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Our Corporate Structure
Full Truck Alliance Co. Ltd. is not a Chinese operating company but a Cayman Islands holding company with operations primarily conducted (i) through contractual arrangements with certain variable interest entities, or the Group VIEs, in China and (ii) by our subsidiaries in China. Under the PRC laws and regulations, the provision of value-added telecommunication services and certain financial services in the PRC is subject to foreign investment restrictions and license requirements. Therefore, we operate such business in China through the Group VIEs, and rely on contractual arrangements among our PRC subsidiaries, the Group VIEs and their respective individual shareholders to control the business operations of the Group VIEs. Investors in our ADSs do not hold equity interest in the Group’s operating entities in China, but instead hold an equity interest in Full Truck Alliance Co. Ltd., a Cayman Islands holding company. As used in this annual report, “FTA,” “we,” “us,” “our Company” or “our” refers to Full Truck Alliance Co. Ltd. and/or its subsidiaries, “the Group” refers to Full Truck Alliance Co. Ltd., the Group VIEs and their respective subsidiaries, and “the consolidated affiliates” refers to the Group VIEs and their respective subsidiaries.
Prior to the fourth quarter of 2021, our Group VIEs were Shanghai Xiwei Information Consulting Co., Ltd., or Shanghai Xiwei, Beijing Manxin Technology Co., Ltd, or Beijing Manxin (formerly known as Beijing Yunmanman Technology Co., Ltd., or Beijing Yunmanman), and Guizhou FTA Logistics Technology Co., Ltd., or Guizhou FTA. In the fourth quarter of 2021, in order to enhance corporate governance, we underwent a reorganization of the holding structure of our onshore subsidiaries and the consolidated affiliates, or the Reorganization. The Reorganization mainly involved (i) changing the Group VIEs and (ii) changing certain subsidiaries of the Group VIEs to wholly-owned or partly-owned subsidiaries of our Company, to the extent permitted under the relevant PRC laws and regulations. The Reorganization was completed on January 1, 2022. On May 24, 2022, Yixing Manxian Information Technology Co., Ltd., or Yixing Manxian, our PRC subsidiary, gained control over Nanjing Manyun Cold Chain Technology Co., Ltd., or Manyun Cold Chain, a majority-owned subsidiary of Jiangsu Manyun Software Technology Co., Ltd., or Manyun Software, through a series of contractual arrangements with Manyun Cold Chain and its shareholders.
The following diagram illustrates our corporate structure with our principal subsidiaries as of December 31, 2025. Certain entities that are immaterial to our results of operations, business and financial condition are omitted. Except as otherwise specified, equity interests depicted in this diagram are held as to 100%.
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(1) Besides Jiangsu Yunmanman Information Technology Co., Ltd. (formerly known as Jiangsu Manyun Logistics Information Co., Ltd.), or Jiangsu Yunmanman, Lucky Logistics Information Limited wholly owns two insignificant subsidiaries incorporated in the PRC.
(2) Besides Guiyang Full Truck Alliance Information Technology Group Co., Ltd. (formerly known as Full Truck Alliance Information Technology Co., Ltd.), or FTA Information, FTA HK’s subsidiaries include two insignificant subsidiaries incorporated in the PRC that are wholly-owned by FTA HK and one insignificant subsidiary incorporated in the British Virgin Islands that is wholly-owned by FTA HK.
(3) Include two insignificant subsidiaries that are majority-controlled by FTA.
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(4) Manyun Software, Tianjin Zhihui Yunli Management Consulting Partnership (Limited Partners), or Tianjin Zhihui and Mr. Peter Hui Zhang hold 82.5%, 10.0% and 7.5% of equity interest in Manyun Cold Chain, respectively. Manyun Cold Chain primarily provides freight matching services for the cold chain logistics sector and operates Yunmanman Cold Chain apps.
(5) Jiangsu Yunmanman and another subsidiary of Lucky Logistics Information Limited each holds 50.0% of the equity interest in Jiangsu Manyun Technology Industry Co., Ltd, or Manyun Technology.
(6) Mr. Peter Hui Zhang and Ms. Guizhen Ma hold 70% and 30% equity interest, respectively, in Manyun Software. Manyun Software and its subsidiaries are primarily involved in operating the Yunmanman apps and Shengsheng apps and providing freight matching services.
(7) Include ten insignificant subsidiaries that are wholly-owned by Jiangsu Yunmanman.
(8) In March 2021, Guizhou FTA became a Group VIE. On January 1, 2022, FTA Information acquired Guizhou FTA from its shareholders and it became a wholly-owned subsidiary of FTA Information.
(9) Include two insignificant subsidiaries that are wholly owned by FTA Information.
(10) Mr. Peter Hui Zhang and Ms. Guizhen Ma hold 70% and 30% equity interest, respectively, in Shan’en Technology. Shan’en Technology and its subsidiaries are primarily involved in operating the Huochebang apps and providing freight matching services and insurance brokerage services.
(11) Include eight insignificant subsidiaries that are wholly-owned by Manyun Software, and one insignificant subsidiary that are majority-owned by Manyun Software.
(12) Previously, Guiyang Huochebang Technology Co., Ltd., or Guiyang Huochebang, was a Group VIE. In March 2021, as directed by FTA Information, Guizhou FTA, a newly established entity, acquired 100% of equity interest in Guiyang Huochebang for a nominal price from the shareholders of Guiyang Huochebang, and FTA Information gained control over Guizhou FTA through a series of contractual arrangements with Guizhou FTA and its shareholders. As a result, Guizhou FTA became a Group VIE, and Guiyang Huochebang became a subsidiary of Guizhou FTA. FTA Information and Guizhou FTA hold 98.2% and 1.8% of equity interest in Guiyang Huochebang, respectively.
(13) Guiyang Huochebang and FTA Information hold 89.5% and 10.5% of equity interest in Guizhou Huochebang Internet Information Service Co., Ltd., respectively.
(14) Include nine insignificant subsidiaries that are wholly-owned by Guiyang Huochebang.
(15) Include two insignificant subsidiaries that are wholly-owned by Chengdu Yunli.
On January 2, 2025, Yixing Manxian, Manyun Cold Chain and its shareholders entered into amended and restated contractual arrangements due to changes in ownership structure of Yixing Manxian and Manyun Cold Chain. The amended and restated contractual arrangements did not change the scope of the Group VIEs. The major Group VIEs are (i) Manyun Software, (ii) Guiyang Shan’en Technology Co., Ltd., or Shan’en Technology, and (iii) Manyun Cold Chain.
The contractual arrangements among our PRC subsidiaries, the Group VIEs and their respective individual shareholders collectively enable us to:
• exercise effective control over our Group VIEs and their subsidiaries;
• receive substantially all the economic benefits of our Group VIEs; and
• have an exclusive option to purchase all or part of the equity interests in all or part of the assets when and to the extent permitted by PRC law.
These contractual arrangements generally include equity interest pledge agreements, spousal consent letters, power of attorney, loan agreements, exclusive service agreement and exclusive option agreement, as the case may be. As a result of the contractual arrangements, we are considered the primary beneficiary of these companies for accounting purposes, and we have consolidated the financial results of these companies in the Group’s consolidated financial statements. However, we do not own equity interest in the Group VIEs. Furthermore, Full Truck Alliance Co. Ltd., as our holding company, does not conduct operating activities other than holding investment in certain of our equity investees.
The individual nominee shareholders of the Group VIEs are current or former directors and/or members of senior management of our Company. We consider such individuals suitable to act as the nominee shareholders of the Group VIEs because of, among other considerations, their contribution to the Group, their competence and their length of service with and loyalty to the Group. For more details of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with the Group VIEs.”
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We are subject to risks associated with our contractual arrangements with the Group VIEs. Our Company and its investors may never have a direct ownership interest in the businesses that are conducted by the Group VIEs. The contractual arrangements may not be as effective as direct ownership in providing us with control over the Group VIEs. If the Group VIEs or their shareholders fail to perform their respective obligations under these contractual arrangements, we could be limited in our ability to enforce these contractual arrangements. There are very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC law. If we are unable to maintain effective control, we would not be able to continue to consolidate the financial results of these entities in the Group’s financial statements. See “—D. Risk Factors—Risks Relating to Our Corporate Structure—We rely on contractual arrangements with the Group VIEs and their shareholders to conduct a substantial part of the Group’s operations in China, which may not be as effective as direct ownership in providing operational control and otherwise have a material adverse effect as to our business” and “—D. Risk Factors—Risks Relating to Our Corporate Structure—The shareholders of the Group VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.”
There are also uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the Group VIEs and their nominee shareholders. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or any of the Group VIEs is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion in accordance with the applicable laws and regulations to take action in dealing with such violations or failures. The Group VIEs hold certain material licenses and assets to conduct business in China and contribute the majority of the Group’s revenues. An event that results in the deconsolidation of the Group VIEs would have a material effect on the Group’s operations and cause the value of the securities of our Company to diminish substantially or even become worthless. See “—D. Risk Factors—Risks Relating to Our Corporate Structure—If the PRC government deems that the contractual arrangements in relation to the Group VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.”
The Group also faces various legal and operational risks and uncertainties associated with being based in or having its operations primarily in China and the country’s complex and evolving laws and regulations. For example, the Group faces risks associated with regulatory approvals on offerings conducted overseas by and foreign investment in China-based issuers, the use of the Group VIEs, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact the Group’s ability to conduct certain businesses, accept foreign investments, or list on a U.S. or other foreign exchange outside of China. These risks could result in a material adverse change in the Group’s operations and the value of our ADSs, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause the value of such securities to significantly decline. See “—D. Risks Factors—Risks Relating to Doing Business in China.”
Holding Foreign Companies Accountable Act
The Holding Foreign Companies Accountable Act, as amended, or the HFCA Act, was signed into law on December 18, 2020 and amended pursuant to the Consolidated Appropriations Act, 2023 on December 29, 2022. Under the HFCA Act and the rules issued by the SEC and the PCAOB thereunder, if we have retained a registered public accounting firm to issue an audit report where the registered public accounting firm has a branch or office that is located in a foreign jurisdiction and the PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction, the SEC will identify us as a “covered issuer”, or SEC-identified issuer, shortly after we file with the SEC a report required under the Securities Exchange Act of 1934, or the Exchange Act (such as our annual report on Form 20-F), that includes an audit report issued by such accounting firm; and if we were to be identified as an SEC-identified issuer for two consecutive years, the SEC would prohibit our securities (including our shares or ADSs) from being traded on a national securities exchange or in the over-the-counter trading market in the United States.
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In December 2021, the PCAOB made its determinations, or the 2021 determinations, pursuant to the HFCA Act that it was unable to inspect or investigate completely registered public accounting firms headquartered in Chinese Mainland or Hong Kong, including our auditor, Deloitte Touche Tohmatsu Certified Public Accountants LLP. After we filed our annual report on Form 20-F for the fiscal year ended December 31, 2021 that included an audit report issued by Deloitte Touche Tohmatsu Certified Public Accountants LLP on April 25, 2022, the SEC conclusively identified us as an SEC-identified issuer on May 26, 2022.
Following the Statement of Protocol signed between the PCAOB and the China Securities Regulatory Commission and the Ministry of Finance of the PRC in August 2022 and the on-site inspections and investigations conducted by the PCAOB staff in Hong Kong from September to November 2022, the PCAOB Board voted in December 2022 to vacate the previous 2021 determinations, and as a result, our auditor, Deloitte Touche Tohmatsu Certified Public Accountants LLP, was no longer a registered public accounting firm that the PCAOB was unable to inspect or investigate completely, and we were not identified as an SEC-identified issuer thereafter. As of the date of this annual report, we do not expect to be identified as an SEC-identified issuer for the fiscal year ended December 31, 2025. However, the PCAOB may change its determinations under the HFCA Act at any point in the future. See “—D. Risks Factors— Risks Relating to Doing Business in China—If the PCAOB determines that it is unable to inspect or investigate completely our auditor at any point in the future, our ADSs may be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, as amended, or the HFCA Act, and any such trading prohibition on our ADSs or threat thereof may materially and adversely affect the price of our ADSs and value of your investment.”
Licenses, Permits and Approvals
We conduct our business primarily through (i) our Group VIEs and their subsidiaries in China and (ii) our subsidiaries in China. Our operations in China are governed by PRC laws and regulations. The Group has received all material permissions that are, or may be, required for its operations in China, including the operations of the Group VIEs. See “Item 4. Information on the Company—B. Business Overview— Licenses, Permits and Approvals.” for more details.
No material permission has been denied from us by relevant authorities in China. To enhance the experience of shippers, truckers and other ecosystem participants, we offer various auxiliary functions, content and value-added services through the FTA platform. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practices by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for these functions, content and services. See “—D. Risk Factors—Risks Relating to Our Business and Industry— If we fail to obtain or maintain licenses, permits or approvals applicable to the Group’s business, we may become subject to significant penalties and other regulatory proceedings or actions.”
In connection with our previous issuance of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the date of this annual report, we, our PRC subsidiaries and our Group VIEs, (i) are not required to obtain permissions from the CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, and (iii) have not received or were denied such requisite permissions by any PRC authority. However, the PRC government has indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, and we cannot assure you that the relevant PRC government authorities will reach the same conclusion in the future. The Cybersecurity Review Office of the CAC announced the initiation of a cybersecurity review of the Yunmanman apps and Huochebang apps on July 5, 2021. During the cybersecurity review, the Yunmanman and Huochebang apps were required to suspend new user registration. Based on notification by the CRO, we have resumed new user registration on the Yunmanman and Huochebang apps since June 29, 2022. For more details, see “—D. Risk Factors—Risks Relating to Our Business and Industry—The Group’s business is subject to complex and evolving PRC laws and regulations relating to cybersecurity and data security” and —D. Risk Factors—Risks Relating to Our Corporate Structure—Uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and its implementing rules and how they may impact the Group’s business, financial condition and results of operations.”
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Cash Transfers within Our Corporate Structure
Full Truck Alliance Co. Ltd. is a Cayman Islands holding company with operations primarily conducted (i) through the consolidated affiliates in China and (ii) by our subsidiaries in China.
The following diagram summarizes how cash was transferred among our Company, our subsidiaries and the consolidated affiliates in 2023, 2024 and 2025.
(1) Our PRC subsidiaries, Jiangsu Yunmanman, FTA Information and Yixing Manxian, entered into contractual arrangements with the Group VIEs, including Manyun Software, Shan’en Technology and Manyun Cold Chain, respectively. See “Item 4. Information on the Company—C. Organizational Structure.”
The following table sets forth a summary of the cash flows that occurred between our Company, our subsidiaries, and the consolidated affiliates.
For the Years Ended December 31,
2023 2024 2025
RMB RMB RMB US$
(in thousands)
Intercompany Cash Flow Data:
Transfer from our Company to our subsidiaries 4,198,690 3,514,587 8,912,353 1,274,450
Transfer from our subsidiaries to our Company 2,364,780 970,085 7,255,944 1,037,586
Transfer from our Company to the consolidated affiliates — 86,170 — —
Transfer from the consolidated affiliates to our Company — 1,204,623 252,030 36,040
Transfer from our subsidiaries to the consolidated affiliates 1,952,383 7,189,271 3,728,938 533,231
Transfer from the consolidated affiliates to our subsidiaries 3,398,082 8,443,505 4,910,478 702,189
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Our Company made cash transfers to our subsidiaries primarily in the form of intercompany loans and capital contribution in 2023, 2024 and 2025.
The subsidiaries made loan repayments to our Company in 2023, 2024 and 2025.
Our Company made cash transfers to the consolidated affiliates in the form of intercompany loans in 2024 to finance the consolidated affiliates’ operations. Our company did not make cash transfers to the consolidated affiliates in 2023 and 2025.
The consolidated affiliates made loan repayments to our Company in 2024 and 2025. The consolidated affiliates did not make cash transfers to our Company in 2023.
Our subsidiaries made cash transfers to the consolidated affiliates primarily in the form of intercompany loans to finance the consolidated affiliates’ operations and other cash transfers in 2023, 2024 and 2025.
The consolidated affiliates made loan repayments and other cash transfers to our subsidiaries in 2023, 2024 and 2025.
The Group VIEs did not pay any service fee under the exclusive service agreements in 2023, 2024 and 2025.
On March 13, 2024, we declared an annual cash dividend for the year ended December 31, 2023 of US$0.0072 per ordinary share, or US$0.1444 per ADS, which was paid on or around April 19, 2024 to holders of record of our ordinary shares at the close of business on April 5, 2024. The aggregate amount of the dividend was approximately US$150 million.
Upon review of our results of operations, business development plan, capital requirements, and cash position, our board of directors approved a semi-annual cash dividend policy in March 2025, pursuant to which the board intends to declare and distribute a cash dividend semi-annually starting from 2025. The determination to make dividend distributions and the exact amount of such distributions in any particular semi-annual period will be made at the discretion of the board based upon our operations and earnings, cash flow, financial condition, and other relevant factors, and subject to adjustment and determination by the board. The board has also approved a semi-annual cash dividend of US$0.0048 per ordinary share, or US$0.0960 per ADS, which was paid on or around April 18, 2025, to holders of record of our ordinary shares at the close of business on April 7, 2025. The aggregate amount of the dividend was approximately US$100 million. In August 2025, the board approved a semi-annual cash dividend for the second half of 2025 in the amount of US$0.0048 per ordinary share, or US$0.0960 per ADS, which was paid on or around October 27, 2025, to holders of record of the Company’s ordinary shares at the close of business on October 13, 2025. The aggregate amount of the dividend was approximately US$100 million.
In January 2026, we announced that, in order to carry out our long-term commitment to returning value to shareholders, our board of directors approved a long-term shareholder return plan (the “Plan”), pursuant to which we will distribute no less than 50% of our non-GAAP adjusted net income of the preceding fiscal year through dividends and/or share repurchases each year. The implementation of the Plan and the specifics of the dividends and/or share repurchases are subject to the approval by the board. The board will review the Plan on an ongoing basis, and may adjust the Plan based on its evaluation of our financial performance, business plan and other relevant factors. To implement the Plan, the board also approved that we will return a total of US$400 million to our shareholders in fiscal year 2026, with at least US$300 million distributed through quarterly dividends and the remainder via share repurchases from open markets. We will make announcements of the details of quarterly dividends and share repurchase program after approval by the board.
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Restrictions on Transfer of Funds
In 2023, 2024 and 2025, no dividends or distributions were made to our Company by our subsidiaries. For more details, see “Item 8. Financial information—A. Consolidated Statements and Other Financial Information—Dividend policy.” Our ability to pay dividends, if any, to the shareholders and ADSs investors and to service any debt we may incur may depend upon dividends paid by our PRC subsidiaries. Under PRC laws and regulations, our PRC subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets offshore to us. In particular, under PRC laws, rules and regulations, each of our subsidiaries incorporated in China is required to set aside at least 10% of its net income each year to fund certain statutory reserves until the cumulative amount of such reserves reaches 50% of its registered capital. These reserves, together with the registered capital, are not distributable as cash dividends.
Furthermore, we are subject to restrictions on currency exchange. The Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans, including loans we may secure from our PRC subsidiaries. Currently, our PRC subsidiaries may purchase foreign currency for settlement of “current account transactions,” including payment of dividends to us, by complying with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, the SAFE and other relevant PRC governmental authorities. Since a significant amount of our future revenues and cash flow will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize cash generated in Renminbi to fund our business activities outside of the PRC or pay dividends in foreign currencies to our shareholders, including holders of our ADSs, and may limit our ability to obtain foreign currency through debt or equity financing for our onshore subsidiaries. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to us. For certain Cayman Islands, PRC and United States federal income tax considerations of an investment in the ADSs, see “Item 10. Additional Information — E. Taxation.”
Summary Financial Information Related to the Consolidated Affiliates
The following condensed consolidated financial statement information presents information related to Full Truck Alliance Co. Ltd., or the Parent, which is a Cayman holding company, the consolidated affiliates and our subsidiaries as of December 31, 2024 and 2025 and for the years ended 2023, 2024 and 2025.
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The following tables present the condensed consolidated schedule of results of operation data for the periods indicated.
