the ordinary shares as of various dates before the offering, the Company, with the assistance of an independent valuation firm, has considered the guidance prescribed by the AICPA Audit and Accounting and Valuation Guide, “Valuation of Privately-Held-Company Equity Securities Issued as Compensation” (the “Guide”).
Paragraph 10.04 of the Guide provides that:
“The ultimate IPO price is generally not likely to be a reasonable estimate of the fair value for pre-IPO equity transactions of the enterprise. The value of a private enterprise before and after a successful IPO may be significantly different. In addition, the IPO event itself increases enterprise value, because, among other things, it allows the enterprise access to the public capital markets.”
Paragraph 10.05 of the Guide provides further that:
“The IPO price also reflects an estimate of the expected valuation of the company’s shares based upon its position following a successful IPO. As a result, it normally incorporates the effect of the issuance of primary shares by the company, the proceeds from which can be used to either reduce the company’s debt level or to provide capital to fully finance the company’s expansion or development of its business plan. In contrast, most financings for earlier stage companies do not allow the company to reach break-even cash flows and to become self-sustaining. Therefore, the IPO price recommendation may be free from the risk premium associated with the need to raise additional capital associated with earlier stage companies.”
In accordance with paragraphs 10.04 and 10.05 of the Guide, the Company believes neither the estimated mid-point of the preliminary indicative price range for this offering nor the final offering price itself should be construed as a reasonable estimate of the fair value of its ordinary shares as of various dates before this offering.
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If you have any questions regarding the foregoing matters, please contact the undersigned by phone at +852-3740-4863 or via e-mail at julie.gao@skadden.com or Geoffrey Wang, the audit engagement partner at PricewaterhouseCoopers Zhong Tian LLP, by telephone at +86 10-6533-2928 or via email at geoffrey.wang@cn.pwc.com. PricewaterhouseCoopers Zhong Tian LLP is the independent registered public accounting firm of the Company.
| Very truly yours, |
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| /s/ Z. Julie Gao |
| Z. Julie Gao |
cc: Rui Chen, Chairman of the Board of Directors and Chief Executive Officer, Bilibili Inc.
Ni Li, Chief Operating Officer, Bilibili Inc.
Xin Fan, Chief Financial Officer, Bilibili Inc.
Haiping Li, Esq., Partner, Skadden, Arps, Slate, Meagher & Flom LLP
Geoffrey Wang, Partner, PricewaterhouseCoopers Zhong Tian LLP
Allen Wang, Esq., Partner, Latham & Watkins