For the Year Ended December 31, 2025
Parent Consolidated affiliates Subsidiaries Eliminating Entries Total
RMB US$ RMB US$ RMB US$ RMB US$ RMB US$
(in thousands)
Freight Matching Services — — 6,176,685 883,254 4,320,086 617,764 — — 10,496,771 1,501,018
Freight brokerage service — — 4,199,393 600,505 — — — — 4,199,393 600,505
Freight listing service(1) — — 980,158 140,161 — — — — 980,158 140,161
Transaction service(1) — — 997,134 142,588 4,320,086 617,764 — — 5,317,220 760,352
Value-added services(2) — — 439,337 62,824 2,552,258 364,969 (998,507 ) (142,785 ) 1,993,088 285,008
Credit solutions — — 3,514 502 1,470,899 210,336 — — 1,474,413 210,838
Other value-added services(1) — — 435,823 62,322 1,081,359 154,633 (998,507 ) (142,785 ) 518,675 74,170
Net Revenues — — 6,616,022 946,078 6,872,344 982,733 (998,507 ) (142,785 ) 12,489,859 1,786,026
Operating expenses:
Cost of revenues(2) (12,628 ) (1,806 ) (3,859,727 ) (551,933 ) (803,058 ) (114,836 ) 56,617 8,096 (4,618,796 ) (660,479 )
Sales and marketing expenses(2) (54,468 ) (7,789 ) (1,070,009 ) (153,009 ) (893,723 ) (127,801 ) 270,441 38,673 (1,747,759 ) (249,926 )
General and administrative expenses(2) (135,783 ) (19,417 ) (674,041 ) (96,387 ) (571,400 ) (81,708 ) 671,449 96,016 (709,775 ) (101,496 )
Research and development expenses (70,927 ) (10,142 ) (190,237 ) (27,204 ) (613,271 ) (87,697 ) — — (874,435 ) (125,043 )
Provision for credit solutions — — — — (445,351 ) (63,684 ) — — (445,351 ) (63,684 )
Total operating expenses (273,806 ) (39,154 ) (5,794,014 ) (828,533 ) (3,326,803 ) (475,726 ) 998,507 142,785 (8,396,116 ) (1,200,628 )
Other operating income — — 4,643 664 47,812 6,837 — — 52,455 7,501
(Loss) income from operations (273,806 ) (39,154 ) 826,651 118,209 3,593,353 513,844 — — 4,146,198 592,899
Other income (expense)
Interest income(3) 325,379 46,529 26,167 3,742 602,554 86,164 (18 ) (3 ) 954,082 136,432
Foreign exchange loss (10,604 ) (1,516 ) — — (6,740 ) (964 ) — — (17,344 ) (2,480 )
Investment income 64,134 9,171 — — 30,583 4,373 — — 94,717 13,544
Unrealized gains from fair value changes of investments 4,818 689 — — 111,344 15,922 — — 116,162 16,611
Other income (expense), net(3) 150,927 21,583 (6,677 ) (955 ) (35,036 ) (5,011 ) 18 3 109,232 15,620
Share of loss in equity method investees — — — — (14,814 ) (2,118 ) — — (14,814 ) (2,118 )
Total other income 534,654 76,456 19,490 2,787 687,891 98,366 — — 1,242,035 177,609
Net income before income tax 260,848 37,302 846,141 120,996 4,281,244 612,210 — — 5,388,233 770,508
Income tax expense (51,879 ) (7,419 ) (205,211 ) (29,345 ) (672,067 ) (96,104 ) — — (929,157 ) (132,868 )
Equity in gain of subsidiaries and consolidated affiliates(4) 4,199,200 600,478 — — — — (4,199,200 ) (600,478 ) — —
Net income 4,408,169 630,361 640,930 91,651 3,609,177 516,106 (4,199,200 ) (600,478 ) 4,459,076 637,640
Less: Measurement adjustment attributable to redeemable non-controlling interests — — — — 78,361 11,205 — — 78,361 11,205
Less: Net loss attributable to non-controlling interests — — (310 ) (44 ) (22,028 ) (3,150 ) (5,116 ) (732 ) (27,454 ) (3,926 )
Net income attributable to ordinary shareholders 4,408,169 630,361 641,240 91,695 3,552,844 508,051 (4,194,084 ) (599,746 ) 4,408,169 630,361
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For the Year Ended December 31, 2024
Parent Consolidated affiliates Subsidiaries Eliminating Entries Total
RMB RMB RMB RMB RMB
(in thousands)
Freight Matching Services — 6,051,994 3,403,140 — 9,455,134
Freight brokerage service — 4,726,989 — — 4,726,989
Freight listing service(1) — 879,489 — — 879,489
Transaction service(1) — 445,516 3,403,140 — 3,848,656
Value-added services(2) — 384,567 2,672,588 (1,273,651 ) 1,783,504
Credit solutions — 1,106 1,340,328 — 1,341,434
Other value-added services(1) — 383,461 1,332,260 (1,273,651 ) 442,070
Net Revenues — 6,436,561 6,075,728 (1,273,651 ) 11,238,638
Operating expenses:
Cost of revenues(2) (11,115 ) (4,511,454 ) (650,082 ) 72,093 (5,100,558 )
Sales and marketing expenses(2) (49,847 ) (1,126,045 ) (675,618 ) 254,747 (1,596,763 )
General and administrative expenses(2) (343,451 ) (904,527 ) (612,407 ) 946,622 (913,763 )
Research and development expenses (81,542 ) (252,168 ) (546,306 ) — (880,016 )
Provision for credit solutions — — (296,528 ) — (296,528 )
Total operating expenses (485,955 ) (6,794,194 ) (2,780,941 ) 1,273,462 (8,787,628 )
Other operating income — 7,046 16,924 — 23,970
(Loss) income from operations (485,955 ) (350,587 ) 3,311,711 (189 ) 2,474,980
Other income (expense)
Interest income(3) 608,065 43,580 423,194 (1,405 ) 1,073,434
Interest expenses(3) — (1,405 ) — 1,405 —
Foreign exchange (loss) gain (437 ) (73 ) 8,514 — 8,004
Investment income (loss) 56,225 4 (1,444 ) — 54,785
Unrealized gains (losses) from fair value changes of investments 3,233 — (24,137 ) — (20,904 )
Other income (expense), net 123,602 5,935 (1,385 ) — 128,152
Impairment loss — — (352,742 ) — (352,742 )
Share of loss in equity method investees — — (2,861 ) — (2,861 )
Total other income 790,688 48,041 49,139 — 887,868
Net income (loss) before income tax 304,733 (302,546 ) 3,360,850 (189 ) 3,362,848
Income tax expense (83,501 ) (9,555 ) (146,355 ) — (239,411 )
Equity in gain of subsidiaries and consolidated affiliates(4) 2,848,617 — — (2,848,617 ) —
Net income (loss) 3,069,849 (312,101 ) 3,214,495 (2,848,806 ) 3,123,437
Less: Measurement adjustment attributable to redeemable non-controlling interests — — 57,136 — 57,136
Less: Net income (loss) attributable to non-controlling interests — 160 82 (3,790 ) (3,548 )
Net income (loss) attributable to ordinary shareholders 3,069,849 (312,261 ) 3,157,277 (2,845,016 ) 3,069,849
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For the Year Ended December 31, 2023
Parent Consolidated affiliates Subsidiaries Eliminating Entries Total
RMB RMB RMB RMB RMB
(in thousands)
Freight Matching Services — 5,720,554 1,332,971 — 7,053,525
Freight brokerage service — 3,916,409 — — 3,916,409
Freight listing service(1) — 828,152 — — 828,152
Transaction service(1) — 975,993 1,332,971 — 2,308,964
Value-added services(2) — 249,606 2,784,880 (1,651,852 ) 1,382,634
Credit solutions — — 1,001,892 — 1,001,892
Other value-added services(1) — 249,606 1,782,988 (1,651,852 ) 380,742
Net Revenues — 5,970,160 4,117,851 (1,651,852 ) 8,436,159
Operating expenses:
Cost of revenues(2) (8,567 ) (3,709,892 ) (494,058 ) 93,501 (4,119,016 )
Sales and marketing expenses(2) (55,280 ) (819,013 ) (570,620 ) 205,722 (1,239,191 )
General and administrative expenses(2) (386,155 ) (1,489,536 ) (414,615 ) 1,352,629 (937,677 )
Research and development expenses (76,817 ) (216,739 ) (653,079 ) — (946,635 )
Provision for credit solutions — — (234,599 ) — (234,599 )
Total operating expenses (526,819 ) (6,235,180 ) (2,366,971 ) 1,651,852 (7,477,118 )
Other operating income — 17,633 20,755 — 38,388
(Loss) income from operations (526,819 ) (247,387 ) 1,771,635 — 997,429
Other income (expense)
Interest income(3) 771,606 61,681 309,976 (1,402 ) 1,141,861
Interest expenses(3) — (1,402 ) — 1,402 —
Foreign exchange gain (loss) 1,152 — (3,301 ) — (2,149 )
Investment income 52,177 — 3,444 — 55,621
Unrealized gains from fair value changes of investments 12,852 — 86 — 12,938
Other income, net 116,546 7,445 6,273 — 130,264
Share of loss in equity method investees — — (2,067 ) — (2,067 )
Total other income 954,333 67,724 314,411 — 1,336,468
Net income (loss) before income tax 427,514 (179,663 ) 2,086,046 — 2,333,897
Income tax expense (93,914 ) (8,297 ) (4,593 ) — (106,804 )
Equity in gains of subsidiaries, and consolidated affiliates(4) 1,879,288 — — (1,879,288 ) —
Net income (loss) 2,212,888 (187,960 ) 2,081,453 (1,879,288 ) 2,227,093
Less: Measurement adjustment attributable to redeemable non-controlling interest — — 15,457 — 15,457
Less: Net income attributable to non-controlling interests — 3,003 65 (4,320 ) (1,252 )
Net income (loss) attributable to ordinary shareholders 2,212,888 (190,963 ) 2,065,931 (1,874,968 ) 2,212,888
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The following tables present the condensed consolidated schedule of balance sheets data as of the dates indicated.
As of December 31, 2025
Parent Consolidated affiliates Subsidiaries Eliminating Entries Total
RMB US$ RMB US$ RMB US$ RMB US$ RMB US$
(in thousands)
Cash and cash equivalents 15,889 2,272 744,145 106,411 5,306,103 758,763 — — 6,066,137 867,446
Restricted cash — — 32,380 4,630 37,910 5,421 — — 70,290 10,051
Short-term investments 3,630,820 519,200 168,400 24,081 7,249,089 1,036,606 — — 11,048,309 1,579,887
Accounts receivable, net — — 21,902 3,132 53,231 7,612 — — 75,133 10,744
Loans receivable, net — — 47,253 6,757 4,804,100 686,977 — — 4,851,353 693,734
Prepayments and other current assets, net 98,060 14,022 347,600 49,706 494,892 70,769 — — 940,552 134,497
Intercompany receivables(5) — — 218,281 31,214 120,290 17,201 (338,571 ) (48,415 ) — —
Total current assets 3,744,769 535,494 1,579,961 225,931 18,065,615 2,583,349 (338,571 ) (48,415 ) 23,051,774 3,296,359
Restricted cash — — 10,000 1,430 20,000 2,860 — — 30,000 4,290
Long-term time deposits and other investments 4,859,544 694,906 1,115,000 159,443 8,293,969 1,186,021 — — 14,268,513 2,040,370
Investments in equity investees 643,523 92,023 60,000 8,580 339,622 48,565 — — 1,043,145 149,168
Property and equipment, net — — 9,766 1,397 447,721 64,023 — — 457,487 65,420
Investment in and amount due from subsidiaries, and consolidated affiliates(4) 30,772,202 4,400,366 — — — — (30,772,202 ) (4,400,366 ) — —
Intangible assets, net — — 94,881 13,568 662,527 94,740 — — 757,408 108,308
Goodwill — — 362,120 51,782 3,663,300 523,845 — — 4,025,420 575,627
Deferred tax assets — — 30,707 4,391 218,844 31,294 — — 249,551 35,685
Operating lease right-of-use assets — — 34,022 4,865 58,196 8,322 — — 92,218 13,187
Other non-current assets 54,205 7,751 30,898 4,418 261,409 37,382 — — 346,512 49,551
Intercompany receivables(3) — — — — 1,395,754 199,590 (1,395,754 ) (199,590 ) — —
Total non-current assets 36,329,474 5,195,046 1,747,394 249,874 15,361,342 2,196,642 (32,167,956 ) (4,599,956 ) 21,270,254 3,041,606
Total assets 40,074,243 5,730,540 3,327,355 475,805 33,426,957 4,779,991 (32,506,527 ) (4,648,371 ) 44,322,028 6,337,965
Accounts payable — — 15,368 2,198 22,382 3,200 — — 37,750 5,398
Amounts due to related parties 14,058 2,010 — — 15,616 2,233 — — 29,674 4,243
Prepaid for freight listing fees and other service fees — — 515,731 73,749 121,758 17,411 — — 637,489 91,160
Income tax payable 3,232 462 100,211 14,330 318,264 45,511 — — 421,707 60,303
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As of December 31, 2025
Parent Consolidated affiliates Subsidiaries Eliminating Entries Total
RMB US$ RMB US$ RMB US$ RMB US$ RMB US$
(in thousands)
Other tax payable — — 433,931 62,051 45,355 6,486 — — 479,286 68,537
Operating lease liabilities — — 25,677 3,672 8,170 1,168 — — 33,847 4,840
Accrued expenses and other current liabilities 5,749 822 631,547 90,310 573,983 82,079 — — 1,211,279 173,211
Intercompany payables(5) — — 70,290 10,051 5,439,051 777,774 (5,509,341 ) (787,825 ) — —
Total current liabilities 23,039 3,294 1,792,755 256,361 6,544,579 935,862 (5,509,341 ) (787,825 ) 2,851,032 407,692
Deferred tax liabilities — — 21,967 3,141 163,611 23,396 — — 185,578 26,537
Operating lease liabilities — — 567 81 918 131 — — 1,485 212
Other non-current liabilities — — 12,328 1,763 — — — — 12,328 1,763
Total non-current liabilities — — 34,862 4,985 164,529 23,527 — — 199,391 28,512
Total liabilities 23,039 3,294 1,827,617 261,346 6,709,108 959,389 (5,509,341 ) (787,825 ) 3,050,423 436,204
Total mezzanine equity — — — — 747,813 106,936 — — 747,813 106,936
Total equity 40,051,204 5,727,246 1,499,738 214,459 25,970,036 3,713,666 (26,997,186 ) (3,860,546 ) 40,523,792 5,794,825
Total liabilities, mezzanine equity and equity 40,074,243 5,730,540 3,327,355 475,805 33,426,957 4,779,991 (32,506,527 ) (4,648,371 ) 44,322,028 6,337,965
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As of December 31, 2024
Parent Consolidated affiliates Subsidiaries Eliminating Entries Total
RMB RMB RMB RMB RMB
(in thousands)
Cash and cash equivalents 1,695,746 1,136,649 2,977,952 — 5,810,347
Restricted cash — 17,364 83,169 — 100,533
Short-term investments 9,454,117 25,900 5,522,886 — 15,002,903
Accounts receivable, net — 13,688 5,955 — 19,643
Loans receivable, net — 54,817 4,144,828 — 4,199,645
Prepayments and other current assets, net 373,648 1,136,314 612,940 — 2,122,902
Intercompany receivables(5) — 789,613 18,926 (808,539 ) —
Total current assets 11,523,511 3,174,345 13,366,656 (808,539 ) 27,255,973
Restricted cash — 20,000 20,000 — 40,000
Long-term time deposits and other investments 1,748,346 518,400 6,572,801 — 8,839,547
Investments in equity investees 658,136 60,000 318,435 — 1,036,571
Property and equipment, net — 9,430 280,181 — 289,611
Investment in and amount due from subsidiaries, and consolidated affiliates(4) 23,902,400 — — (23,902,400 ) —
Intangible assets, net — 69,631 324,035 (189 ) 393,477
Goodwill — 283,256 2,841,572 — 3,124,828
Deferred tax assets — 540 92,342 — 92,882
Operating lease right-of-use assets — 61,771 53,883 — 115,654
Other non-current assets 15,119 12,708 70,705 — 98,532
Intercompany receivables(3) — — 2,679,400 (2,679,400 ) —
Total non-current assets 26,324,001 1,035,736 13,253,354 (26,581,989 ) 14,031,102
Total assets 37,847,512 4,210,081 26,620,010 (27,390,528 ) 41,287,075
Accounts payable — 11,086 20,141 — 31,227
Prepaid for freight listing fees and other service fees — 479,476 91,709 — 571,185
Income tax payable 141,572 4,991 189,657 — 336,220
Other tax payable 9,693 862,150 26,553 — 898,396
Operating lease liabilities — 37,569 3,635 — 41,204
Accrued expenses and other current liabilities 19,521 638,045 484,192 — 1,141,758
Intercompany payables(5) — 43,419 4,715,857 (4,759,276 ) —
Total current liabilities 170,786 2,076,736 5,531,744 (4,759,276 ) 3,019,990
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As of December 31, 2024
Parent Consolidated affiliates Subsidiaries Eliminating Entries Total
RMB RMB RMB RMB RMB
(in thousands)
Deferred tax liabilities — 17,308 78,262 — 95,570
Operating lease liabilities — 22,497 1,431 — 23,928
Other non-current liabilities — 12,414 — — 12,414
Total non-current liabilities — 52,219 79,693 — 131,912
Total liabilities 170,786 2,128,955 5,611,437 (4,759,276 ) 3,151,902
Total mezzanine equity — — 443,070 — 443,070
Total equity 37,676,726 2,081,126 20,565,503 (22,631,252 ) 37,692,103
Total liabilities, mezzanine equity and equity 37,847,512 4,210,081 26,620,010 (27,390,528 ) 41,287,075
The following tables present the condensed consolidated schedule of cash flow data for the periods indicated.
For the Year Ended December 31, 2025
Parent Consolidated affiliates Subsidiaries Eliminating entries Total
RMB US$ RMB US$ RMB US$ RMB US$ RMB US$
(in thousands)
Net cash provided by operating activities 558,178 79,820 715,057 102,252 3,353,645 479,563 — — 4,626,880 661,635
Net cash used in investing activities (334,473 ) (47,829 ) (268,280 ) (38,364 ) (2,936,754 ) (419,950 ) 822,144 117,565 (2,717,363 ) (388,578 )
Net cash (used in) provided by financing activities (1,845,460 ) (263,898 ) (834,265 ) (119,298 ) 1,845,921 263,964 (822,144 ) (117,565 ) (1,655,948 ) (236,797 )
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For the Year Ended December 31, 2024
Parent Consolidated affiliates Subsidiaries Eliminating entries Total
RMB RMB RMB RMB RMB
(in thousands)
Net cash provided by (used in) operating activities 548,480 (948,849 ) 3,370,494 — 2,970,125
Net cash provided by (used in) investing activities 2,735,785 (1,051,374 ) (6,062,937 ) 1,958,890 (2,419,636 )
Net cash (used in) provided by financing activities (1,639,429 ) 532,841 1,545,733 (1,958,890 ) (1,519,745 )
For the Year Ended December 31, 2023
Parent Consolidated affiliates Subsidiaries Eliminating entries Total
RMB RMB RMB RMB RMB
(in thousands)
Net cash provided by operating activities 788,079 137,792 1,343,775 — 2,269,646
Net cash provided by (used in) investing activities 380,149 (240,125 ) (1,677,662 ) 2,091,377 553,739
Net cash (used in) provided by financing activities (1,374,825 ) 257,467 2,041,733 (2,091,377 ) (1,167,002 )
(1) Effective from January 1, 2024, the Group renamed “Transaction commission” revenue stream as “Transaction service,” which consists of all monetization from truckers related to our freight matching service, including the revenue generated from our intra-city business, which was previously classified under “Freight listing service” and “Other value-added services.” The comparative net revenues for the year ended December 31, 2023 have been recast to conform to this presentation. RMB101.2 million from “Freight listing service” and RMB4.7 million from “Other value-added services” were reclassified to “Transaction service” for the year ended December 31, 2023.
(2) Represents intercompany provision of services, primarily technical services and promotion services provided by our subsidiaries to the consolidated affiliates. The related revenue and costs/expenses were eliminated upon consolidation.
(3) Represents intercompany entrusted loans from our PRC subsidiaries to the consolidated affiliates to fund their operations. As the entrusted loans are of a long-term investment nature, they are included in equity of the consolidated affiliates. The loan balances were eliminated against the consolidated affiliates’ equity upon consolidation.
(4) Represents the Parent’s investments in subsidiaries and the consolidated affiliates, including share of gain or loss from such investments under the equity method of accounting, and the amounts due from subsidiaries and consolidated affiliates, which were eliminated upon consolidation. To align with the line item in the condensed balance sheets of the Parent, amounts due from subsidiaries and consolidated affiliates are not included in intercompany receivables.
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(5) Represents the intercompany balances among the Parent, our subsidiaries, and the consolidated affiliates, which were eliminated upon consolidation.
A. [Reserved]
B. Capitalization and Indebtedness
Not required.
C. Reasons for the Offer and Use of Proceeds
Not required.
D. Risk Factors
Summary of Risk Factors
Investing in our ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in the ADSs. Below please find a summary of the principal risks we face, organized under relevant headings:
Risks Relating to Our Business and Industry
Risks and uncertainties relating to our business and industry include, but are not limited to, the following:
• The Group’s historical financial and operating performance may not be indicative of its future prospects and results of operations due to the limited operating history of some of the Group’s business lines, evolving business model and changing market;
• The Group’s operations have grown substantially since inception. We may not be able to effectively manage the Group’s growth, control the Group’s expenses or implement the Group’s business strategies;
• The Group’s business may be affected by fluctuations in China’s road transportation market;
• If we are unable to attract or maintain a critical mass of shippers and truckers in a cost-effective manner, whether as a result of competition or other factors, transaction activities on the FTA platform and the Group’s financial results would be adversely impacted;
• The Group’s business is subject to complex and evolving PRC laws and regulations relating to cybersecurity and data security;
• We may not succeed in continuing to maintain, protect and strengthen the Group’s brands, and any negative publicity about the Group, its business, its management, its ecosystem participants or the road transportation market in general, may materially and adversely affect the Group’s reputation, business, results of operations and growth;
• If the Group’s solutions and services do not achieve and maintain sufficient market acceptance or provide the expected benefits to ecosystem participants, its financial condition, results of operations and competitive position will be materially and adversely affected;
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• If the Group’s users, other ecosystem participants or their employees engage in, or are subject to, criminal, violent, fraudulent, inappropriate or dangerous activities, the Group’s reputation, business, financial condition, and operating results may be adversely impacted;
• The profitability of the Group’s freight brokerage service has been and is expected to continue to be reliant upon, among others, grants provided by local government authorities. If the Group cannot continue to receive such grants, its freight brokerage service and its contribution to the Group’s financial performance may be materially and adversely affected;
• If we fail to effectively match truckers with shipments and optimize our pricing models, the Group’s business, financial condition and results of operations could be adversely affected;
• We cannot guarantee that our monetization strategies or the Group’s business initiatives will be successfully implemented or generate sustainable profit;
• The Group may not be able to achieve, maintain or increase profitability in the future;
• The Group’s expansion into overseas markets could subject the Group to legal, reputational and operational risks, as well as a broad array of local legal and regulatory requirements that could adversely affect the Group’s operations; and
• The Group may be required to write down goodwill and other identifiable intangible assets.
Risks Relating to Our Corporate Structure
Risks and uncertainties relating to our corporate structure include, but are not limited to, the following:
• If the PRC government deems that the contractual arrangements in relation to the Group VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations;
• Our contractual arrangements with the Group VIEs may result in adverse tax consequences to us;
• We rely on contractual arrangements with the Group VIEs and their shareholders to conduct a substantial part of the Group’s operations in China, which may not be as effective as direct ownership in providing operational control and otherwise have a material adverse effect as to our business; and
• The shareholders of the Group VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.
Risks Relating to Doing Business in China
We are subject to risks and uncertainties relating to doing business in China in general, including, but are not limited to, the following:
• Changes in the political and economic policies of the PRC government may materially and adversely affect the Group’s business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies;
• There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations;
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• The audit report included in this annual report is prepared by an auditor which the U.S. Public Company Accounting Oversight Board was unable to inspect and investigate completely before 2022 and, as such, our investors have been deprived of the benefits of such inspections in the past, and may be deprived of the benefits of such inspections in the future;
• If the PCAOB determines that it is unable to inspect or investigate completely our auditor at any point in the future, our ADSs may be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, as amended, or the HFCA Act, and any such trading prohibition on our ADSs or threat thereof may materially and adversely affect the price of our ADSs and value of your investment; and
• You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China, based on the United States or other foreign laws, against us, our directors, executive officers or the expert named in this annual report. Therefore, you may not be able to enjoy the protection of such laws in an effective manner.
Risks Relating to Our ADSs
Risks relating to our ADSs, include, but not limited to, the following:
• The trading price of our ADSs has been and is likely to continue to be volatile, which could result in substantial losses to holders of our ADSs;
• We may fail to meet our publicly announced guidance or other expectations about the Group’s business, which could cause our stock price to decline;
• If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about the Group’s business, the market price for our ADSs and their trading volume could decline; and
• Because we cannot guarantee any future payment of cash dividends, you may not receive any return on your investment unless you sell your ADSs for a price greater than that which you paid for them.
Risks Relating to Our Business and Industry
The Group’s historical financial and operating performance may not be indicative of its future prospects and results of operations due to the limited operating history of some of the Group’s business lines, evolving business model and changing market.
The Group started its business in 2011 by providing freight listing service through QQ and WeChat groups. The FTA platform is a leading digital freight platform in China, and the Group facilitated 236.3 million fulfilled orders in 2025. The Group has limited experience in certain key aspects of its business operations, such as freight matching and pricing, offering value-added services, as well as developing and maintaining long-term relationships with a wide range of ecosystem participants. It is difficult to accurately predict the Group’s future revenues and budget for its costs and expenses, and the evaluation of the Group’s business and prediction about its future performance may not be as accurate as they would be if the Group had a longer operating history. In the event that actual results differ from the investors’ expectations, the market price of our ADSs could decline.
As the Group’s business develops or in response to competition, the Group may continue to introduce new services, make adjustments to its existing services, its business model or its operations in general, which may not be successful or generate results that meet our expectations. Any significant change to the Group’s business model or failure to achieve the intended business results may have a material and adverse impact on the Group’s business and results of operations. We also face challenges to successfully develop new platform features and expand the Group’s service offerings to enhance the experience of shippers and truckers. Therefore, it may be difficult to effectively assess the Group’s future prospects. Furthermore, the road transportation and internet service industries in China are undergoing constant change. The laws and regulations governing the road transportation and internet service industries in China are also subject to further changes and interpretation. As the market, the regulatory environment or other conditions evolve, the Group’s existing solutions and services may not continue to deliver the expected business results.
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You should consider the Group’s business and prospects in light of the risks and challenges it encounters or may encounter given the limited operating history of some of the Group’s business lines, as well as its evolving business model and changes in the market in which the Group operates. These risks and challenges include the Group’s ability to, among other things:
• continue to maintain, protect and strengthen the Group’s brands and reputation;
• attract or maintain a critical mass of shippers and truckers;
• continue to provide superior experience to shippers and truckers;
• keep up with the technological developments and implementation of advanced technologies;
• effectively match truckers with shipments and optimize the related pricing models;
• capture monetization opportunities on the FTA platform;
• maintain and expand cooperative relationships or strategic partnerships with other ecosystem participants;
• improve the Group’s operational efficiency;
• attract, retain and motivate talented employees, particularly sales and marketing and research and development personnel to support the Group’s business growth;
• navigate economic conditions and fluctuations;
• implement the Group’s business strategies, including the offering of new services; and
• comply with complex and evolving laws, regulations, policies and guidelines and resolve legal actions and regulatory actions.
The Group’s operations have grown substantially since inception. We may not be able to effectively manage the Group’s growth, control the Group’s expenses or implement the Group’s business strategies.
The Group’s operations have grown substantially since inception, which placed significant strain on our management and resources. There can be no assurance that the Group’s level of revenue growth will be sustainable or achieved at all in the future. We believe that the Group’s growth and expansion will depend on its ability to attract and retain shippers and truckers on the FTA platform, to increase engagement and transaction activities of users on the FTA platform, monetize the Group’s services, and leverage its scale of business to manage operating costs and expenses. There can be no assurance that the Group will achieve any of the above.
To manage the Group’s growth and expansion, we anticipate that we will need to implement a variety of new and upgraded operational systems, procedures and controls, including improving the Group’s technology infrastructure as well as internal management systems. Expanding into new businesses and developing and adopting new technologies will require the Group to incur additional costs, such as compensation, benefit costs and office rental expenses. We may also need to further expand, train, manage and motivate the Group’s workforce and manage its relationships with ecosystem participants. All of these endeavors involve risks and will require substantial management efforts and skills and significant additional expenditures. The Group’s further expansion may divert its management, operational or technological resources from the Group’s existing business operations. In addition, the Group’s expansion may require it to adjust its existing offerings or enter into new market segments, and we may have difficulty in satisfying market demands and regulatory requirements. We cannot assure you that we will be able to successfully maintain the Group’s growth rate or implement its future business strategies effectively, and failure to do so may materially and adversely affect its business, financial condition, results of operations and future prospects.
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The Group’s business may be affected by fluctuations in China’s road transportation market.
We are sensitive to changes in overall economic conditions that impact cargo volumes and truck capacity. China’s road transportation market historically has experienced cyclical fluctuations due to economic slowdowns, downturns in business cycles of shippers, volatility in energy price, pandemic, electricity rationing measures, shortages of raw materials, rising commodity prices and other economic factors beyond our control. Deterioration in the economic environment would subject the Group’s business to various risks, including the following that may have a material and adverse impact on the Group’s operating results and cause it not to achieve growth or profitability:
• a reduction in overall cargo volumes reduces the Group’s revenue and opportunities for growth; in addition, a decline in the volume of cargo shipped due to a downturn in shippers’ business cycles or other factors generally results in decreases in order pricing, as truckers compete for shipping orders to maintain truck productivity, which will affect the Group’s monetization opportunities;
• a number of truckers may go out of business and the Group may be unable to have sufficient truckers to meet shippers’ demand when the market recovers; and
• the Group may not be able to appropriately adjust its expenses to changing platform activities. In periods of rapid change, it is more difficult to match the Group’s staffing levels to its business needs. In addition, the Group has other expenses that are fixed for a period of time, and it may not be able to adequately adjust them in a period of rapid change in platform activities.
Furthermore, China’s road transportation market may experience changes as a result of new technologies. For example, new energy vehicles may become prevalent in the future, which could change the supply structure of heavy-duty trucks and potentially reshape the competitive landscape. Similarly, the development of autonomous driving technologies may affect the vehicle and labor costs of the road transportation market, which may change the market landscape. In addition, the development of autonomous driving technologies may influence the adoption of related solutions, which will in turn affect our intelligent driving related operations. If the Group were unable to adapt to changes in China’s road transportation market, its business, results of operations and financial condition would be materially and adversely affected.
If we are unable to attract or maintain a critical mass of shippers and truckers in a cost-effective manner, whether as a result of competition or other factors, transaction activities on the FTA platform and the Group’s financial results would be adversely impacted.
The Group’s success significantly depends on its ability to maintain and increase the scale of its network by attracting additional shippers and truckers to the FTA platform in a cost-effective manner. If shippers choose not to use the FTA platform, the Group may lack sufficient opportunities for truckers to find shipments, which may reduce the perceived utility of the FTA platform. Similarly, if truckers choose not to offer their services through the FTA platform, the Group may lack a sufficient supply of truckers to attract shippers to the FTA platform. An insufficient supply of shippers or truckers would adversely affect the Group’s revenue and financial results. Although we may benefit from having a larger network of shippers and truckers than our competitors, the network effects of the FTA platform may not result in sufficient competitive advantages or may be overcome by our competitors. Maintaining a balance between shipper demand and trucker supply for any given route at any given time and the Group’s ability to execute operationally may be more important to service quality than the absolute size of the network. If the Group’s service quality diminishes or our competitors’ services achieve greater market adoption, our competitors may be able to grow at a quicker rate than we do and may diminish the Group’s network effects. Additionally, if we fail to cater to the needs and preferences of shippers and truckers, control the Group’s costs in doing so or fail to deliver superior user experience, we may not be able to attract additional shippers and truckers in a cost-effective manner, and the Group’s business, financial condition and results of operations may be materially and adversely affected.
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Transaction activities on the FTA platform may decline materially or fluctuate as a result of many factors, including, among other things, dissatisfaction with the operation of the FTA platform, the price of shipping orders, dissatisfaction with the quality of service provided by the truckers on the FTA platform, quality of platform user support, negative publicity related to the Group’s brands, including as a result of safety incidents, dissatisfaction with the Group’s services and offerings in general or regulatory restrictions on its services. If the Group fails to provide high-quality support, or introduce new or upgraded service offerings, or features that truckers, shippers, as well as ecosystem participants recognize as valuable or if the Group cannot otherwise attract and retain a large number of shippers and truckers, the Group’s fulfilled orders and revenue would decline, and its business would suffer. In addition, new features and functions on the FTA platform that may be received positively by one category of users may be viewed as negative to another category of users. For example, some truckers may be dissatisfied with the “tap and go” feature, which allows a shipper to post shipping order with a fixed price and is intended to replace price negotiation and streamline the transaction process between shippers and truckers, because such feature may result in lower prices for certain transactions. Furthermore, although we aim to increase truckers’ truck utilization, earnings potential, as well as profitability through smarter and more efficient freight matching, some truckers may view the increased efficiency in overall freight price discovery and negotiation on the FTA platform as a negative to their gross earnings. Dissatisfied truckers may lodge complaints with regulators, which, regardless of their veracity, may result in possibly heightened attention from regulators, the public and the media. In addition, we may introduce additional new features and functions, including pricing mechanisms to automate and minimize negotiations and improve the overall transaction efficiency on the FTA platform. We are committed to protecting interests of all of the FTA platform users and adjusting features and functions on the FTA platform based on user feedback. However, we cannot assure you that we will not experience user dissatisfaction or receive negative reactions from platform users. Any complaints and negative comments resulting from user dissatisfaction may cause government inquiries or substantial harm to the Group’s brand, reputation and operations.
Shippers and truckers on the FTA platform may engage in unethical or fraudulent behaviors that harm the interests of their counterparties. For example, shippers may misrepresent cargo information or refuse to pay shipping fees to truckers; and truckers may raise shipping fees after picking up cargos. We have implemented rules that are designed to protect the interests of shippers and truckers on the FTA platform and promote honest dealings, but there can be no assurance as to the effectiveness of such rules. Shippers and truckers may feel dissatisfied towards the FTA platform due to the unethical behaviors of other ecosystem participants. Any decline in the number of shippers or truckers using the FTA platform or their activity level on the FTA platform would reduce the value of the Group’s network and would harm its future operating results.
The Group’s business is subject to complex and evolving PRC laws and regulations relating to cybersecurity and data security.
Regulatory authorities in China have enhanced regulatory requirements to cybersecurity, data security and personal information protection, and the PRC government may adopt other rules and restrictions in the future. As we generate and process a large amount of data through the FTA platform, we face risks inherent in handling and protecting large volumes of data, including protecting the data hosted in our system, detecting and prohibiting unauthorized data share and transfer, preventing attacks on our system by outside parties or fraudulent behavior or improper use by our employees, and maintaining and updating our database. Any privacy or data security breach or failure to comply with these laws and regulations could have a material adverse impact on the Group’s reputation, brand, business and results of operations.
In April 2020, the Cyberspace Administration of China, or CAC, and other regulatory authorities of the PRC jointly promulgated the Rules on Cybersecurity Review. The Rules on Cybersecurity Review was replaced by the Revised Cybersecurity Review Measures, which are described in more details below, on February 15, 2022. Pursuant to the Rules on Cybersecurity Review, if an operator of critical information infrastructure purchases internet products and services that implicate or may implicate national security, such operator should be subject to cybersecurity review by the Cybersecurity Review Office of the CAC, or CRO.
The CRO announced the initiation of a cybersecurity review of the Yunmanman and Huochebang apps on July 5, 2021. During the cybersecurity review, the Yunmanman and Huochebang apps were required to suspend new user registration. The Group fully cooperated with the CRO to facilitate its review process. Based on notification by the CRO, we have resumed new user registration on the Yunmanman and Huochebang apps since June 29, 2022.
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On July 10, 2021, the CAC and other related authorities released the draft amendment to the Rules on Cybersecurity Review for public comments through July 25, 2021. On December 28, 2021, the CAC and certain other government authorities promulgated the Revised Cybersecurity Review Measures that replaced the last version and took effect from February 15, 2022. Pursuant to the Revised Cybersecurity Review Measures, online platform operator holding over one million users’ information must apply for a cybersecurity review before listing abroad, and operators of “critical information infrastructure” that intend to purchase internet products and services that will or may affect national security must apply for a cybersecurity review. Furthermore, the competent government authorities may also initiate a cybersecurity review against the relevant operators where the authorities believe that the network product or service or data processing activities affect or may affect national security.
On July 30, 2021, the PRC State Council promulgated the Regulations on Security Protection of Critical Information Infrastructure, which became effective on September 1, 2021. Pursuant to such regulations, critical information infrastructure, or the CII, refers to any important network facilities or information systems of the important industry or field, such as public communication and information service, energy, transportation, water conservancy, finance, public services, e-government affairs and national defense science, which may endanger national security, people’s livelihood and public interest in the case of damage, function loss or data leakage. Relevant administration departments of each critical industry and sector are required to formulate detailed guidance to recognize the CII in the respective sectors, and a critical information infrastructure operator, or a CIIO, must take the responsibility to protect the security of CII by performing certain prescribed obligations. As of the date of this annual report, no detailed implementation rules have been formally issued by the relevant governmental authorities. However, as this regulation was newly issued, the relevant governmental authorities may formulate further detailed rules or explanations with respect to the interpretation and implementation of this regulation. As of the date of this annual report, we have not been informed by any governmental authority that we are a critical information infrastructure operator.
On April 24, 2023, the PRC Ministry of Transport published the Administrative Measures for the Security Protection of Highway and Waterway Critical Information Infrastructure, or the Administrative Measures, which stipulates that the Ministry of Transport shall formulate and revise the rules for identification of highway and waterway critical information infrastructure, considering the following factors: (i) the degree of importance of network facilities and information systems for key core business of highway and waterway; (ii) whether network facilities, information systems, etc., store or process core national data, and the degree of potential harm in the event of destruction or disfunction of network facilities and information systems, or data leakage; and (iii) the relevant impact to other industries and fields. As of the date of this annual report, we have not been informed by relevant governmental authority that we are a highway and waterway critical information infrastructure operator.
On September 24, 2024, the State Council promulgated the Administration Regulations on Cyber Data Security, which came into effect on January 1, 2025. The Administration Regulations on Cyber Data Security reiterate and refine the general regulations for cyber data processing activities, rules of personal information protection, important data security protection, cyber data cross-border transfer management, and the responsibilities of online platform service providers. In particular, the Administration Regulations on Cyber Data Security provide that cyber data processors whose cyber data processing activities affect or may affect national security shall be subject to national security review in accordance with the relevant regulations. However, the Administration Regulations on Cyber Data Security provide no further explanation or interpretation for the criteria on determining the risks that “affect or may affect national security.” Additionally, since the Administration Regulations on Cyber Data Security are still relatively new, the interpretation and implementation of these regulations may further evolve and develop.
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Moreover, on July 7, 2022, the CAC promulgated the Security Assessment Measures for Outbound Data Transfer, or the Security Assessment Measures, effective from September 1, 2022 to regulate outbound data transfer activities, protect the rights and interests of personal information, safeguard national security and social public interests, and promote the cross-border security and free flow of data. The Provisions on Promoting and Regulating Cross-border Data Flows, or the Provisions on Cross-border Data Flows, issued and become effective on March 22, 2024, further clarify and elaborate the relevant provisions of the Security Assessment Measures. The Security Assessment Measures and the Provisions on Cross-border Data Flows require the data processor providing data overseas and falling under certain circumstances to apply for the security assessment of cross-border data transfer with the local provincial-level counterparts of the national cybersecurity authority. For details, see “Item 4. Information on the Company. — B. Business Overview — Regulatory Matters — Regulations Related to Internet Security and Privacy Protection.” As of the date of this annual report, we believe the Group is not involved in outbound data transfers in its daily operations, and therefore, we do not currently expect the Security Assessment Measures or the Provisions on Cross-border Data Flows to have a material impact on the Group’s daily operations. However, if we engage in any outbound data transfer in the future, we may be subject to the restrictions under the Security Assessment Measures. Moreover, there are uncertainties as to the interpretation of such measures, and the PRC government authorities have discretion in the interpretation and enforcement of the applicable laws. Therefore, it is uncertain whether we would be required to report any security assessment for cross-border data transfers to the CAC.
Non-compliance with cybersecurity and personal information protection laws and regulations could result in administrative penalties, such as warnings, fines, service suspension, removal of the Group’s apps from the relevant app stores, revocation of relevant business permits and/or licenses, or penalties of other nature that may cause a material adverse impact on the Group’s business, results of operations and financial condition.
We may not succeed in continuing to maintain, protect and strengthen the Group’s brands, and any negative publicity about the Group, its business, its management, its ecosystem participants or the road transportation market in general, may materially and adversely affect the Group’s reputation, business, results of operations and growth.
Enhancing the recognition and reputation of the Group’s brands is critical to its business and competitiveness. Factors that are vital to this objective include but are not limited to the Group’s ability to:
• maintain the quality and reliability of services offered on the FTA platform;
• maintain and develop relationships with shippers, truckers and other ecosystem participants;
• provide prospective and existing shippers and truckers with superior experiences;
• effectively manage and resolve user complaints; and
• effectively protect personal information and privacy of, and any sensitive data received from, shippers and truckers.
Any malicious or inadvertent negative allegations made by the media or other parties about the foregoing or other aspects of the Group, including but not limited to its management, business, regulatory compliance, financial condition or prospects, whether with merit or not, could severely hurt the Group’s reputation and harm its business and results of operations. In addition, the Group makes postings on various third-party media platforms to enhance our engagement with users. However, if the content posted on such platforms is viewed as inappropriate or controversial by the public, whether due to oversight in the Group’s content review process, inappropriate conduct or mistake of the Group’s employees or other reasons, the Group may face adverse reactions of users, negative social sentiment, potential regulatory investigation or even fines or penalties, which may in turn adversely affect the Group’s reputation, business operation and financial condition.
As the road transportation market in China is under constant development and the regulatory framework for this market is subject to changes and developments, negative publicity about this industry may arise from time to time. Negative publicity about the road transportation market in general may also have a negative impact on the Group’s reputation, regardless of whether we have engaged in any inappropriate activities. Any actual or perceived failure of other digital freight platforms to detect or prevent illegal activities or provide high-quality services could compromise the Group’s image, undermine the trust and credibility we have established and have a negative impact on the Group’s ability to attract new shippers, truckers and other ecosystem participants. Negative developments in the road transportation market, such as fraudulent or illegal behavior by industry participants, may also lead to tightened regulatory scrutiny of the sector and limit the scope of permissible business activities that may be conducted by us. If any of the foregoing takes place, the Group’s business and results of operations could be materially and adversely affected.
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The Group collaborates with various road transportation industry participants in providing its solutions and services. Such participants include financial institutions, insurance companies, gas station operators and other business partners. Negative publicity about such counterparties, including any failure by them to adequately protect the information of shippers and truckers, to comply with applicable laws and regulations or to otherwise meet required quality and service standards could harm the Group’s reputation.
If the Group’s solutions and services do not achieve and maintain sufficient market acceptance or provide the expected benefits to ecosystem participants, its financial condition, results of operations and competitive position will be materially and adversely affected.
The Group has incurred and will continue to incur expenses to develop, adjust and market existing or new solutions and services for shippers and truckers. For example, we plan to expand dedicated teams to accelerate the adoption of AI across logistics transactions and fulfillment, leveraging AI to empower both shippers and truckers. Adjusted or new solutions and services must achieve high levels of market acceptance in order for us to recoup the Group’s investment in developing, acquiring and bringing them to market.
The Group’s existing or new solutions and services and changes to the FTA platform could fail to maintain or achieve sufficient market acceptance for many reasons, including but not limited to:
• our failure to predict market demand accurately and supply solutions and services that meet this demand in a timely fashion;
• ecosystem participants may not like, find useful or agree with the functions and features of the Group’s solutions and/or services, fees charged for the Group’s solutions and/or services, or any changes we make;
• our failure to properly price new solutions and services;
• negative publicity about the Group’s solutions and services or the FTA platform’s performance or effectiveness;
• the Group’s failure to satisfy the expectations of the quality or reliability of its solutions and/or services;
• views taken by regulatory authorities that the Group’s solutions and services or platform changes do not comply with PRC laws, rules or regulations applicable to us; and
• the introduction or anticipated introduction of competing solutions and services by our competitors, particularly in the intra-city and less-than-truckload, or LTL, segments.
If the Group’s existing solutions and services do not maintain market acceptance, or its new solutions and services do not achieve adequate acceptance in the market or provide the expected benefits to ecosystem participants, the level of user engagement and transaction activities on the FTA platform may decrease and the Group’s market share and profitability may be negatively affected, which could materially and adversely affect its business, financial condition, results of operations and prospects, as well as its reputation and brands. In addition, the Group may incur higher cost and expenses as a result of adjusted or new solutions and services. New solutions and services may also subject the Group to additional regulatory or licensing requirements. Failure by the Group to comply with any such new regulatory or licensing requirements could materially and adversely affect its business and results of operations.
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If the Group’s users, other ecosystem participants or their employees engage in, or are subject to, criminal, violent, fraudulent, inappropriate or dangerous activities, the Group’s reputation, business, financial condition, and operating results may be adversely impacted.
We are not able to control or predict the actions of shippers, truckers and other ecosystem participants, either during their use of the FTA platform or otherwise, and we may be unable to protect or provide a safe environment for ecosystem participants and other third parties as a result of certain actions by shippers, truckers and other ecosystem participants. Such actions may result in accidents, injuries, loss of cargo, truck damage, leakage of sensitive personal information, business interruption, or damages to the Group’s financial condition, brands and reputation. The Group’s users may also suffer damages due to false or misleading information posted on the FTA platform. Although the Group administers certain qualification measures for shippers and truckers, including requiring identity information from shippers and truckers in the user registration process, these qualification measures may not provide the Group with all potentially relevant information. Furthermore, if the Group fails to duly verify the requisite qualifications or licenses of shippers, truckers or other ecosystem participants, it may be subject to fines, penalties or other regulatory actions. In addition, as an online platform, the Group does not inspect the cargos that truckers carry, and such cargos may contain unsafe, prohibited or restricted items. The Group also does not independently test truckers’ driving skills. Consequently, the Group expects to continue to receive complaints from shippers, and it may become subject to actual or threatened legal action related to truckers’ conduct.
To prevent illegal activities on the FTA platform, protect the rights of the Group’s users and maintain a benign ecosystem, the Group adopts various measures in screening, risk control and operation and also collaborates with administrative and judicial authorities when necessary. However, due to the large number of transactions on the FTA platform, we may not be able to identify every incident of inappropriate, illegal or fraudulent activities involving the FTA platform, or prevent all such activities from occurring, especially given the evolving nature of illegal activities such as new forms of fraud. For example, if truckers engage in criminal activities, fraud or misconduct, such as speeding, drowsy driving and other traffic violations, operating beyond licensed scope, or use the FTA platform as a conduit for criminal or fraudulent activities, shippers may not consider the Group’s service offerings safe, and we may receive negative press coverage or regulatory inquiries as a result of the Group’s business relationships with such truckers, which would adversely impact the Group’s brands, reputation, and business. On the other hand, if shippers engage in criminal or fraudulent activities, such as issuing invoice with false amount, or other misconducts while using the FTA platform, truckers may be unwilling to continue using the FTA platform. We cannot assure you the Group’s safety measures against potential criminal activities and safety incidents will be effective. If any of these happens, the Group’s ability to attract platform users may be harmed, its operations and functions may be disrupted or suspended, and its business and financial results could be adversely affected. In such event, claims may also be brought against the Group, its management and relevant personnel for civil or criminal liabilities. In response to allegations of illegal, fraudulent or inappropriate activities conducted through the FTA platform, relevant governmental authorities may also intervene and hold the Group, its management and relevant personnel liable for non-compliance with applicable laws and regulations and impose penalties. Defending or attending to such actions could be costly and require significant time and attention of the Group’s management and other resources, which would materially and adversely affect the Group’s business.
The Group, its management and employees are subject to risks associated with operational safety in operating the Group’s services, which may result in potential liabilities on the Group, its management and relevant personnel. Public reporting or disclosure of safety incidents reportedly occurring on or related to the FTA platform, whether generated by us or third parties such as media or regulators, may adversely impact the Group’s business and financial results. Furthermore, we may be subject to claims of significant liability based on traffic accidents, deaths, injuries, or other incidents that are caused by truckers or shippers while using the FTA platform, or even when shippers or truckers are not actively using the FTA platform. In addition, regulators may decide to hold us liable for incidents caused by shippers or truckers, despite the Group’s status as a platform that facilitates transactions between shippers and truckers. Even if these claims or regulatory proceedings do not result in liability or penalties on the Group, it could incur significant costs in investigating and defending against them or suffer significant reputational damage, which could have a material and adverse effect on the Group’s prospects and future growth, including its ability to attract and retain shippers and truckers.
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The profitability of the Group’s freight brokerage service has been and is expected to continue to be reliant upon, among others, grants provided by local government authorities. If the Group cannot continue to receive such grants, its freight brokerage service and its contribution to the Group’s financial performance may be materially and adversely affected.
As online freight brokers, the consolidated affiliates enter into contracts with shippers to sell shipping service and platform service and also enter into contracts with truckers to purchase shipping service pursuant to relevant PRC regulations. The difference between the amount the consolidated affiliates collect from shippers and the amount they pay to truckers represents the FTA platform service fee and the Group’s net revenue. The consolidated affiliates assume the legal obligation to pay VAT assessed on the entire selling price of the shipping service and platform service pursuant to their contracts with shippers and truckers. The consolidated affiliates receive grants from local government authorities in connection with the VAT obligation. While the gross amount of VAT related to freight brokerage service that the consolidated affiliates were obliged to pay has historically exceeded the Group’s net revenues from such services in certain years, the Group was able to generate gross profit from the freight brokerage service because of the grants received from local government authorities. For details regarding government grants, see “Item 5. Operating and Financial Review and Prospects – Components of Results of Operations – Cost of Revenues”. The Group’s VAT obligations net of the government grants were recorded in its cost of revenues for freight brokerage service. As a result, the profitability of the freight brokerage service significantly depends upon, among others, the amount of grants provided by local government authorities, which are not guaranteed.
Whether the consolidated affiliates can obtain such government grants in a particular province in the PRC is subject to the policy of the local government authority and the negotiation between such local government authority and the relevant consolidated affiliates, and if the Group fails to further obtain such grants from local government authorities, its business and financial condition could be materially and adversely affected. We cannot assure you that our consolidated affiliates will be able to continue to receive such government grants on similar terms, or at all. Some local government authorities reduced the amount of such government grants in recent years. For the years ended December 31, 2023, 2024 and 2025, the gross amounts of VAT costs amounted to RMB5,271.1 million, RMB5,996.2 million and RMB4,165.7 million (US$595.7 million), respectively, while the government grants amounted to RMB2,150.1 million, RMB2,102.8 million and RMB 903.3 million (US$129.2 million), respectively. We cannot assure you that the government grants will not continue to decrease in the future. In addition, on June 6, 2024, the State Council promulgated the Regulations on Fair Competition Review, which became effective on August 1, 2024. Please see “Item 4. Information on the Company — B. Business Overview — Regulatory Matters — Regulations Related to Anti-Monopoly and Anti-unfair Competition” for details. Pursuant to the Regulations on Fair Competition Review, selective or differentiated fiscal reward or subsidy policies which are not supported by any law or administrative regulation or approved by the relevant departments may be suspended or terminated. While our consolidated affiliates are currently entitled to government grants based on cooperation agreements with the local government authorities rather than such policies, we cannot assure you that these cooperation arrangements will not be deemed as related policies in the future. If they are deemed as related policies, they may be required to be suspended or terminated. In addition, any significant delay in the payment of government grants may also have a material and adverse impact on the Group’s results of operations and financial condition.
We take into consideration the VAT obligation the consolidated affiliates assume under their contracts with shippers and truckers, the estimated amount of grants that they expect to receive from local government authorities, as well as other relevant factors when setting the rate of the FTA platform service fee. Starting from August 2025, to ensure sustainability of our freight brokerage service, the Group increased the service fee rate for freight brokerage service to reduce the reliance on government grants and mitigate potential uncertainties. Such increase caused a significant decline in the transaction volume and corresponding revenue from freight brokerage service. In the event that the government grants are reduced or canceled, we may have to further adjust the rate of the FTA platform service fee, which could make the freight brokerage service less attractive to shippers and truckers and the Group’s business could be materially and adversely affected. We cannot assure you that we will always be able to pass on any increased VAT costs due to reduction or elimination of related government grants through adjustment of the rate of platform service fee either, in which case, the Group may incur gross loss for the freight brokerage service and its results of operations and financial condition could be materially and adversely affected.
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If we fail to effectively match truckers with shipments and optimize our pricing models, the Group’s business, financial condition and results of operations could be adversely affected.
We offer shippers and truckers a digital freight platform that matches them efficiently. The Group’s ability to attract shippers and truckers to use, and build trust in, the FTA platform is significantly dependent on its ability to match suitable shipping orders to reliable truckers. In order to recommend or present suitable shipping orders to truckers, our matching algorithms compare the labels of cargos with those of the trucker and predict the probability for the trucker to accept each shipping order. If the quantity or quality of data available to us for analysis is unsatisfactory, or if our matching algorithms have deficiencies, our matching may not be effective, resulting in fewer transactions on the FTA platform, which in turn would materially and adversely affect the Group’s business, financial condition, results of operations and prospects.
In addition, we apply freight pricing models in our “tap and go” feature for shippers and, in certain circumstances, transaction service fee-charging for online transaction service. Our system generates a recommended price based on the prices of historical comparable shipping orders for shippers to determine the actual price for their shipping orders. In addition, in certain circumstances, such as when the order prices are not available to us, the Group’s transaction service fees for online transaction service are based on fair market prices estimated by our freight pricing models. The pricing methodology depends on the availability of comparable historical transaction data. If our freight pricing models are flawed or ineffective or the data we accumulate are incorrect or outdated, our price recommendation or estimate could be adversely affected. Shippers may not use our “tap and go” feature if our price recommendation fails to serve as a meaningful reference. With respect to the Group’s transaction service fees for online transaction service, underestimation of the fair market price would reduce the amount of transaction service fees paid by truckers to us, and overestimation of such price would result in trucker dissatisfaction. As a result of such flawed pricing, the Group’s business, brands, reputation, results of operations and financial condition may be materially and adversely affected.
We cannot guarantee that our monetization strategies or the Group’s business initiatives will be successfully implemented or generate sustainable profit.
We are at an early stage of monetizing the FTA platform services and our monetization model is evolving. We cannot assure you that we can successfully implement the Group’s existing business model to generate sustainable profit. If the Group’s existing business model fails to maintain market acceptance or we fail to develop or implement new monetization strategies, we may not be able to maintain or increase the Group’s revenue or effectively manage any associated costs. In addition, we are exploring and will continue to explore new business initiatives that we believe are important to the Group’s long-term success and future growth, but they may have the effect of increasing the Group’s costs, reducing its revenue and lowering its margins and profit, and this effect may be significant in the short term and potentially over longer periods.
Furthermore, we may introduce new products and services or increase investments in products and services for which we have limited scale or operating experience. For example, we plan to expand dedicated teams to accelerate the adoption of AI across logistics transactions and fulfillment, leveraging AI to empower both shippers and truckers. The Group’s services in these business initiatives may be less profitable than other services. If these new products or services fail to meet our expectations or are unable to attract or engage shippers and truckers or other ecosystem participants, as the case may be, we may fail to diversify the Group’s revenue streams or generate sufficient revenues to justify its investments and costs, and the Group’s business and operating results may suffer as a result.
The Group may not be able to achieve, maintain or increase profitability in the future.
In 2023, 2024 and 2025, the Group recorded net income of RMB2,227.1 million, RMB3,123.4 million and RMB4,459.1 million (US$637.6 million), respectively. We will need to continue to generate and sustain increased revenue levels and effectively manage expenses in future periods to maintain and increase profitability. However, there is no guarantee that the Group will continue to record or increase net income in the future.
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We focus on long-term success and future growth. We have in the past and will continue to invest in efforts to serve more shippers and truckers, enhance their user experience, and expand the capabilities and scope of the FTA platform. We believe these efforts are important to the Group’s long-term success and future growth, but they may have the effect of increasing the Group’s costs, reducing its revenue and/or resulting in net losses, and this effect may be significant in the short term and potentially in the long term. These efforts may also prove to be more expensive than we anticipate, and we may not succeed in increasing the Group’s revenue sufficiently to offset these expenses. For example, we may aggressively accelerate the adoption of AI across logistics transactions and fulfillment, leveraging AI to empower both shippers and truckers, and we may incur substantial costs in connection with such efforts. Furthermore, many of our efforts to generate revenue are new and unproven, and any failure to adequately increase revenue or contain the related costs could prevent us from attaining or increasing profitability. The Group’s strategic investments and acquisitions may also adversely affect its results of operations. For example, our investment in Plus Automation, Inc. and our acquisition of a majority interest in Giga.AI may have a negative impact on our profit in the future. Plus Automation, Inc. and Giga.AI are developers of automated driving systems for trucks, and they have incurred significant losses and may not become profitable in the near future or at all. As such, we may not be able to achieve, maintain or increase profitability in the future.
We face risks associated with the cargo transported using the freight matching service and vicarious liability for vehicles registered with the Group.
The consolidated affiliates handle a large volume of cargos through the freight brokerage service, and face challenges with respect to the safety of these cargos. Cargos may be stolen, damaged or lost for various reasons, and the consolidated affiliates may be perceived or found liable for such incidents. Although the consolidated affiliates only assume liability for cargo damages up to RMB20,000 per shipment under their shipping agreements, we may need to expend resources on responding to and defending against claims arising out of these incidents. Furthermore, there can be no assurance that the consolidated affiliates will be able to limit our liability to RMB20,000 per shipment in every instance. In addition, the consolidated affiliates do not inspect cargos for unsafe, prohibited or restricted items. Unsafe items, such as flammables and explosives, toxic or corrosive items and radioactive materials, may damage other cargos, injure recipients, harm truckers, damage properties or cause serious accidents. Furthermore, if truckers on the FTA platform transport and deliver prohibited or restricted items, the consolidated affiliates may be subject to administrative or criminal penalties, and if any personal injury or property damage takes place, the consolidated affiliates may be subject to civil liabilities. We may face similar risks for our freight listing service and online transaction service, although to a lesser extent, as the transportation is fulfilled by third-party truckers.
Historically, we allowed a number of truckers to register their vehicles with our transportation companies to satisfy their compliance and financing needs in connection with our legacy financial leasing business. Although we have ceased offering financial leases and stopped registering new vehicles, our transportation companies may continue to face vicarious liability for traffic accidents, deaths, injuries, cargo damage or other incidents that are caused by vehicles registered with us. The Group’s auto insurance and general liability insurance policies may not cover all potential claims to which we are exposed, and may not be adequate to indemnify us for all potential liabilities. These incidents may also subject us to negative publicity, which could adversely affect the Group’s business, operating results, and future prospects.
Any financial or economic crisis, or perceived threat of such a crisis may materially and adversely affect the Group’s business, prospects, financial condition and results of operation.
Any prolonged slowdown in the Chinese or global economy may have a negative impact on the Group’s business, financial condition and results of operations. In particular, general economic factors and conditions in China or worldwide may affect the road transportation industry. The global macroeconomic environment is facing challenges, such as the conflicts in Ukraine, the military conflicts in the Middle East involving the United States, Israel, and Iran, and the ongoing global trade disputes and tariffs. There is considerable uncertainty over the long-term effects of the monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, such as the uncertainty of U.S. interest rate. Economic conditions in China are sensitive to global economic conditions. Any prolonged slowdown in China’s economic development might lead to tighter credit markets, increased market volatility, sudden drops in business and consumer confidence and dramatic changes in business and consumer behaviors. These adverse economic effects could negatively affect the road transportation industry, resulting in reduced cargo volumes and truck capacity on the FTA platform and as well as financial difficulty among shippers and truckers, which would negatively impact their ability to repay loans facilitated by us or otherwise materially and adversely affect the Group’s business, results of operations and financial condition. Furthermore, continued turbulence in the international markets may adversely affect our ability or plan to access the capital markets.
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We could be adversely affected by political tensions between the United States and China.
Political tensions between the United States and China have escalated in recent years due to, among other things, the recent trade war between the two countries, the COVID-19 outbreak, the imposition of U.S. sanctions on certain Chinese officials from China’s central government and the Hong Kong Special Administrative Region by the U.S. government, and the imposition of sanctions on certain individuals from the U.S. by the Chinese government and various executive orders issued by U.S. President Donald J. Trump. During 2025, the U.S. government imposed a wide range of tariffs at varying levels, including in particular tariffs on Chinese imports, and many countries, including China, have taken retaliating measures. While certain tariffs have subsequently been suspended following trade talks between the U.S. and Chinese governments, trade negotiations between the United States and China and other countries remain fluid. Rising political tensions between China and the U.S. could reduce levels of trades, investments, technological exchanges and other economic activities between the two major economies, which would have a material adverse effect on global economic conditions and the stability of global financial markets. The measures taken by the U.S. and Chinese governments may have the effect of restricting the Group’s ability to transact or otherwise do business with entities within or outside of China and may cause investors to lose confidence in Chinese companies and counterparties, including us. If the Group was unable to conduct its business as it is currently conducted as a result of such regulatory changes, the Group’s business, results of operations and financial condition would be materially and adversely affected.
Furthermore, there were media reports on deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets, and delisting China-based companies from U.S. national securities exchanges. In January 2021, after reversing its own delisting decision, the NYSE ultimately resolved to delist China Mobile, China Unicom and China Telecom in compliance with the executive order issued in November 2020, after receiving additional guidance from the U.S. Department of Treasury and its Office of Foreign Assets Control. These delistings have introduced greater confusion and uncertainty about the status and prospects of Chinese companies listed on the U.S. stock exchanges. On April 9, 2025, amid the escalation of trade war between the U.S. and China, the U.S. Secretary of the Treasury, Scott Bessent, indicated the possibility of delisting U.S.-listed China-based issuers. If any further such deliberations were to materialize, it may have a material and adverse impact on the stock performance of China-based issuers listed in the United States such as us, and we cannot assure you that we will always be able to maintain the listing of our ADSs on a national stock exchange in the U.S., such as the NYSE or the Nasdaq Stock Market, or that you will always be allowed to trade our ADSs.
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If we fail to keep up with the technological developments and implementation of advanced technologies, the Group’s business, results of operations and prospects may be materially and adversely affected.
We apply technologies to serve the Group’s ecosystem participants more efficiently and bring them better user experience. The Group’s success will in part depend on its ability to keep up with the changes in technologies and the continued successful implementation of advanced technology, including AI, data analytics and autonomous driving. For instance, the increasing use of AI in logistics and transportation-related services may improve efficiency and change how freight matching and related services are provided across the industry. These developments may lead to shifts in customer expectations and industry practices, and could intensify competition from participants that are able to more effectively leverage new technologies. In addition, autonomous driving technologies may, over time, have a significant impact on freight transportation. If such technologies are commercialized and adopted at scale, they may affect the demand for traditional driver-based transportation services and alter existing supply and demand dynamics in the industry.
We have accumulated extensive operational experience in the freight matching industry, built a large-scale network of shippers and truckers, and developed a substantial proprietary dataset over time. These assets, together with our existing human service capabilities and ongoing investments in technology and AI-related research and development, may help us adapt to evolving industry conditions. However, there can be no assurance that our existing capabilities, data assets, network effects, or ongoing investments will be sufficient to fully offset the impact of technological disruption. If we fail to adapt the FTA platform and services to changes in technological developments in an effective and timely manner, the Group’s business operations may suffer. Changes in technologies may require substantial expenditures in research and development as well as in modification of the Group’s services, which may be disruptive to its business and can be time-consuming and expensive, and may increase management responsibilities and divert management attention. Hurdles in implementing technological advances may result in the Group’s services becoming less attractive to ecosystem participants, which, in turn, may materially and adversely affect its business, results of operations and prospects.
We are subject to the evolving laws and regulations governing the road transportation, internet service and insurance industries in the PRC. Heightened regulatory scrutiny may lead to frequent regulatory communications, inquiries or investigations that could materially and adversely affect the Group’s business model, results of operations and prospects.
The Group’s business is subject to a variety of laws and regulations in the PRC governing the rapidly evolving road transportation, internet service, financial service and insurance industries. The application and interpretation as to certain of these laws and regulations are currently ambiguous and evolving, and may be interpreted and administered inconsistently between the different government authorities and local bureaus.
As of the date of this annual report, the Group had not been involved in any non-compliance incident which, individually or in the aggregate, have had or are reasonably likely to have a material and adverse impact on the Group’s business, financial condition or results of operations. However, if the PRC government continues to tighten its regulatory framework for the road transportation, financial service and internet service industries in the future, and subject industry participants such as the Group to new or specific requirements, such as licensing or additional user protection requirements, or require us to adjust the Group’s existing business practices, the Group’s business, financial condition and prospects would be materially and adversely affected. For instance, since 2021, the PRC Ministry of Transport has issued several guidances which repeatedly mentioned the concept of ensuring truck drivers’ reasonable income and restriction of transaction service fees and membership fees. Moreover, since 2025, the PBOC and the National Financial Regulatory Administration also issued several guidances which may further restrict the maximum interest rate for future loans. However, there are uncertainties regarding the interpretation and application of these guidances and there is no further detailed rules or requirements that have been issued by such authority currently. The PRC Ministry of Transport or other regulatory authorities may from time to time issue new guidances or take further actions in the future to strengthen this aspect. We alone and also together with several other industry players, were requested to attend certain regulatory guidance meetings, and subject to relevant supervisions or requests in the past. During these meetings, the relevant regulators emphasized the industry players’ responsibilities to manage safety risks, set appropriate shipping prices, charges and refund policy, avoid unfair competition, maintain adequate internal processes, set up transparency mechanism and protect user (particularly trucker) rights, among other requirements. In connection with these regulatory advice and mandates, we were also from time to time requested to furnish materials regarding our business practices with respect to the relevant topics. Going forward, we may continue to be required to attend similar meetings or become subject to regulatory inquiries, investigations or requirements with PRC regulators. There is no guarantee that such regulatory communications or supervisions would not result in substantial penalties or orders, or require us to adjust the Group’s existing business practices in ways that may materially and adversely affect its growth and results of operations and we cannot assure you that we may be able to make such adjustment in a timely manner, or at all. Compliance with existing and future rules, laws and regulations can be costly and if the Group’s practices are deemed to violate any existing or future rules, laws and regulations, the Group may face injunctions, including orders to cease non-compliant activities, and may be exposed to other penalties as determined by the relevant government authorities as well. We may also suffer reputational damages, if the Group or its business partners are deemed to violate any existing or future rules, laws and regulations. In addition, we may also be forced to suspend or terminate some of our services if there is a change in PRC laws and regulations, which may negatively affect our business, financial condition and results of operations.
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Under PRC laws and regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet or wireless networks content that, among other things, violates the principle of the PRC constitution, laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, fraudulent or defamatory. While the Group has adopted content screening mechanisms, there is no guarantee that the content posted or displayed on the FTA platform, including those posted by us and by our users, such as shippers, will not be deemed by the PRC government to violate any content restrictions. If such cases happen, we could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect the Group’s business, financial condition and results of operations.
In addition, the insurance brokerage business of Shan’en Insurance has been and will continue to be subject to regular and ad hoc regulatory inspections and actions by National Financial Regulatory Administration (formerly known as China Banking and Insurance Regulatory Commission, or the CBIRC), or the NAFR, and other authorities regarding its compliance with applicable rules and regulations. We were subject to an inspection from July to September 2021 by a local counterpart of CBIRC, who, upon completion of the inspection, required us to rectify our archive management and disclosure policy. As of the date of this annual report, we have taken the rectification actions as well as measures to enhance internal control, and paid an immaterial amount of fine. There can be no assurance that the regulatory authorities will not identify non-compliance incidents regarding Shan’en Insurance’s operations in the future. Regulatory actions against Shan’en Insurance may materially and adversely affect the Group’s business, financial condition and results of operations.
The Group’s day-to-day operation is also subject to laws and regulations such as occupational safety and fire control requirements, among others. The Group may from time to time develop new solutions and services, which may also subject the Group or its business partners to additional regulatory or licensing requirements, including anti-monopoly laws, anti-unfair competition law, consumer protection laws and tax requirements, among others. Failure by the Group or its business partners to comply with any such new regulatory or licensing requirements could result in fines, penalties or even criminal liabilities, which would materially and adversely affect the Group’s business and results of operations.
The Group’s business generates, collects, stores and processes a large amount of data, which include sensitive personal information and may include data that may be deemed core data or material data. The improper processing of such data by the Group, its employees or business partners could materially and adversely affect the Group’s reputation, business, results of operations and financial condition.
We face risks inherent in handling and protecting a large amount of data that the Group’s business generates and processes from the significant number of transactions the FTA platform facilitates, and such data include sensitive personal information and may include data that may be deemed core data or material data. In particular, we face a number of challenges relating to data from transactions and other activities on the FTA platform, including:
• protecting the data in and hosted on the Group’s system, including against attacks on its system by external parties or misbehavior by its employees;
• addressing concerns related to privacy, security and other factors; and
• complying with applicable laws, rules and regulations relating to the processing and security of data that include personal information and data that may be deemed core data or material data, including any requests from regulatory and government authorities relating to such data.
In particular, if we fail to secure platform users’ sensitive personal information, such as their addresses and contact information, platform users may be vulnerable to harassments, and their assets may also be put at risk due to data leakages. As a result, we may be held liable for these incidents, and platform users may feel insecure and cease to use the Group’s services. In addition, any system or technological failure or compromise of our technology system that results in unauthorized access to or release of any personal data of platform users or proprietary information of the Group’s business operations could significantly harm the Group’s reputation and/or result in litigation, regulatory investigations and penalties against us.
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We are subject to various data privacy and protection laws and regulations in China, including without limitation, the Cybersecurity Law and the Administration Regulations on Cyber Data Security. Under the Cybersecurity Law, the owners and administrators of networks and network service providers have various personal information security protection obligations, including restrictions on the collection and use of personal information of users, and they are required to take steps to prevent personal data from being divulged, stolen, or tampered with. Under the Administration Regulations on Cyber Data Security, the network data processors that handle personal information of more than 10 million individuals shall also comply with the relevant provisions made for network data processors handling important data. See “Item 4. Information on the Company — B. Business Overview — Regulatory Matters—Regulations Related to Internet Security and Privacy Protection” for details. We cannot assure you that the governmental authorities will not interpret or implement the laws or regulations in ways that negatively affect us. Moreover, different regulatory bodies in China, including the MIIT, the CAC, the Ministry of Public Security and State Administration of Market Regulation, or the SAMR, have enforced data privacy and protection laws and regulations with various standards and applications. These various standards in enforcing data privacy and protection laws may create difficulties in ensuring full compliance and increase the Group’s operating cost, as we need to spend time and resources to deal with various inspections for compliance.
While we have adopted a rigorous and comprehensive policy for the collection, processing, storage and other aspects of data use and privacy and taken necessary measures to comply with all applicable data privacy and protection laws and regulations, we cannot guarantee the effectiveness of these policies and measures undertaken by us, or business partners on the FTA platform. In the past, we received notices from regulatory authorities that identified certain compliance defects in our data privacy and protections practices, requiring us to rectify our data privacy measures. We have adopted several remedial measures in response to such notices and submitted our rectification reports to the relevant governmental authorities. Despite the absence of any material cybersecurity breach and our continuous efforts to comply with our internal policies as well as applicable laws and regulations, any failure or perceived failure to comply with all applicable data privacy and protection laws and regulations, any failure or perceived failure of the Group’s business partners to do so, or any failure or perceived failure of the Group’s employees to comply with internal control measures, may result in warning, negative publicity and legal proceedings or regulatory actions against the Group, and could result in fines, revocation of permits, licenses, suspension of business operations or other penalties or liabilities, which may in turn damage the Group’s reputation, discourage current and potential shippers and truckers from using the Group’s services, and subject the Group to fines and damages, which could have a material adverse effect on the Group’s business and results of operations.
Furthermore, the PRC regulatory and enforcement regime with regard to data security and data protection is still evolving. PRC regulators have been increasingly focused on regulation in the areas of data security and data protection. For example, on June 10, 2021, the Standing Committee of the National People’s Congress of China, or the SCNPC, promulgated the PRC Data Security Law, which took effect on September 1, 2021. The PRC Data Security Law imposes data security and privacy protection obligations on entities and individuals which carry out data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it might cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, which took effect on November 1, 2021. The Personal Information Protection Law provides the basic regulatory regime for personal information protection, including without limitation, stipulating an expanded definition of personal information, providing a long-arm jurisdiction in cross-border scenarios, emphasizing individual rights, and prohibiting rampant infringement of personal information, such as stealing, selling, or secretly collecting personal information. The Group provides services to individual shippers and truckers who may upload personal information to FTA platform when using the Group’s services, which may be deemed to be sensitive personal information under the Personal Information Protection Law. Any failure to comply with the Personal Information Protection Law may subject the Group to liabilities or administrative penalties, including but not limited to suspension or termination of the Group’s services. For further details, see “Item 4. Information on the Company — B. Business Overview — Regulatory Matters — Regulations Related to Internet Security and Privacy Protection.” Furthermore, on December 8, 2022, the MIIT published the Measures for the Administration of Data Security in the Field of Industry and Information Technology (for Trial Implementation), which became effective from January 1, 2023 and stipulates that telecom data processors (including telecom business operators with telecom business operation licenses) shall sort out data regularly, identify important and core data in accordance with relevant standards and develop their own specific catalogues to ensure data security in data collection, storage, use, processing, transmission, provision and disclosure. These newly promulgated laws and regulations reflect PRC government’s further attempts to strengthen the legal protection for personal information, as well as the security of national network and key information infrastructure.
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The functional designs and interactive logic of the Group’s mobile apps may need to be adjusted from time to time in order to comply with evolving laws, regulations, norms and other applicable regulatory requirements, which could increase the Group’s compliance costs and may adversely affect its mobile apps’ user experience. We cannot assure you that relevant regulators will not interpret or implement the laws or regulations in ways that negatively affect the Group. In addition, the Group may become subject to additional or new laws and regulations in this regard, which may result in additional expenses to the Group and subject the Group to potential liability and risk of negative publicity. We expect that data security and protection will continue to receive significant public attention and scrutiny from regulators going forward, which could increase the Group’s compliance costs and subject the Group to heightened risks and challenges associated with data security and protection. If the Group were unable to manage these risks, it could become subject to penalties, fines, suspension of business and revocation of required permits or licenses, and the Group’s reputation and results of operations could be materially and adversely affected.
Regulatory uncertainties relating to, or failure to comply with, anti-monopoly and competition laws could adversely affect the Group’s business, financial condition, or operating results.
The PRC anti-monopoly enforcement agencies have in recent years strengthened enforcement under the PRC Anti-monopoly Law, including levying significant fines, with respect to concentration of undertakings and cartel activity, mergers and acquisitions, as well as abusive behavior by companies with market dominance. In March 2018, the SAMR was formed as a new governmental agency to take over, among other things, the anti-monopoly enforcement functions from the relevant departments under the MOFCOM, the National Development and Reform Commission of the PRC, or the NDRC, and State Administration of Industry and Commerce of the PRC, or the SAIC. The SAMR issued a new set of guidelines with respect to merger control review in September 2018, and issued the Notice on Anti-monopoly Enforcement Authorization on December 28, 2018, which grants authorizations to the SAMR’s provincial branches to enforce anti-monopoly laws within their respective jurisdictions. The SAMR has imposed several administrative penalties on various companies for failing to duly make filings as to their transactions subject to merger control review by the SAMR. The scope of the companies that were penalized is broad, and covers a variety of different industries.
Significant regulatory uncertainty existed as to whether prior filing of notification of concentration is required for business concentration involving variable interest entities prior to 2020. In November 2020, the Anti-monopoly Bureau of SAMR released the draft Guidelines on Anti-monopoly Issues in Platform Economy, or the Platform Economy Anti-monopoly Guidelines, for public comment and in February 2021, adopted the Platform Economy Anti-monopoly Guidelines, which for the first time specified that, any concentration made between the variable interest entities shall be regulated by the Anti-monopoly Law. In addition, the Platform Economy Anti-monopoly Guidelines set out detailed standards and rules in respect of the definition of relevant markets, typical types of cartel activities and abusive behaviors by online platform operators with market dominance, which provide further guidelines for enforcement of anti-monopoly laws against online platform operators. For instance, online platform operators that use technological advantages, such as data and algorithms, to eliminate or restrict competition or impose price restrictions or exclusivity requirements on users may be deemed to be abusing dominant market position.
Prior to the effectiveness of the Platform Economy Anti-monopoly Guidelines, the SAMR has already fined certain companies that acquired businesses using variable interest entities without obtaining merger control approval or without prior filing of notification of concentration, indicating its increased scrutiny over historical cases of concentration of undertakings involving companies using variable interest entities and heightened enforcement efforts over past failure to file prior notification of concentration of undertakings for such transactions. Since 2020, the SAMR has fined companies that acquired or merged with or cooperated with onshore or offshore entities, including those operated through variable interest entities, for failure to file prior notification before conducting the mergers or cooperation transactions.
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Although we do not believe we were legally required to make a merger control review filing or obtain merger control approval in relation to the historical merger between Yunmanman and Huochebang in 2017, there can be no assurance that regulators will agree with us, particularly, in light of the enforcement actions since 2020. In addition, as there were few cases where companies using variable interest entities were investigated for failure to make filings in connection with concentration of undertakings prior to 2020, we did not file prior notification of concentration of undertakings for our historical business alliance or joint-investment transactions with our business partners. The SAMR issued a penalty decision on one transaction we made in 2020, for which we have paid an immaterial amount of penalty. There can also be no assurance that regulators will not initiate other anti-monopoly enquiry or investigation into, or take enforcement actions against, the historical merger between Yunmanman and Huochebang and/or our historical business alliance or joint-investment transactions or require us to submit filings in relation to such historical transactions. We may be subject to penalty in connection with any such enquiry or investigation, if we are determined by the anti-monopoly enforcement agency to have failed to make the requisite filings, including (i) a fine up to ten percent of the business operator’s sales revenue in the past year, if the concentration of undertakings has or may have an effect of excluding or limiting competition, or (ii) a fine up to RMB5 million if the concentration of undertakings does not have the effect of excluding or limiting competition, and in extreme cases the anti-monopoly enforcement agency may order business operators to cease illegal concentration, to dispose shares, assets or businesses within a certain period of time, or to take other necessary measures to restore to the state before the concentration pursuant to the applicable PRC anti-monopoly law. We may also be subject to claims from our competitors or users, which could adversely affect the Group’s business and operations. Furthermore, any new requirements or restrictions, or proposed requirements or restrictions, could result in adverse publicity or fines against the Group.
On June 24, 2022, the Decision of the Standing Committee of the National People’s Congress to Amend the Anti-Monopoly Law of the People’s Republic of China was adopted and became effective on August 1, 2022, which stipulates that the State Council’s anti-monopoly enforcement agency may order business operators to cease illegal concentration, to dispose shares, assets or businesses within a certain period of time, or to take other necessary measures to restore to the state before the concentration.
On May 6, 2024, the SAMR promulgated the Interim Provisions Against Unfair Competition in Cyberspace. The Interim Provisions Against Unfair Competition in Cyberspace stipulates that a platform operator shall strengthen the standardization and management of competition acts within the platform, and shall take necessary disposal measures in a timely manner, keep relevant records, and report to the local administration for market regulation at or above the county level of the place where the platform operator is domiciled in accordance with the regulations if it is found that an operator using the platform has adopted an unfair competition method, has illegally sold goods or provided services, or has infringed upon the lawful rights and interests of consumers. The record shall be kept for a period of not less than three years from the date on which the disposal measures are taken. For details, see “Item 4. Information on the Company — B. Business Overview — Regulatory Matters — Regulations Related to Anti-Monopoly and Anti-unfair Competition.” Stricter anti-monopoly and anti-unfair competition enforcement by the PRC regulatory authorities, especially enforcement actions focused on platform economy, may, among other things, prohibit the Group from future acquisitions, divestitures or combinations the Group plans to make, impose fines or penalties, require divestiture of certain of the Group’s assets, or impose other restrictions that limit or require the Group to modify its operations, including limitations on the Group’s contractual relationships with shippers and truckers or restrictions on the Group’s pricing or revenue models, which could materially and adversely affect the Group’s business, financial condition, results of operations and future prospects.
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Furthermore, as we continue to navigate the evolving legislative environment and varied local implementation practices of anti-monopoly and competition laws and regulations in the PRC, we have attended and may continue to be required to attend administrative guidance meetings or other communications with regulators from time to time. We may continue to receive greater scrutiny and attention from regulators and more frequent and stringent investigations or reviews by regulators, which will increase the Group’s compliance costs. It could also be time-consuming to comply with the relevant regulations described above to complete future transactions and carry out the Group’s business operations. Heightened regulatory inquiries, investigations and other governmental actions and approval requirements from governmental authorities such as the SAMR may be uncertain and could delay or inhibit our ability to complete these transactions and carry out the Group’s business operations, which could affect the Group’s ability to expand its business, maintain its market share or otherwise achieve the goals of our acquisition strategy, divert significant management time and attention and the Group’s financial resources, bring negative publicity, subject the Group to liabilities or administrative penalties, and/or materially and adversely affect the Group’s financial conditions, operations and business prospects.
We may not be able to compete effectively, which could materially and adversely affect the Group’s business, financial condition, results of operations and prospects, as well as its reputation and brands.
The road transportation market is intensely competitive and characterized by fragmentation and shifting user preferences. We face competition from regional players in local markets and players that focus on certain segments of the road transportation market. We also compete with other companies for value-added services that cater to various essential needs of shippers and truckers. Players that focus on certain segments of the road transportation market may enter into new segments in which we operate and compete with us. Furthermore, large technology companies that have strong brand recognition, substantial financial resources and sophisticated technology capabilities may develop their own digital freight platforms in the future.
The Group operates as a digital freight marketplace, which is a relatively new business model. Our competitors may operate different business models, have different cost structures or participate selectively in different industry segments. They may ultimately prove to be more successful or more adaptable to customer demand and new regulatory, technological and other developments. Some of our current and potential competitors may have significantly more financial, technological, marketing and other resources than we do and may be able to devote greater resources to the development, promotion and support of their platforms and service offerings. Our competitors may also have longer operating history and greater brand recognition than us. Additionally, a current or potential competitor may acquire, or form a strategic alliance with, one or more of our other competitors. Our competitors may be better at developing new solutions and services, offering more attractive fees, responding more quickly to new technologies and undertaking more extensive and effective marketing campaigns. More players may enter the road transportation market and intensify the market competition.
In response to competition, we may have to lower and/or adjust the various fees that the Group charges to shippers and truckers or increase its operating expenses and capital expenditures to attract more shippers and truckers, which could materially and adversely affect its business, margins and results of operations. If the Group is not able to compete effectively, its ability to attract and retain shippers, truckers and other ecosystem participants may be adversely affected, the level of transaction activities and user engagement on the FTA platform may decrease and the Group’s market share may be negatively affected, which could materially and adversely affect the Group’s business, financial condition, results of operations and prospects, as well as its reputation and brands.
If we fail to obtain or maintain licenses, permits or approvals applicable to the Group’s business, the Group may become subject to significant penalties and other regulatory proceedings or actions.
The road transportation business in China is highly regulated by the PRC government. See also “Item 4. Information on the Company — B. Business Overview — Regulatory Matters—Regulations Related to Road Transportations.” In connection with the online operations of the FTA platform, the Group is also required to obtain value-added telecommunications service licenses, in order to provide relevant value-added telecommunication services. The consolidated affiliates have obtained value-added telecommunications service licenses for the operations of the mobile apps and websites.
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To enhance the experience of shippers, truckers and other ecosystem participants, the Group offers various auxiliary functions, content and value-added services through the FTA platform. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practices by relevant government authorities, the Group may be required to obtain additional licenses, permits, filings or approvals for these functions, content and services. For example, it remains unclear whether the in-app message and voice call functions on the Group’s mobile apps would require a separate value-added telecommunications service authorization in relation to “instant interactive services” under the applicable PRC laws and regulations. Although we do not believe that a separate authorization is required because the Group’s mobile apps are not primarily communication software and such in-app message and voice call functions are only auxiliary functions to the Group’s main services. However, we cannot assure you that the relevant PRC government authorities would agree with our interpretation. If the Group were required to obtain additional authorization, it may not be able to do so in a timely manner, or at all.
Moreover, we cannot assure you that the Group will be able to maintain existing licenses and permits, or renew any of them when their current term expires, or update information (such as information related to the Group’s websites, mobile applications, legal representatives, business scopes or professional staff) filed with regulators in time due to procedural or substantive requirements. Under applicable PRC laws, rules and regulations, any failure to obtain, maintain and/or renew the licenses and permits, or any failure to update information filed with regulators in time, in each case required to conduct the Group’s business, may subject the Group to various penalties, including confiscation of revenues, imposition of fines, and restrictions on or termination of the business operation subject to such license or permit requirement. Any such disruption in the business operations of our PRC subsidiaries, the Group VIEs or consolidated affiliates could materially and adversely affect the Group’s business, financial condition and results of operations.
Furthermore, if the Group enters into new service categories or business lines, adopt new business models, or any of its current services are determined to be subject to new licensing requirements in the future, especially due to the evolving application or interpretation of relevant laws and regulations, it may be required to obtain licenses or permits that it does not currently have or to amend the licenses or permits it currently has. We will strive to obtain and amend the relevant licenses and permits but we cannot assure you that the Group will be able to obtain or amend such licenses and permits in a timely manner, or at all.
Regulatory uncertainties relating to online lending industry in China could harm the Group’s business, financial condition and results of operations.
The online lending industry in China is subject to evolving regulations. We cannot assure you that our existing or future credit solutions provided as part of our value-added services that cater to various essential needs of shippers and truckers would not be deemed by regulators to be in violation of any laws, regulations and rules in the future. In addition, new laws and regulations relating to the online lending industry may be adopted, and existing laws and regulations may be interpreted in ways that are inconsistent with our existing or future business practices, which, along with any possible changes needed to fully comply with any existing or new regulations, could require us to modify our business or operations. Compliance with such laws or regulations could force us to incur increased operating expenses, or modify our business models, which may have a material and adverse impact on the Group’s business, financial condition and results of operations.
The State Council promulgated the Regulations on the Administration of Financing Guarantee Companies, or the Financing Guarantee Rules, in 2017. According to the Financing Guarantee Rules, the establishment of financing guarantee companies shall be subject to the approval by the competent government authority, and unless otherwise stipulated, no entity may operate financing guarantee business without such approval. If any entity violates these regulations and operates financing guarantee business without approval, the entity may be subject to penalties including ban or suspension of business, fines of RMB500,000 to RMB1,000,000, confiscation of illegal gains if any, and if the violation constitutes a criminal offense, criminal liability in accordance with applicable laws.
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We currently facilitate loans funded by third-party financial institutions that we collaborate with, and we guarantee such loans through our PRC subsidiaries. In some instances, guarantees had and may continue to be provided by certain of the consolidated affiliates that lack required license to operate financial guarantee business. In the past, one of the consolidated affiliates provided guarantees during a period in which its license for financial guarantee business had expired. We maintained routine reporting to the competent regulatory authority and have subsequently renewed such license. If any of our practices were found by the regulatory authorities to be in violation of the applicable regulations, we would be subject to penalties, such as confiscation of illegal gains and fines, which could have an adverse impact on the Group’s business, financial condition and results of operations. Furthermore, there can be no assurance that we will be able to obtain or renew our licenses for financial guarantee business when such licenses expire in the future.
On December 31, 2024, the NAFR issued the Interim Administrative Measures for Small Loan Companies, or the Interim Administrative Measures. Small loan companies are not allowed to conduct business across provinces, autonomous regions or municipalities directly under the Central Government, while the requirements regarding the operating scope of online small loan company will be provided for separately. The Interim Administrative Measures require our small loan company to adjust their businesses as necessary to be in compliance with such measures after the two-year transition period. If we failed to comply with NAFR’s requirements in a timely manner or at all, we may subject to penalties and our licenses may be revoked, which could have an adverse impact on the Group’s business, financial condition and results of operations. As of December 31, 2025, the total outstanding balance of the on-balance sheet loans, consisting of the total principal amounts (excluding loans that are over 180 days past due and are therefore charged off) and all accrued and unpaid interests of the loans funded through our small loan company, reduced by an allowance for estimated losses, was RMB4,851.4 million (US$693.7 million).
Furthermore, relevant regulatory and judicial authorities may change the private lending rate of interest that can be charged by non-financial institutions from time to time. On August 20, 2020, China’s Supreme People’s Court, or the SPC, announced its decision to lower the cap for such private lending rate in a revised judicial interpretation. Under the revised judicial interpretation, such total annual percentage rates (inclusive of any default rate, default penalty and any other fee) exceeding four times that of China’s benchmark one-year loan prime rate, or LPR, as published each month will not be legally protected. Based on the LPR of 3.0% as published on March 20, 2026, such cap would be 12.0%. According to a guidance letter issued by the SPC on December 29, 2020, clarifying the applicability of its revised judicial interpretation, the cap for private lending rate does not apply to small loan companies, financial guarantee companies, financial leasing companies, commercial factoring companies and certain other local financial organizations under the supervision of local financial regulatory authorities. However, uncertainties still exist with respect to the interpretation and implementation of existing and future laws and regulations governing small loan companies. For example, SPC guidance and judgment indicate that the portion of annualized interest rate, or APR, charged by financial institutions in excess of 24% per annum will not be supported in litigations. The APRs on our cash loans vary depending on borrowers’ credit profiles and may exceed 24%. The excess portion may not be enforceable should any dispute arise between us and the relevant borrowers. On December 31, 2024, the NAFR published the Interim Measures for the Supervision and Administration of Small Loan Companies. Pursuant to the Interim Measures for the Supervision and Administration of Small Loan Companies, the balance of loans granted by online small loan companies to a single household for consumption shall not exceed RMB200,000, and the balance of loans granted to a single household for production and business operations shall not exceed RMB10 million. In December 2025, we have been informed that a new rule in relations to small loan company like us had been issued by the NAFR and the PBOC, according to which small loan companies are prohibited from granting new loans where the total annual financing cost percentage rates (inclusive of all interest and fee expenses, such as interest, guarantee fees, insurance fees, and other related charges) exceeds 24%. As of December 31, 2025, the annual financing cost percentage rates of us has been reduced to below 24%. We cannot assure you that we will not be required to further reduce such annual financing cost percentage rates in the future. If the regulatory requirements for our licensed small loan company or financial guarantee companies are strengthened by any newly adopted, or by the application of any existing laws, regulations, policies, guidelines or rulings, our licensed small loan company or financial guarantee companies may need to change their business models, which may adversely affect the Group’s business, financial condition, results of operation and prospects.
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The Group relies on commercial banks and third-party online payment service providers for payment processing services for certain of its services. If these payment services are restricted or curtailed in any way or become unavailable or unavailable on reasonable terms to the Group for any reason, its business may be materially and adversely affected.
The Group is not licensed to process payments and rely on commercial banks and third-party online payment service providers for payment processing services for certain of the Group’s services involving payments. If the quality, utility, convenience or attractiveness of these payment processing services declines, or we have to change the Group’s business arrangements with them for using these payment services for any reason, the attractiveness of the FTA platform could be materially and adversely affected.
The Group’s third-party online payment service providers and its relationship with them are subject to a number of risks that could materially and adversely affect their ability to provide payment processing and escrow services to the Group, including:
• dissatisfaction with these online payment services or decreased use of their services by shippers, truckers and other ecosystem participants;
• increasing competition, including from other established Chinese internet companies, payment service providers and companies engaged in other financial technology services;
• changes to rules or practices applicable to payment systems that third-party online payment service providers reply on;
• breach of users’ personal information and concerns over the use and security of information collected from users;
• service outages, system failures or failures to effectively scale the system to handle large and growing transaction volumes;
• increasing costs to third-party online payment service providers, including fees charged by commercial banks processing transactions through online payment channels, which could in turn be passed on to the Group and increase its costs of revenues; and
• failure to manage funds accurately or loss of funds, whether due to employee fraud, security breaches, technical errors or otherwise.
If any of the foregoing takes place, the Group’s third-party online payment service providers’ services may be restricted or curtailed or become unavailable or unavailable on reasonable terms to the Group, and its business and results of operations could be materially and adversely affected.
In addition, the commercial banks and third-party online payment service providers that we work with are subject to the supervision of the PBOC. The PBOC may publish rules, guidelines and interpretations from time to time regulating the operation of financial institutions and payment service providers that may in turn affect the business arrangements between such entities and the Group. For example, in November 2017, the PBOC published a notice, or the PBOC Notice, on the investigation and administration of illegal offering of settlement services by financial institutions and third-party payment service providers to unlicensed entities. The PBOC Notice intended to prevent unlicensed entities from using licensed payment service providers as a conduit for conducting the unlicensed payment settlement services, so as to safeguard the fund security and information security. As the laws and regulations in this area are still evolving and subject to interpretation, we cannot assure you that the PBOC or other governmental authorities will not scrutinize the Group’s business arrangements with commercial banks and third-party online payment service providers. For instance, the Group’s past settlement practices may give rise to the risk of the Group being deemed as inadvertently engaging in payment activity without the required license. The Group has adjusted its business arrangements in accordance with applicable laws and regulations. However, if its business arrangements were found by the regulatory authorities to be noncompliant, or if required by the PBOC or any new laws, rules or regulations, the Group’s payment service providers may decide to, among other things, suspend their services or be forced to adjust their business arrangements with the Group. As a result, the Group may incur additional expenses to find alternative payment service providers or adjust its business practices or invest considerable resources in complying with the requirements. Furthermore, if the PBOC or other governmental authorities deem the Group’s business arrangements with payment service providers to be noncompliant, the Group may be subject to regulatory action, investigations, fines and penalties, which could materially and adversely affect its business, results of operations and reputation.
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If we fail to effectively manage the credit risks related to our credit solutions provided to truckers and shippers on the FTA platform, our business may be adversely affected.
We provide various credit solutions to shippers and truckers to meet their financial needs. We have primarily used our own capital to fund cash credit solutions for shippers and truckers. We also facilitate loans funded by third-party financial institutions, and we guarantee such loans. We believe our credit solutions create value for our ecosystem participants and enhance user engagement and transaction activities on the FTA platform. As of December 31, 2025, the total outstanding loan balance, consisting of the aggregate principal amount outstanding under on-balance sheet and off-balance sheet loans as of the end of each reporting period (excluding loans that are more than 180 days past due), was RMB5.5 billion (US$0.8 billion), and the total non-performing loan ratio for these loans was 2.9%. Our non-performing loan ratio is calculated by dividing the sum of total outstanding principal of the on- and off-balance sheet loans that were over 90 calendar days past due (excluding loans that are over 180 days past due and are therefore charged off) by the sum of total outstanding principal of on- and off-balance sheet loans (excluding loans that are over 180 days past due and are therefore charged off) as of a specified date.
We may increase the amount of credit we offer and we are exploring freight fee receivable loans for truckers to improve their cash flows. Furthermore, while we have implemented a risk management system, we cannot assure you as to the effectiveness of such system. If we fail to effectively manage the credit risks related to our credit solutions, the Group’s business, results of operations and financial condition would be materially and adversely affected.
In addition, our failure to collect payments on the loans funded or guaranteed by us may have a material adverse effect on the Group’s business operations and financial positions. Moreover, the current regulatory regime for debt collection in the PRC remains unclear. We aim to ensure collection efforts carried out by us and our third-party service providers comply with relevant laws and regulations in the PRC, and we have employed contractual measures to further ensure third-party service providers’ compliance with relevant laws and regulations. However, we only exercise limited control over third-party service providers, and if our collection methods are viewed by the borrowers or regulatory authorities as harassments, threats or other illegal means, we may be subject to risks relating to third-party debt collection services providers, including lawsuits initiated by the borrowers or restrictions, fines or penalties imposed by the relevant regulatory authorities.
The Group’s expansion into overseas markets could subject the Group to legal, reputational and operational risks, as well as a broad array of local legal and regulatory requirements that could adversely affect the Group’s operations.
While the Group operates its business primarily in the China market, it has been exploring opportunities in expanding its business into the overseas markets. For instance, we have launched our overseas digital freight platform business, Qmove, in selected international markets, such as Türkiye, Egypt, the United Arab Emirates and Indonesia, to connect shippers and truckers.
Operating a multinational business creates difficulties associated with staffing, managing the Group’s global operations, as well as complying with local legal and regulatory requirements. The Group’s existing operations in the overseas markets may not succeed eventually, and may expose the Group to increased risks associated with different market dynamics and competition in the overseas markets. The Group is subject to a variety of local laws and regulations that involve matters central to its business, including, among others, freight matching services, data privacy and security, competition, labor, consumer protection and taxation. These laws and regulations can be particularly restrictive in certain jurisdictions, as they constantly evolve and remain subject to change. In addition, the application and interpretation of these laws and regulations, which are subject to change, could result in government inquiries, claims, disputes, changes to the Group’s business practices, increased cost of operations and declines in user growth, retention or engagement, any of which could seriously harm the Group’s business.
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Some of the jurisdictions in which the Group has expanded or plan to expand its business have undergone significant political, economic and social change in recent years and the risk of new, unforeseen changes in these jurisdictions remains greater than in other more developed countries. Although the Group has engaged experienced staffs and consultants in jurisdictions in which it deems appropriate, we cannot assure you that the Group will continue to be found to be operating in compliance with all applicable laws or regulations which it may be subject to. The Group’s business, financial condition and results of operations could be materially and adversely affected if it cannot effectively manage its business to address the market demands and complexities of operating a multinational business.
Employee misconduct may expose us to vicarious liabilities, reputational harm and/or economic damages.
Many of the Group’s employees play critical roles in ensuring the safety and reliability of the Group’s services or its compliance with relevant laws and regulations. Certain of the Group’s employees have access to sensitive information, proprietary technologies and know-how. While we have adopted codes of conduct for all of the Group’s employees and implemented policies and procedures relating to data privacy, intellectual property, anti-corruption, proprietary information and trade secrets, we cannot assure you that the Group’s employees will abide by these codes, policies and procedures or that the precautions we take to detect and prevent employee misconduct will be effective. For example, prior to the merger of Yunmanman and Huochebang, a then employee of Huochebang was found guilty by a court for stealing user data from Huochebang’s database. There were other instances of employee misconduct in the past, but there were no legal liabilities for the Group or the Group’s employees. Although such incidents did not have a material impact on the Group’s business, we cannot assure you that employee misconduct will not materially and adversely affect its business, results of operations and financial condition in the future. If any of the Group’s employees engage in any misconduct or illegal or suspicious activities, including but not limited to, misappropriation or leakage of sensitive user information or proprietary information, the Group and such employees could be subject to legal claims and liabilities and the Group’s reputation and business could be materially and adversely affected as a result. In addition, while the Group has screening procedures during the recruitment process, we cannot assure you that the Group will be able to uncover misconduct of job applicants that occurred before offering them employment, or that the Group will not be affected by legal proceedings against its existing or former employees as a result of their actual or alleged misconduct.
Any significant disruption in the Group’s mobile apps and information technology systems, including events beyond the Group’s control, could prevent the Group from offering its solutions and services or reduce their attractiveness.
In the event of a system outage, malfunction or data loss, the Group’s ability to provide services would be materially and adversely affected. The satisfactory performance, reliability and availability of the Group’s technology, mobile apps and information technology systems and the Group’s underlying network infrastructure are critical to its operations, user service, reputation and its ability to attract new and retain existing shippers, truckers and other ecosystem participants. The Group’s information technology infrastructure is currently deployed and its data is currently maintained on customized cloud computing services. The Group’s servers are housed at two third-party data centers, and the Group’s operations depend on the service providers’ ability to protect the Group’s systems in their facilities as well as their own systems against damage or interruption from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer malware, viruses, spamming, phishing attacks or other attempts to harm the Group’s systems, criminal acts and similar events, many of which may be beyond our control. The Group’s mobile apps are provided through third-party app stores and any disruptions to the services of these app stores may negatively affect the delivery of the Group’s mobile apps to users. Moreover, if the Group’s arrangements with these service providers are terminated or if there is a lapse of service or damage to their facilities or if the services are no longer cost-effective to us, we could experience interruptions in the Group’s solutions and service as well as delays and additional expense in arranging new solutions and services for shippers, truckers and other ecosystem participants.
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Any interruptions or delays in the Group’s service, whether as a result of third-party error, our error, natural disasters or security breaches, whether accidental or willful, could harm the Group’s relationships with shippers, truckers and other ecosystem participants and its reputation. We may not have sufficient capacity to recover all data and services lost in a timely manner in the event of an outage. These factors could prevent the Group from matching shippers with truckers or engaging in other business operations, damage the Group’s brands and reputation, divert the Group’s employees’ attention, reduce its revenue, subject it to liability and cause shippers, truckers and other ecosystem participants to abandon the Group’s solutions and services, any of which could adversely affect the Group’s business, financial condition and results of operations.
As information technology is a critical aspect in the efficient operation of the Group’s business, failure to maintain or improve its information technology infrastructure could harm the Group’s business and prospects.
The efficient and reliable operation of the Group’s business depends on its information technology systems. We are continuously upgrading the FTA platform to provide increased scale, improved performance, additional capacity and additional built-in functionality, including functionality related to security. Adopting new services and maintaining and upgrading the Group’s information technology infrastructure require significant investment of time and resources. Any failure to maintain and improve the Group’s information technology infrastructure could result in unanticipated system disruptions, slower response time, impaired user experience, delays in reporting accurate operating and financial information and failures in risk management. The risks of these events occurring are even higher during certain periods of peak usage and activity when cargo volume is higher on the FTA platform. In addition, much of the software and interfaces the Group uses are internally developed and proprietary technology. If we experience problems with the functionality and effectiveness of the Group’s software, interfaces or platform, such as undetected errors or defects, or are unable to maintain and continuously improve the Group’s information technology infrastructure to handle its business needs, the Group’s business, financial condition, results of operations and prospects, as well as its reputation and brand, could be materially and adversely affected.
Furthermore, the Group’s information technology infrastructure and services, including its service offerings, incorporate third-party-developed software, systems and technologies, as well as hardware purchased or commissioned from external suppliers. If the Group’s information technology infrastructure and services expand and become increasingly complex, it will face increasingly serious risks to the performance and security of its information technology infrastructure and services that may be caused by these third-party-developed components, including risks relating to incompatibilities among these components, service failures or delays or back-end procedures on hardware and software. The Group also needs to continuously enhance its existing technology. Otherwise, it faces the risk of its information technology infrastructure becoming unstable and susceptible to security breaches. This instability or susceptibility could create serious challenges to the security and uninterrupted operation of the FTA platform and services, which would materially and adversely affect the Group’s business and reputation.
The Group’s collection and recovery efforts may become less effective and may also subject it to regulatory risks and reputational risks.
We provide truckers with cash credit solutions and shippers with working capital loans, which are primarily funded by us through our small loan company, which is one of our PRC subsidiaries. A small amount of cash loans for truckers are funded by an institutional funding partner, and we guarantee such loans through arrangements with the institutional funding partner. The term of such loans is typically less than one year.
The Group endeavors to ensure that it complies with the relevant laws and regulations in the PRC in collecting loans receivable and has established strict policies and implemented measures to ensure that the personnel responsible for collecting loans receivable do not engage in aggressive or predatory practices. However, there can be no assurance that such personnel will not engage in any misconduct while performing their tasks. Any misconduct by such personnel or the perception that the collection and recovery practices are considered to be aggressive, predatory or not compliant with the relevant laws and regulations in the PRC may lead to negative publicity and result in harm to our reputation and business, which could further undermine the ability to collect loans receivable, or result in fines and penalties being imposed by the relevant regulatory authorities, any of which may have a material adverse effect on our results of operations.
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Any failure by the Group, its business partners or users to comply with applicable anti-money laundering laws and regulations could damage the Group’s reputation.
The Group, its business partners and third-party payment service providers are subject to anti-money laundering obligations under applicable anti-money laundering laws and regulations and are regulated in that respect by the PBOC. If any of the Group’s third-party service providers or users fail to comply with applicable anti-money laundering laws and regulations, the Group’s reputation could suffer and it could become subject to regulatory intervention, which could have a material adverse effect on the Group’s business, financial condition and results of operations. In addition, any negative perception of the industries relevant to the Group’s business, such as any failure of online transaction platform to detect or prevent money laundering activities, even if factually incorrect or based on isolated incidents, could compromise the Group’s image or undermine the trust and credibility it has established.
We have granted and expect to continue to grant share-based awards in the future under our share incentive plans, which may result in increased share-based compensation expenses.
We adopted share incentive plans to provide additional incentives to directors, officers, employees and consultants. See “Item 6. Directors, Senior Management and Employees — B. Compensation — Share Incentive Plans.” We have granted options and ordinary shares to certain directors, officers and employees pursuant to our share incentive plans, and option to purchase 264,238,482 Class A ordinary shares was outstanding as of March 31, 2026. The Group recorded RMB441.8 million, RMB496.6 million and RMB281.6 million (US$40.3 million) in 2023, 2024 and 2025, respectively, in share-based compensation expenses in relation to share-based award grants. We also expect to continue to grant awards under our share incentive plans, which we believe is of significant importance to our ability to attract and retain key personnel and employees. As a result, the Group’s expenses associated with share-based compensation may increase, which may have an adverse effect on the Group’s financial condition and results of operations.
The Group’s financial results may vary significantly from period to period due to the seasonality of its business and fluctuations in its operating costs.
The Group’s quarterly results of operations, including the levels of its revenue, operating cost and expenses, net income and other key metrics such as fulfilled orders, may vary significantly in the future due to a variety of factors, some of which are outside of our control, and period-to-period comparisons of the Group’s operating results may not be meaningful, especially given the Group’s limited operating history. Accordingly, the results for any one quarter are not necessarily an indication of future performance. Fluctuations in quarterly results may adversely affect the price of our ADSs. Factors that may cause fluctuations in the Group’s quarterly financial results include:
• the Group’s ability to attract or maintain a critical mass of shippers and truckers;
• the levels of user engagement and transaction activities;
• the mix of solutions and services the Group offers;
• the amount and timing of incurrence of the Group’s operating cost and expenses and the maintenance and expansion of its business, operations and infrastructure;
• the Group’s focus on the long-term success and future growth, instead of near-term profit;
• the Group’s ability to execute its monetization strategies;
• network outages or security breaches;
• general economic, industry and market conditions; and
• changes in applicable laws and regulations, as well as our involvement in legal or regulatory actions.
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In addition, because the Group’s revenue generated from freight brokerage service and online transaction service is related to the available working days of shippers and truckers, national holidays and the number of business days during a given period may also create seasonal impact on the Group’s results of operations. The transaction volume on the FTA platform is typically lower during the first quarter each year due to the Chinese New Year holiday season. In addition, some shippers operate in industries where shipping patterns are tied closely to consumer demand, which can sometimes be difficult to predict or are based on just-in-time production schedules. Furthermore, increases in toll fees and fuel costs may lead to rising shipping fees, which may in turn adversely affect transaction activities on the FTA platform and our results of operations. Therefore, the Group’s revenue is, to a large degree, affected by factors that are outside of our control. There can be no assurance that the Group’s historic operating patterns will continue in future periods, as we cannot influence or forecast many of these factors. The quarterly fluctuations in the Group’s revenue and results of operations could result in volatility and cause the price of our ADSs to fall. To the extent the Group’s revenue grows, these seasonal fluctuations may become more pronounced.
The successful operation of the Group’s business depends upon the performance, reliability and security of the internet infrastructure in China.
The successful operation of the Group’s business depends on the performance and reliability of the internet infrastructure and telecommunications networks in China. Almost all access to the internet in China is maintained through state-owned telecommunications operators under the administrative control and regulatory supervision of the MIIT. Moreover, the Group primarily relies on a limited number of telecommunication service providers to provide it with data communications capacity. The Group has limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure or the telecommunications networks provided by telecommunications service providers. With the expansion of its business, the Group may be required to upgrade its technology and infrastructure to keep up with the increasing traffic on the FTA platform. However, we have no control over the costs of the services provided by telecommunications service providers. If the prices we pay for telecommunications and internet services rise significantly, the Group’s results of operations may be materially and adversely affected. Furthermore, if internet access fees or other charges to internet users increase, the Group’s user engagement and transaction activities may decline and the Group’s business may be harmed.
The Group’s business depends upon the interoperability of the FTA platform across devices, operating systems, and third-party applications that we do not control.
One of the most important features of the FTA platform is its broad interoperability with a range of devices, operating systems, and third-party applications. The FTA platform is accessible from devices running various operating systems such as iOS and Android. We depend on the accessibility of the FTA platform across these third-party operating systems and applications that we do not control. Moreover, third-party services and products are constantly evolving, and we may not be able to modify the FTA platform to assure its compatibility with that of relevant third parties following development changes. The loss of interoperability, whether due to actions of third parties or otherwise, could adversely affect the Group’s business.
The Group’s use of third-party open source software could adversely affect the Group’s ability to offer its products and offerings and subject the Group to possible litigation.
We use open source software in the Group’s software and systems and will use open source software in the future. Open source software generally refers to software for which the original source code is freely available and may be redistributed or modified. The licenses applicable to our use of open source software may require the source code that is developed using open source software to be made available to the public and that any modifications or derivative works to certain open source software continue to be licensed under open source licenses. From time to time, we may face claims from external parties claiming infringement of their intellectual property rights, or demanding the release or license of the open source software or derivative works that we developed using such software (which could include our proprietary source code) or otherwise seeking to enforce the terms of the applicable open source license. Our use of open source software may also present additional security risks because the source code for open source software is publicly available, which may make it easier for hackers and other parties to determine how to breach our systems that rely on open source software. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have a material adverse effect on the Group’s business, results of operations, financial condition and prospects.
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We are dependent on app stores to distribute the Group’s mobile apps.
We currently cooperate with Apple’s app store and Android app stores to distribute the Group’s mobile apps to users. As such, the promotion, distribution and operation of the Group’s applications are subject to such distribution platforms’ standard terms and policies for application developers, which are subject to the interpretation of, and frequent changes by, these distribution channels. There is no guarantee that the Group’s applications will always comply with the standard terms and policies of such distribution platforms. If these third-party distribution platforms change their terms and conditions or their interpretations of these terms and conditions in a manner that is detrimental to us, or refuse to distribute the Group’s applications, timely launch updated versions of the Group’s applications, or remove the Group’s applications, or if any other major distribution channel with which we would like to seek collaboration refuses to collaborate with us in the future on commercially reasonable terms, or at all, the Group’s business, financial condition and results of operations may be materially and adversely affected. In addition, such distribution platforms may require us to update or change our user policies or functions to meet their terms and conditions. As a result, our ability to attract, retain and expand our user base may be hindered, which could adversely affect the Group’s business or financial results.
The Group may be subject to potential liability in connection with pending or threatened legal proceedings and other matters, which could adversely affect the Group’s business or financial results.
From time to time, the Group has become and may in the future become a party to various legal or administrative proceedings arising in the ordinary course of the Group’s business in China, including claims arising from the Group’s freight brokerage service and discontinued financial leasing service. See “—We face risks associated with the cargo transported using the freight brokerage service and vicarious liability for vehicles registered with the Group.” In addition, we were named as a defendant in certain putative shareholder class action lawsuits in connection with our initial public offering. See “Item 4. Information of the Company — B. Business Overview —Legal Proceedings and Compliance.” The Group may also be subject to potential liability in connection with pending or threatened legal proceedings arising from breach of contract claims, anti-competition claims and other matters.
These proceedings, investigations, claims and complaints could be initiated or asserted under or on the basis of a variety of laws in different jurisdictions, including, without limitation, data protection and privacy laws, trucker or consumer protection laws, labor and employment laws, anti-monopoly or competition laws, transportation laws, advertising laws, value-added telecommunication services laws, intellectual property laws, securities laws, financial services laws, tort laws, contract laws, property laws, anti-money laundering laws, anti-corruption laws, anti-bribery laws and criminal laws. There is no guarantee that the Group will be successful in defending itself in legal and administrative actions or in asserting its rights under various laws. If the Group fails to defend itself in these actions, the Group may be subject to restrictions, fines or penalties that will materially and adversely affect the Group’s operations. Even if the Group is successful in its attempt to defend itself in legal and regulatory actions or to assert its rights under various laws and regulations, the process of communicating with relevant regulators, defending itself and enforcing its rights against the various parties involved may be expensive and time-consuming. These actions could expose the Group to negative publicity, substantial monetary damages and legal defense costs, injunctive relief and criminal and civil fines and penalties, including but not limited to suspension or revocation of licenses to conduct business.
In addition, the Group’s directors, management and key employees may from time to time be subject to litigation, regulatory investigations, proceedings, confinement and/or negative publicity or otherwise face potential liability in relation to commercial, labor, employment, securities or other matters, which could affect their ability or willingness to continue to serve the Group or dedicate their efforts to the Group and negatively affect the Group’s brand and reputation, resulting in an adverse effect on its business, results of operations and financial condition.
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Certain of the Group’s leased property interests may be defective, which could cause disruption to the Group’s business.
As of the date of this annual report, we had not completed the relevant property leasing registrations for most of the Group’s leased properties in China, which may expose us to potential fines if we fail to remediate after receiving any notice from the relevant PRC government authorities. According to our PRC legal counsel, the failure to complete the registration process does not affect the validity of the property lease agreements but a maximum penalty of RMB10,000 for each leased property may be imposed on us for the non-registration of each lease. As of the date of this annual report, we are not aware of any material claims or actions being contemplated or initiated by government authorities with respect to the Group’s leasehold interests in or use of such properties.
In addition, we may become involved in disputes with the property owners or parties who otherwise have rights to or interests in the Group’s leased properties. For instance, if a lessor of the Group’s leased properties has not obtained valid authorizations from the legal owners with respect to the Group’s leases, or has not obtained requisite approvals or permits with respect to the construction of such properties, the Group’s leases with such lessor could be invalid and the lessor’s right to lease might be challenged by an interested third party or the government authority. If any of such properties were successfully challenged, we may be forced to relocate our operations housed in the affected properties. We can provide no assurance that we will be able to find suitable replacement sites on terms acceptable to us on a timely basis, or at all, or that we will not be subject to material liability resulting from external parties’ challenges on the Group’s use of such properties. As a result, the Group’s business, financial condition and results of operations may be adversely affected.
We may need additional capital to pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances, and financing may not be available on terms acceptable to us, or at all.
Growing and operating the Group’s business will require significant cash investments, capital expenditures and commitments to respond to business challenges, including developing or enhancing new or existing services and technologies and expanding the Group’s infrastructure. If cash on hand, cash generated from operations, and the net proceeds from our initial public offering are not sufficient to meet the Group’s cash and liquidity needs, we may need to seek additional capital, potentially through debt or equity financings. We may not be able to raise required cash on terms acceptable to us, or at all. Volatility in the credit markets may have an adverse effect on the Group’s ability to obtain debt financing. Issuances of equity or convertible debt securities may be on terms that are dilutive or potentially dilutive to our shareholders. The holders of new securities may also have rights, preferences, or privileges that are senior to those of existing stockholders. If new financing sources are required, but are insufficient or unavailable, we may need to modify the Group’s growth and operating plans and business strategies based on available funding, if any, which would harm the Group’s ability to grow its business.
The Group’s business depends substantially on the continuing efforts of our directors, executive officers, senior management, key employees and qualified personnel, and the Group’s operations may be severely disrupted if we lose their services.
The Group’s future success depends substantially on the continuing efforts of our directors, executive officers, senior management, and key employees and qualified personnel. In particular, we rely on the leadership, expertise, experience and vision of our directors and senior management team. If one or more of our directors, executive officers, senior management, key employees or qualified personnel were unable or unwilling to continue their services with us, whether due to resignation, accident, health condition, family considerations or any other reason, we might not be able to find their successors in a timely manner, or at all. The size and scope of the FTA platform also require the Group to hire and retain a wide range of capable and experienced personnel who can adapt to a dynamic, competitive and challenging business environment. We will need to continue to attract and retain experienced and capable personnel at all levels. Since the road transportation industry is characterized by high demand and intense competition for talent, we cannot assure you that we will be able to attract or retain qualified management or other highly skilled employees.
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We do not have key man insurance for our directors, executive officers, senior management or other key employees. If any of the Group’s key employees terminate his or her services or otherwise becomes unable to provide continuous services to us, the Group’s business, financial condition and results of operations may be materially and adversely affected and it may incur additional expenses to recruit, train and retain qualified personnel. Each of our executive officers and key employees has entered into an employment agreement with a non-compete clause with us. However, these agreements may be breached by the counterparties, and there may not be adequate and timely remedies available to us to compensate our losses arising from the breach. We cannot assure you that we would be able to enforce these non-compete clauses. If any of our executive officers or key employees joins a competitor or forms a competing company, we may lose customers, know-how and key professionals and staff members.
Our metrics and estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may harm the Group’s reputation and negatively affect its business.
We rely on certain key operating metrics, such as fulfilled orders, average shipper MAUs and shipper MAUs, among other things, to evaluate the performance of the Group’s business. Our operating metrics may differ from estimates published by third parties or from similarly titled metrics used by other companies due to differences in methodology and assumptions. We calculate these operating metrics using internal company data, which are subject to our estimates and adjustments. For example, we define (i) active shippers as the aggregate number of registered shipper accounts on the FTA platform that have posted at least one shipping order on the FTA platform during a given period, and (ii) shipper MAUs as the number of active shippers in a given month. However, some shippers may use more than one account, and/or may share the same account with other shippers. As a result, the Group’s shipper MAUs may understate or overstate the number of shippers who have posted at least one shipping order on the FTA platform in a given month. If we discover material inaccuracies in the operating metrics we use, or if they are perceived to be inaccurate, the Group’s reputation may be harmed and our evaluation methods and results may be impaired, which could negatively affect the Group’s business. If investors make investment decisions based on operating metrics we disclose that are inaccurate, we may also face potential lawsuits or disputes.
We may not be able to prevent others from unauthorized use of the Group’s intellectual property and we may be subject to intellectual property infringement claims, either of which could harm the Group’s business and competitive position.
We rely on a combination of patents, trademarks, copyrights, trade secrets and confidentiality agreements to protect the Group’s proprietary rights. As of December 31, 2025, the Group had 415 patents, 133 pending patent applications, 1491 registered trademarks and 47 pending trademark applications and 460 registered software copyrights in China. As of December 31, 2025, the Group had 46 registered trademarks in other countries, including India, Russia and Vietnam.
We have invested significant resources to develop these intellectual properties. However, any of the Group’s intellectual property rights could be challenged, invalidated or circumvented, or such intellectual property may not be sufficient to provide us with competitive advantages. In addition, other parties may misappropriate the Group’s intellectual property rights, which would cause us to suffer economic or reputational damage. Because of the rapid pace of technological change, there can be no assurance that all of the Group’s proprietary technologies and similar intellectual property will be patented in a timely or cost-effective manner, or at all. Furthermore, parts of the Group’s business rely on technologies developed or licensed by other parties, or co-developed with other parties, including open source software, and we may not be able to obtain or continue to obtain licenses and technologies from these other parties on reasonable terms, or at all.
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It is often difficult to register, maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. For instance, we may seek to register new trademarks in the future, and there is no assurance that the relevant applications for trademark registrations in the PRC will be approved by competent governmental authority. If such trademarks could not be successfully registered in the categories related to the Group’s business, we may fail to prevent others from using such trademarks in businesses similar to ours, and the Group’s business, financial condition and results of operations may be materially and adversely affected. In addition, confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect the Group’s intellectual property rights or to enforce the Group’s contractual rights in China. Preventing any unauthorized use of the Group’s intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of the Group’s intellectual property. In the event that we resort to litigation to enforce the Group’s intellectual property rights, such litigation could result in substantial costs and a diversion of the Group’s managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, the Group’s trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in protecting or enforcing the Group’s intellectual property rights could have a material adverse effect on its business, financial condition and results of operations.
Meanwhile, the Group’s operations or any aspects of its business could infringe upon or otherwise violate trademarks, copyrights, know-how, proprietary technologies or other intellectual property rights held by other parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, other parties’ trademarks, copyrights, know-how, proprietary technologies or other intellectual property rights may be infringed by the Group’s services or other aspects of the Group’s business without its awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in China, the U.S. or other jurisdictions. If any infringement claims are brought against us, we may be forced to divert management’s time and other resources from the Group’s business and operations to defend against these claims, regardless of their merits.
Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks, copyrights, know-how, proprietary technologies or other intellectual property rights in China are still evolving and are uncertain, and there can be no assurance that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, the Group’s business and results of operations may be materially and adversely affected.
The Group’s insurance coverage strategy may not be adequate to protect it from all business risks or, if insurance carriers change the terms of such insurance in a manner not favorable to us, if we are required to purchase additional insurance for other aspects of the Group’s business, or if we fail to comply with regulations governing insurance coverage, the Group’s business could be harmed.
The Group maintains various insurance policies to safeguard against risks and unexpected events. However, the Group does not maintain business interruption insurance or key-man insurance or any insurance covering liabilities resulting from misconducts or illegal activities committed by its employees, users or business partners. We cannot assure you that the Group’s insurance coverage is sufficient to prevent the Group from any loss or that the Group will be able to successfully claim its losses under its current insurance policy on a timely basis, or at all. If the Group incurs any loss that is not covered by its insurance policies, or the compensated amount is significantly less than its actual loss, the Group’s business, financial condition and results of operations could be materially and adversely affected. See also “—We face risks associated with the cargo transported using the freight brokerage service and vicarious liability for vehicles registered with the Group.” If the Group’s insurance carriers change the terms of the Group’s policies in a manner unfavorable to the Group, its insurance costs could increase.
In addition, the Group is subject to laws, rules, and regulations relating to insurance coverage which could result in proceedings or actions against the Group by governmental entities or others. Furthermore, shippers using the freight brokerage service may require higher levels of coverage as a condition to entering into contracts with the consolidated affiliates. Any failure, or perceived failure, by the Group to comply with laws, rules, and regulations or contractual obligations relating to insurance coverage could result in proceedings or actions against it by governmental entities or others. These lawsuits, proceedings, or actions may subject the Group to significant penalties and negative publicity, require the Group to increase its insurance coverage, require it to amend its insurance policy disclosure, increase its costs, and disrupt its business.
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From time to time we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management attention, disrupt the Group’s business and adversely affect its financial results.
We may evaluate and consider strategic investments, combinations, acquisitions or alliances to enhance our competitive position. For example, the FTA platform was created through the business merger of Yunmanman and Huochebang in 2017. These transactions could be material to the Group’s financial condition and results of operations if consummated. If we are able to identify an appropriate business opportunity, we may not be able to successfully consummate the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction, which may result in investment losses.
Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including:
• difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquired business;
• inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits, including the inability to successfully further develop the acquired technology;
• difficulties in retaining, training, motivating and integrating key personnel;
• diversion of management’s time and resources from the Group’s normal daily operations and potential disruptions to its ongoing business;
• strain on the Group’s liquidity and capital resources;
• difficulties in executing intended business plans and achieving the intended objectives, benefits, revenue-enhancing opportunities or synergies from such strategic investments or acquisitions;
• difficulties in maintaining uniform standards, controls, procedures and policies within the overall organization;
• difficulties in retaining relationships with existing business partners of the acquired business;
• risks of entering markets in which the Group has limited or no prior experience;
• regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business;
• assumption of contractual obligations that contain terms that are not beneficial to the Group, require it to license or waive intellectual property rights or increase its risk for liability;
• liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities and litigations and other proceedings initiated in connection therewith;
• in the case of overseas acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries; and
• unexpected costs and unknown risks and liabilities associated with strategic in-vestments or acquisitions.
Any future investments or acquisitions may not be successful, may not benefit the Group’s business strategy, may not generate sufficient revenues to offset the associated acquisition costs, may not result in the intended benefits, may incur unanticipated liabilities and expenses, or may otherwise harm the Group’s business generally.
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We have limited influence over our minority-owned investees, which subjects us to substantial risks, including potential loss of value.
Our growth strategy has included investing in minority ownership positions in technology and logistics companies. Our investment in these entities involves significant risks that are outside of our control. We have limited influence over our minority-owned investees. As a result, the boards of directors or management teams of these companies may make decisions or take actions with which we disagree or that may be harmful to the value of our ownership in these companies.
In addition, any material decline in the business of these entities would adversely affect the value of our assets and the Group’s financial results. Furthermore, the value of these assets is based in part on the market valuations of these entities, and weakened financial markets have adversely affected, and may in the future adversely affect such valuations. These positions could expose us to risks, litigation, and unknown liabilities because, among other things,
• these companies have limited operating histories in evolving industries and may have less predictable operating results;
• these companies may be privately owned and, as a result, limited public information is available and we may not learn all the material information regarding these businesses;
• these companies may be domiciled and operate in countries with particular economic, tax, political, legal, safety, regulatory and public health risks;
• these companies depend on the management talents and efforts of a small group of individuals, and, as a result, the death, disability, resignation, or termination of one or more of these individuals could have an adverse effect on the relevant company’s operations; and
• these companies will likely require substantial additional capital to support their operations and expansion and to maintain their competitive positions. Any of these risks could materially affect the value of our assets, which could have an adverse effect on the Group’s business, financial condition or results of operations.
Furthermore, we are contractually limited in our ability to sell or transfer these assets. There is currently no public market for any of these securities, and there may be no market in the future if and when we decide to sell such assets. Furthermore, we may have to sell these assets at a time at which we would not be able to realize what we believe to be the long-term value of these assets. Additionally, we may have to pay significant taxes upon the sale or transfer of these assets. Accordingly, we may never realize the value of these assets relative to the contributions we made to these businesses.
The Group recognized share of loss in equity method investees of RMB2.1 million, RMB2.9 million and RMB14.8 million (US$2.1 million) in 2023, 2024 and 2025, respectively. Impairment loss recognized on the Group’s equity investees and investments in debt securities may also affect the Group’s results of operations. For example, the Group recognized impairment loss of RMB352.7 million in 2024 resulting from credit impairment on debt investment in certain investee. The Group may also extend loans to certain companies from time to time and may experience impairment loss in connection with such loans.
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If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the NYSE. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. Commencing with our fiscal year ended December 31, 2022, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Form 20-F filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. In addition, beginning at the same time, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting.
As of December 31, 2025, our management has concluded that our internal control over financial reporting is effective. See “Item 15. Controls and Procedures — Management’s Annual Report on Internal Control over Financial Reporting.” Our independent registered public accounting firm has issued a report, which has concluded that we maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025.
However, our internal control over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
If we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If that were to happen, the market price of our ADSs and/or Class A ordinary shares could decline and we could be subject to sanctions or investigations by the NYSE, SEC or other regulatory authorities.
Enforcement of stricter labor laws and regulations and increases in labor costs in the PRC may adversely affect the Group’s business and results of operations.
The economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including pension insurance, housing funds, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of the Group’s employees. We expect that the Group’s labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control the Group’s labor costs or pass on these increased labor costs, the Group’s financial condition and results of operations may be adversely affected. Furthermore, pursuant to the PRC Labor Contract Law, as amended, or the Labor Contract law, and its implementation rules, employers are subject to various requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. In the event that we decide to terminate some of the Group’s employees or otherwise change the Group’s employment or labor practices, the Labor Contract Law and its implementation rules may limit our ability to affect those changes in a desirable or cost-effective manner, which could adversely affect the Group’s business and results of operations.
In addition, we cannot assure you that the Group’s employment practices will be deemed to be in compliance with labor-related laws and regulations in China due to interpretation and implementation uncertainties related to the evolving labor laws and regulations, which may subject us to labor disputes or government investigations. Under the PRC Social Insurance Law and the Administrative Measures on Housing Provident Fund, employees are required to participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance, maternity insurance, and housing provident funds, and employers are required, together with their employees or separately, to pay the contributions to social insurance and housing provident funds for their employees. The relevant government agencies may examine whether an employer has made adequate payments of the requisite statutory employee benefits, and employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. For instance, certain of our PRC subsidiaries and consolidated affiliates engage third-party human resources agencies to make social insurance and housing provident fund contributions for some of their employees. There is no assurance that such third-party agencies make contributions in full in a timely manner, or at all, and even if they do, regulators may deem such practice to be noncompliant with the relevant labor laws and bring enforcement actions against us. If we are deemed to have violated relevant labor laws and regulations, we could be required to make additional contributions to social insurance or housing provident funds, pay late fees and fines, provide additional compensation to the Group’s employees or adjust our labor practices and the Group’s business, financial condition and results of operations could be materially and adversely affected. In addition, any strike or other work stoppage or group incidents engaged by our employees may subject us to significant disruption of our operations and/or higher on-going labor costs, which may have an adverse effect on our reputation, business, financial condition and results of operations.
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We face risks related to health epidemics and other outbreaks, harsh weather and natural disasters, which could significantly disrupt the Group’s operations.
The Group’s business could be materially and adversely affected by the outbreak of a widespread health epidemic, such as COVID-19, swine flu, avian influenza, severe acute respiratory syndrome, or SARS, Ebola, Zika, harsh weather conditions or natural disasters, such as snowstorms, earthquakes, fires or floods, or other events, such as wars, acts of terrorism, environmental accidents, power shortage or communication interruptions. The occurrence of a disaster or a prolonged outbreak of an epidemic illness or other adverse public health developments in China could materially disrupt the Group’s business and operations. These events could also significantly impact the industries we operate in and cause a temporary closure of the facilities the Group uses for its operations, which would severely disrupt its operations and have a material adverse effect on its business, financial condition and results of operations. The Group’s operations could be disrupted if any of its employees, or employees of its business partners were suspected of contracting an epidemic disease, since this could require the Group or business partners to quarantine some or all of these employees or disinfect the facilities used for operations. In addition, the Group’s revenue and profitability could be materially reduced to the extent that a health epidemic, adverse weather conditions or natural disaster or other outbreak harms the global or Chinese economy in general. The Group’s operations could also be severely disrupted if shippers, truckers and other ecosystem participants were affected by health pandemics or epidemics, harsh weather conditions, natural disasters or other outbreaks.
The Group may be required to write down goodwill and other identifiable intangible assets.
The Group’s balance sheet includes a material amount of goodwill and intangible assets. Goodwill and intangible assets, net, together accounted for approximately 10.79% of total assets on its balance sheet as of December 31, 2025. The impairment of a significant portion of these assets would negatively affect the Group’s financial condition or results of operations. The Group regularly evaluates whether events and circumstances have occurred indicating that any portion of its intangible assets and goodwill may not be recoverable. When factors indicate that intangible assets and goodwill should be evaluated for possible impairment, the Group may be required to reduce the carrying value of these assets. The Group did not identify additional impairment indicator as of December 31, 2025 to trigger the impairment of the goodwill and intangible assets.
The trading price of our ADSs has been and is likely to continue to be volatile and could fluctuate widely in response to a variety of factors. There is no guarantee that our market capitalization will not decrease in the future. If such situation occurs, we may be required to evaluate the recoverability of goodwill prior to the annual assessment, and we can provide no assurance that a material impairment charge will not occur in a future period. Such an impairment could have a material adverse effect on our business, financial position, results of operations and liquidity.
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Risks Relating to Our Corporate Structure
If the PRC government deems that the contractual arrangements in relation to the Group VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.
Foreign ownership of value-added telecommunication businesses, such as online information service, is subject to restrictions under current PRC laws and regulations, especially the Special Entry Management Measures (Negative List) for the Access of Foreign Investment (2024 version), or the 2024 Negative List, which took effect on November 1, 2024. Industries not listed in the 2024 Negative List are generally deemed “permitted” for foreign investments unless specifically restricted by other PRC laws. According to the 2024 Negative List and other applicable laws and regulations, the industry of value-added telecommunications services (other than the services of electronic commerce, multiparty conferencing within the PRC, information storage and forwarding, and call center) generally falls into the restricted category with very limited exceptions in certain pilot demonstration zones.
Because we are an exempted company incorporated in the Cayman Islands, we are classified as a foreign enterprise under PRC laws and regulations, and our PRC subsidiaries are foreign-invested enterprises. Due to PRC laws and regulations that impose certain restrictions or prohibitions on foreign equity ownership of entities providing value-added telecommunications services, we conduct a substantial part of the Group’s operations in China through the Group VIEs, which hold certain licenses required to operate our business in China. Our PRC subsidiaries, Jiangsu Yunmanman, FTA Information and Yixing Manxian, entered into contractual arrangements with the Group VIEs (which are Manyun Software, Shan’en Technology and Manyun Cold Chain) and the Group VIEs’ respective shareholders, respectively. For a detailed description of these contractual arrangements, see “Item 4. Information of the Company — C. Organizational Structure — Contractual Arrangements with the Group VIEs.”
We believe that our corporate structure and contractual arrangements comply with the current applicable PRC laws and regulations. Our PRC legal counsel, based on its understanding of the relevant laws and regulations, is of the opinion that each of the contracts among (i) Jiangsu Yunmanman, Manyun Software and Manyun Software’s shareholders, (ii) FTA Information, Shan’en Technology and Shan’en Technology’s shareholders and (iii) Yixing Manxian, Manyun Cold Chain and Manyun Cold Chain’s shareholders is valid, binding and enforceable in accordance with its terms. In addition, our PRC legal counsel, based on its understanding of the relevant laws and regulations, is of the opinion prior to the termination thereof in connection with the Reorganization, each of the contracts among (i) Jiangsu Yunmanman, Shanghai Xiwei, and Shanghai Xiwei’s shareholders, (ii) Jiangsu Yunmanman, Beijing Manxin, and Beijing Manxin’s shareholders and (iii) FTA Information, Guizhou FTA, and Guizhou FTA’s shareholders was valid, binding and enforceable in accordance with its terms then in effect.
However, as there are uncertainties regarding the interpretation and application of PRC laws and regulations, including the PRC Foreign Investment Law and its implementing rules, the Telecommunications Regulations and the relevant regulatory measures concerning the telecommunications industry and other industries the Group is engaged in, there can be no assurance that the PRC government authorities, including the MOFCOM, the MIIT, or other competent authorities would agree that our corporate structure or any of the above contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations.
If our corporate structure and contractual arrangements are deemed by the MIIT or the MOFCOM or other regulators having competent authority to be illegal, either in whole or in part, we may lose control of the Group VIEs and have to modify such structure to comply with regulatory requirements. However, there can be no assurance that we can achieve this without material disruption to our business. Furthermore, if our corporate structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:
• revoking the Group’s relevant business and operating licenses;
• imposing fines on us;
• confiscating any of the Group’s income that they deem to be obtained through illegal operations;
• shutting down the Group’s relevant services;
• discontinuing or restricting the Group’s operations in China;
• imposing conditions or requirements with which we may not be able to comply;
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• requiring us to change our corporate structure and contractual arrangements;
• restricting or prohibiting our use of the proceeds from overseas offering to finance our PRC subsidiaries’ and the consolidated affiliates’ business and operations; and
• taking other regulatory or enforcement actions that could be harmful to the Group’s business.
As such, if Chinese regulatory authorities disallow the VIE structure, such development would likely result in a material change in the Group’s operations and/or the value of our ADSs, including that it could cause the value of such securities to significantly decline or become worthless. Furthermore, new PRC laws, rules and regulations may be introduced to impose additional requirements that may be applicable to our corporate structure and contractual arrangements. See “—Uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and its implementing rules and how they may impact the Group’s business, financial condition and results of operations.” Occurrence of any of these events could materially and adversely affect the Group’s business, financial condition and results of operations. In addition, if the imposition of any of these penalties or requirements to restructure our corporate structure causes us to lose the rights to direct the activities of the Group VIEs or our right to receive their economic benefits, we would no longer be able to consolidate the financial results of such Group VIEs in the Group’s consolidated financial statements. However, we do not believe that such actions would result in the liquidation or dissolution of our Company, our subsidiaries in China or the Group VIEs or their subsidiaries. See “Item 4. Information on the Company — C. Organizational Structure — Contractual Arrangements with the Group VIEs.”
Our contractual arrangements with the Group VIEs may result in adverse tax consequences to us.
We could face material and adverse tax consequences if the PRC tax authorities determine that our contractual arrangements with the Group VIEs were not made on an arm’s length basis and adjust our income and expenses for PRC tax purposes by requiring a transfer pricing adjustment. A transfer pricing adjustment could adversely affect us by (i) increasing the tax liabilities of the Group VIEs without reducing the tax liability of our subsidiaries, which could further result in late payment fees and other penalties to the Group VIEs for underpaid taxes; or (ii) limiting the ability of the Group VIEs to obtain or maintain preferential tax treatments and other financial incentives.
We rely on contractual arrangements with the Group VIEs and their shareholders to conduct a substantial part of the Group’s operations in China, which may not be as effective as direct ownership in providing operational control and otherwise have a material adverse effect as to our business.
We are a Cayman Islands holding company and primarily conduct the Group’s operations through and generate a substantial part of revenue from the Group VIEs, with which we maintain contractual arrangements. We currently rely on contractual arrangements with Manyun Software, Shan’en Technology, Manyun Cold Chain and their respective shareholders to operate the value-added telecommunications business and insurance brokerage service in the PRC, and we and our shareholders do not have any equity interests in these Group VIEs, as current PRC laws and regulations restrict foreign investment in companies that engage in such services. For a description of our contractual arrangements with the Group VIEs and their shareholders, see “Item 4. Information on the Company — C. Organizational Structure — Contractual Arrangements with the Group VIEs.” These contractual arrangements may not be as effective as direct ownership in providing us with control over the Group VIEs. If the Group VIEs or their shareholders fail to perform their respective obligations under these contractual arrangements, our recourse to the assets held by the Group VIEs is indirect and we may have to incur substantial costs and expend significant resources to enforce such arrangements in reliance on legal remedies under PRC law. These remedies may not always be effective, particularly in light of uncertainties regarding the interpretation and enforcement of the relevant laws and regulations. Furthermore, in connection with litigation, arbitration or other judicial or dispute resolution proceedings, assets under the name of any of record holder of equity interest in the Group VIEs, including such equity interest, may be put under court custody. As a consequence, we cannot be certain that the equity interest will be disposed pursuant to the contractual arrangement or ownership by the record holder of the equity interest.
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All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. However, the legal framework and system in China, in particularly those relating to arbitration proceedings, are not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the interpretation and enforcement of PRC laws, rules and regulations could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC law. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in the PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant time delays or other obstacles in the process of enforcing these contractual arrangements, it would be very difficult to exert effective control over the Group VIEs, and the Group’s ability to conduct its business and the Group’s financial condition and results of operations may be materially and adversely affected. The arbitration provisions in the contractual arrangements do not apply to claims made under the U.S. federal securities laws. See “Risks Relating to Doing Business in China—There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.”
We may lose the ability to use and benefit from, the licenses, approvals and assets held by the Group VIEs that are material to the operation of our business if any of the Group VIEs goes bankrupt or becomes subject to dissolution or liquidation proceeding.
As part of our contractual arrangements with the Group VIEs, these entities hold certain licenses, approvals and assets that are material to the operation of our business. If any of the Group VIEs goes bankrupt and all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some of our business activities, which could materially and adversely affect the Group’s business, financial condition and results of operations. Additionally, if any of the Group VIEs undergoes voluntary or involuntary liquidation proceeding, unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect the Group’s business, financial condition and results of operations.
The shareholders of the Group VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.
Mr. Peter Hui Zhang, our founder, chairman and chief executive officer, and Ms. Guizhen Ma, our director, hold 70% and 30% of equity interest in each of Manyun Software and Shan’en Technology, respectively. Manyun Software, Tianjin Zhihui and Mr. Peter Hui Zhang hold 82.5%, 10.0% and 7.5% of equity interest in Manyun Cold Chain, respectively. In connection with the Group’s operations in China, we rely on the shareholders of the Group VIEs to abide by the obligations under such contractual arrangements. The interests of these shareholders in their individual capacities as the shareholders of the Group VIEs may differ from the interests of our Company as a whole, as what is in the best interests of the Group VIEs, including matters such as whether to distribute dividends or to make other distributions to fund our offshore requirement, may not be in the best interests of our Company. There can be no assurance that when conflicts of interest arise, any or all of these individuals will act in the best interests of our Company or those conflicts of interest will be resolved in our favor. In addition, these individuals may breach or cause the Group VIEs and their subsidiaries to breach or refuse to renew the existing contractual arrangements with us. Control over, and funds due from, the Group VIEs may be jeopardized if such individuals breach the terms of the contractual arrangements or are subject to legal proceedings.
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Currently, we do not have arrangements to address potential conflicts of interest the shareholders of the Group VIEs may encounter, on the one hand, and as a beneficial owner of our Company, on the other hand. We, however, could, at all times, exercise our option under the exclusive call option agreements to cause them to transfer all of their equity ownership in the Group VIEs to a PRC entity or individual designated by us as permitted by the then applicable PRC laws. In addition, if such conflicts of interest arise, we could also, in the capacity of attorney-in-fact of the then existing shareholders of the Group VIEs as provided under the power of attorney agreements, directly appoint new directors of the Group VIEs. We rely on the shareholders of the Group VIEs to comply with PRC laws and regulations, which protect contracts and provide that directors and executive officers owe a duty to our Company and require them to avoid conflicts of interest and not to take advantage of their positions for personal gains, and the laws of the Cayman Islands, which provide that directors have a duty of care and a duty to act honestly in good faith with a view to our best interests. However, the legal frameworks of China and the Cayman Islands do not provide guidance on resolving conflicts in the event of a conflict with another corporate governance regime. If we cannot resolve any conflicts of interest or disputes between us and the shareholders of the Group VIEs, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to uncertainty as to the outcome of any such legal proceedings.
Our corporate actions will be substantially controlled by Mr. Peter Hui Zhang, who will have the ability to control or exert significant influence over important corporate matters that require approval of shareholders, which may deprive you of an opportunity to receive a premium for your ADSs and materially reduce the value of your investment.
Our memorandum and articles of association provide that in respect of all matters subject to a shareholders’ vote, each Class A ordinary share is entitled to one (1) vote, and each Class B ordinary share is entitled to thirty (30) votes, voting together as one class. Mr. Peter Hui Zhang, our founder, chairman and chief executive officer, beneficially owns all the Class B ordinary shares issued and outstanding, which, together with the Class A ordinary shares he beneficially owns, represent 77.2% of the voting power of our total issued and outstanding shares as of March 31, 2026. As a result, Mr. Peter Hui Zhang has the ability to control or exert significant influence over important corporate matters to the extent permitted under our memorandum and articles of association, and investors may be prevented from affecting important corporate matters involving our Company that require approval of shareholders, including, among others:
• the composition of our board of directors and, through it, any determinations with respect to the Group’s operations, business direction and policies, including the appointment and removal of officers; and
• any determinations with respect to mergers or other business combinations.
These actions may be taken even if they are opposed by our other shareholders, including the holders of the ADSs. Furthermore, this concentration of ownership may also discourage, delay or prevent a change in control of our Company, which could have the dual effect of depriving our shareholders of an opportunity to receive a premium for their shares as part of a sale of our Company and reducing the price of the ADSs. As a result of the foregoing, the value of your investment could be materially reduced.
The dual-class structure of our share capital may render the ADSs ineligible for inclusion in certain stock market indices, and thus adversely affect the market price and liquidity of the ADSs.
In July 2017, FTSE Russell and Standard & Poor’s announced that they would cease to allow most newly public companies utilizing dual or multi-class capital structures to be included in their indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together make up the S&P Composite 1500. Under the announced policies, our dual-class capital structure would make the ADSs ineligible for inclusion in any of these indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not be investing in ADSs. These policies are still relatively new and it is yet unclear what effect, if any, they have had and will have on the valuations of publicly traded companies excluded from the indices, but it is possible that they may depress these valuations compared to those of other similar companies that are included and may adversely affect the liquidity of the shares of such companies. As such, the exclusion of the ADSs from these indices could result in a less active trading market for the ADSs and adversely affect their trading price.
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If the custodians or authorized users of our controlling non-tangible assets, including chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these assets, the Group’s business and operations may be materially and adversely affected.
Under PRC law, legal documents for corporate transactions, including agreements and contracts such as the leases and sales contracts that the Group’s business relies on, are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with the relevant local branch of the SAMR. We generally execute legal documents by affixing chops or seals, rather than having the designated legal representatives sign the documents. The chops of our subsidiaries and the Group VIEs are generally held by the relevant entities so that documents can be executed locally. Although we usually utilize chops to execute contracts, the registered legal representatives of our subsidiaries and the Group VIEs have the apparent authority to enter into contracts on behalf of such entities without chops, unless such contracts are set forth otherwise.
In order to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to the designated key employees of our legal, administrative or finance departments. Our designated legal representatives generally do not have access to the chops. Although we have approval procedures in place and monitor our key employees, including the designated legal representatives of our subsidiaries and the Group VIEs, the procedures may not be sufficient to prevent all instances of abuse or negligence. There is a risk that our key employees or designated legal representatives could abuse their authority, for example, by binding our subsidiaries and the Group VIEs with contracts against our interests, as we would be obligated to honor these contracts if the other contracting party acts in good faith in reliance on the apparent authority of our chops or signatures of our legal representatives. If any designated legal representative obtains control of the chop in an effort to obtain control over the relevant entity, we would need to have a shareholder or board resolution to designate a new legal representative and to take legal action to seek the return of the chop, apply for a new chop with the relevant authorities, or otherwise seek legal remedies for the legal representative’s misconduct. If any of the designated legal representatives obtains and misuses or misappropriates our chops and seals or other controlling intangible assets for whatever reason, the Group could experience disruption to its normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from the Group’s operations, and its business and operations may be materially and adversely affected.
Uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and its implementing rules and how they may impact the Group’s business, financial condition and results of operations.
The VIE structure through contractual arrangements has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. MOFCOM published a discussion draft of the proposed PRC Foreign Investment Law in January 2015, or the 2015 Draft FIL, according to which, variable interest entities that are controlled via contractual arrangements would also be deemed as foreign-invested entities, if they are ultimately “controlled” by foreign investors. In March 2019, the PRC National People’s Congress promulgated the PRC Foreign Investment Law, and in December 2019, the State Council promulgated the Implementing Rules of PRC Foreign Investment Law, or the Implementing Rules, to further clarify and elaborate the relevant provisions of the PRC Foreign Investment Law. The PRC Foreign Investment Law and the Implementing Rules both became effective from January 1, 2020 and replaced the major previous laws and regulations governing foreign investments in the PRC. Pursuant to the PRC Foreign Investment Law, “foreign investments” refer to investment activities conducted by foreign investors (including foreign natural persons, foreign enterprises or other foreign organizations) directly or indirectly in the PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights and interests of enterprises within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other investors, and (iv) investment in other methods as specified in laws, administrative regulations, or as stipulated by the State Council. The PRC Foreign Investment Law and the Implementing Rules do not introduce the concept of “control” in determining whether a company would be considered as a foreign-invested enterprise, nor do they explicitly provide whether the VIE structure would be deemed as a method of foreign investment. However, the PRC Foreign Investment Law has a catch-all provision that includes into the definition of “foreign investments” made by foreign investors in China in other methods as specified in laws, administrative regulations, or as stipulated by the State Council, and as the PRC Foreign Investment Law and the Implementing Rules are newly adopted and relevant government authorities may promulgate more laws, regulations or rules on the interpretation and implementation of the PRC Foreign Investment Law, the possibility cannot be ruled out that the concept of “control” as stated in the 2015 Draft FIL may be embodied in, or the VIE structure adopted by us may be deemed as a method of foreign investment by, any of such future laws, regulations and rules. If the Group VIEs were deemed as foreign-invested enterprises under any of such future laws, regulations and rules, and any of the businesses that we operate would be in any “negative list” for foreign investment and therefore be subject to any foreign investment restrictions or prohibitions, further actions required to be taken by us under such laws, regulations and rules may materially and adversely affect the Group’s business, financial condition and results of operations. Furthermore, if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, business, financial condition and results of operations.
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Risks Relating to Doing Business in China
Changes in the political and economic policies of the PRC government may materially and adversely affect the Group’s business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.
The Group’s operations are mainly conducted in the PRC, and all of the Group’s revenue has historically been sourced from the PRC. Accordingly, the Group’s financial condition and results of operations are affected to a significant extent by economic, political and legal developments in the PRC.
The PRC economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, restricting the inflow and outflow of foreign capital, regulating financial services and institutions and providing preferential treatment to particular industries or companies.
While the PRC economy has experienced significant growth in the past three decades, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may also have a negative effect on us. The Group’s financial condition and results of operations could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. The PRC government also has significant authority to exert influence on the ability of a China-based issuer, such as our Company, to conduct its business and control over securities offerings conducted overseas and/or foreign investments in such issuer. The PRC government may intervene or influence the operations of a China-based issuer, which could result in a material change in the Group’s operations and/or the value of our ADSs. In particular, there have been recent statements by the PRC government indicating an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. Any such regulatory oversight or control could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our ADSs to significantly decline or become worthless. For further details, see “—There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.” In addition, the PRC government has implemented in the past certain measures to control the pace of economic growth. These measures may cause decreased economic activity, which in turn could lead to a reduction in demand for the Group’s services and consequently have a material adverse effect on the Group’s business, financial condition and results of operations.
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There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.
The Group’s operations are mainly conducted in the PRC, and are governed by PRC laws, rules and regulations. Our PRC subsidiaries and consolidated affiliates are subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.
In 1979, the PRC government began to promulgate a comprehensive system of laws, rules and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investment in China. However, recently enacted laws, rules and regulations may not sufficiently cover all aspects of economic activities in China or may be subject to significant degrees of interpretation by PRC regulatory agencies. In particular, because these laws, rules and regulations are relatively new, and because of the limited number of published decisions and the nonbinding nature of such decisions, and because the laws, rules and regulations often give the relevant regulator significant discretion in how to enforce them, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable. In addition, rules and regulations in China may evolve quickly. Uncertainties due to evolving laws and regulations could impede the ability of a China-based issuer, such as our Company, to obtain or maintain permits or licenses required to conduct business in China. In the absence of required permits or licenses, governmental authorities could impose material sanctions or penalties on us. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation. Furthermore, if China adopts more stringent standards with respect to environmental protection or corporate social responsibilities, we may incur increased compliance costs or become subject to additional restrictions in the Group’s operations.
On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly promulgated the Opinions on Strictly Cracking Down on Illegal Securities Activities According to the Law, or the Opinions, which, among other things, require the relevant governmental authorities to strengthen cross-border oversight of law enforcement and judicial cooperation, to accelerate rulemaking related to data security and cross-border data flow, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. Since the Opinions are relatively new, uncertainties still exist as to how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on companies like us. Efforts by the PRC government to strengthen oversight or control over offerings that are conducted overseas and/or foreign investment in China-based issuers could hinder our ability to offer or continue to offer our ADSs or Class A ordinary shares to investors and cause the value of our ADSs or Class A ordinary shares to significantly decline or become worthless.
Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into and/or the Group’s intellectual property rights and could materially and adversely affect the Group’s business, financial condition and results of operations.
Furthermore, the high volume of orders and transactions taking place on the FTA platform as well as publicity about the Group’s business attracts heightened attention from the public, regulators and the media. In addition, due to changes that have occurred and will occur in the Group’s services or policies, we have faced and may continue to face objections, complaints and negative comments from members of the public, the traditional, new and social media, shippers, truckers and other participants on the FTA platform. From time to time, these objections, complaints and negative comments, regardless of their veracity, may result in user dissatisfaction, public protests or negative publicity, which could result in government inquiries or stricter regulatory scrutiny or substantial harm to the Group’s brand, reputation and operations.
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If we do not pay sufficient attention to public opinion or if any incident arises but is not dealt with in a timely manner, the Group’s reputation, brand and image will be adversely affected.
The M&A rules and certain other regulation of PRC regulatory agencies establish complex procedures for acquisitions conducted by foreign investors that could make it more difficult for us to grow through acquisitions.
On August 8, 2006, six PRC regulatory agencies, including MOFCOM, the State-Owned Assets Supervision and Administration Commission, the State Administration of Taxation, or the SAT, the State Administration for Industry and Commerce, currently known as the SAMR, the China Securities Regulatory Commission, or the CSRC, and State Administration of Foreign Exchange People’s Republic of China, or the SAFE, jointly adopted the Regulations on Mergers of Domestic Enterprises by Foreign Investors, or the M&A Rules, which came into effect on September 8, 2006 and were amended on June 22, 2009. The M&A Rules include provisions that purport to require that an offshore special purpose vehicle that is controlled by PRC domestic companies or individuals and that has been formed for the purpose of an overseas listing of securities through acquisitions of PRC domestic companies or assets to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles. However, uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles. See “Item 4. Information on the Company — B. Business Overview — Regulatory Matters— Regulations Related to M&A Rules and Overseas Listings.”
These regulations established additional procedures and requirements that are expected to make merger and acquisition activities in China by foreign investors more time-consuming and complex. For example, the M&A rules require that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. The approval from the MOFCOM shall be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire affiliated domestic companies. Mergers, acquisitions or contractual arrangements that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance to the anti-monopoly authority under the State Council when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings issued by the State Council in August 2008 and amended in September 2018, is triggered. In addition, the Provisions of Ministry of Commerce on Implementation of Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors issued by the MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. Moreover, on December 19, 2020, the NDRC and the MOFCOM promulgated the Measures for the Security Review of Foreign Investment, which stipulated that foreign investment that affects or may affect national security shall be subject to a security review. We may grow our business in part by acquiring other companies operating in our industry. Complying with the requirements of the new regulations to complete such transactions could be time-consuming, and any required approval processes, including approval from the MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share. See “Item 4. Information on the Company — B. Business Overview — Regulatory Matters— Regulations Related to M&A Rules and Overseas Listings.”
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The filing with and reporting to the CSRC will be required in connection with our future offshore offerings and occurrences of relevant specific events. We cannot assure you that we will be able to make such filing or reporting in a timely manner.
On February 17, 2023, the CSRC released several regulations regarding the management of filings for overseas offerings and listings by domestic companies, including the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, together with 5 supporting guidelines (together with the Trial Measures, collectively referred to as the “New Regulations on Filing”), and published the answers to reporters’ questions and an announcement about filing management arrangements. Currently, the Group is not required to make any filing under the New Regulations on Filing or the announcement. However, according to the New Regulations on Filing, any future securities offerings made by the Group in the U.S. securities markets shall be filed with and reported to the CSRC within three working days after the offering is completed, and any future securities offerings made by the Group in other overseas securities markets shall be filed with and reported to the CSRC within three working days after the applications for such offerings are submitted. The Group will also be subject to filing requirement if it seeks to directly or indirectly list its domestic assets in overseas markets through one or multiple acquisitions, share swaps, transfers of shares or other means. In addition, the Group shall submit a report to CSRC after the occurrence and public disclosure of the following material events: (1) change of control; (2) investigations or sanctions imposed by overseas securities regulatory agencies or other relevant competent authorities; (3) change of listing status or transfer of listing segment and (4) voluntary or mandatory delisting. See “Item 4. Information on the Company — B. Business Overview — Regulatory Matters— Regulations Related to M&A Rules and Overseas Listings.”
If we engage in offshore securities offerings or experience relevant events mentioned above in the future, we would need to comply with the filing and reporting requirements under the Trial Measures. If we fail to comply with such requirements, we may face adverse actions or sanctions by the CSRC, such as orders for correction, warnings and a fine between RMB1,000,000 and RMB10,000,000. Furthermore, the CSRC and other PRC regulatory authorities may adopt new regulatory requirements for offshore securities offerings. We cannot assure you that we will be able to make all filings or reports and obtain all applicable approvals in connection with future offshore securities offerings in a timely manner, or at all. Any adverse regulatory actions or sanctions could result in material and adverse effect on the Group’s business, reputation, financial condition or the trading price of the ADSs, such as delays or cancellation of offshore securities offerings, delays in or restrictions on the repatriation of the proceeds from any such offerings into the PRC, or restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China.
We may rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries to fund offshore cash and financing requirements. Any limitation on the ability of our PRC operating subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.
We are a holding company and rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries, for our offshore cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, fund inter-company loans, service any debt we may incur outside of China and pay our expenses. When our principal operating subsidiaries and consolidated affiliates incur additional debt, the instruments governing the debt may restrict their ability to pay dividends or make other distributions or remittances to us. Furthermore, the laws, rules and regulations applicable to our PRC subsidiaries and the consolidated affiliates and certain other subsidiaries permit payments of dividends only out of their retained earnings, if any, determined in accordance with applicable accounting standards and regulations.
Under PRC laws, rules and regulations, each of our subsidiaries and the consolidated affiliates incorporated in China is required to set aside at least 10% of its net income each year to fund certain statutory reserves until the cumulative amount of such reserves reaches 50% of its registered capital. These reserves, together with the registered capital, are not distributable as cash dividends. As a result of these laws, rules and regulations, our subsidiaries and the consolidated affiliates incorporated in China are restricted in their ability to transfer a portion of their respective net assets to their shareholders as dividends, loans or advances. Certain of our subsidiaries and the consolidated affiliates did not have any retained earnings available for distribution in the form of dividends as of December 31, 2025. In addition, registered capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary.
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We are subject to restrictions on currency exchange.
All of the Group’s revenue is denominated in Renminbi. The Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans, including loans we may secure from our PRC subsidiaries. Currently, our PRC subsidiaries may purchase foreign currency for settlement of “current account transactions,” including payment of dividends to us, by complying with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, the SAFE and other relevant PRC governmental authorities. Since a significant amount of the Group’s future revenue and cash flow will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize cash generated in Renminbi to fund our business activities outside of the PRC or pay dividends in foreign currencies to our shareholders, including holders of the Class A ordinary shares and the ADSs, and may limit our ability to obtain foreign currency through debt or equity financing for our PRC subsidiaries and the Group VIEs.
PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits.
PRC residents are subject to restrictions and filing requirements when investing in offshore companies. The SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles on July 4, 2014, or the SAFE Circular 37. SAFE Circular 37 requires PRC residents to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.” Pursuant to SAFE Circular 37, “control” refers to the act through which a PRC resident obtains the right to carry out business operation of, to gain proceeds from or to make decisions on a special purpose vehicle by means of, among others, shareholding entrustment arrangement. SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls. According to the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment released on February 13, 2015 and amended on December 30, 2019 by the SAFE, local banks will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration, under SAFE Circular 37 from June 1, 2015.
We may not be aware of the identities of all of our beneficial owners who are PRC residents. We do not have control over our beneficial owners and there can be no assurance that all of our PRC-resident beneficial owners will comply with SAFE Circular 37 and subsequent implementation rules, and there is no assurance that the registration under SAFE Circular 37 and any amendment will be completed in a timely manner, or will be completed at all. The failure of our beneficial owners who are PRC residents to register or amend their foreign exchange registrations in a timely manner pursuant to SAFE Circular 37 and subsequent implementation rules, or the failure of future beneficial owners of our Company who are PRC residents to comply with the registration procedures set forth in SAFE Circular 37 and subsequent implementation rules, may subject such beneficial owners or our PRC subsidiaries to fines and legal sanctions. Failure to register or comply with relevant requirements may also limit our ability to contribute additional capital to our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to our Company. These risks may have a material adverse effect on the Group’s business, financial condition and results of operations.
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Any failure to comply with PRC regulations regarding our employee share incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies due to their position as director, senior management or employees of the PRC subsidiaries of the overseas companies may submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies before they obtain the incentive shares or exercise the share options. Our directors, executive officers and other employees who are PRC residents and who have been granted options under our 2018 Plan may follow SAFE Circular 37 to apply for the foreign exchange registration before our Company becomes an overseas listed company. As we are an overseas listed company, we and our directors, executive officers and other employees who are PRC residents and who have been granted options are subject to the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, issued by SAFE in February 2012, according to which, employees, directors, supervisors and other management members participating in any stock incentive plan of an overseas publicly listed company, such as our 2018 Plan and 2021 Plan, who are PRC residents are required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company, and complete certain other procedures. We have been making efforts to comply with these requirements. However, there can be no assurance that they can successfully register with SAFE in full compliance with the rules. Failure to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit the ability to make payment under our share incentive plans or receive dividends or sales proceeds related thereto, or our ability to contribute additional capital into our wholly-foreign owned enterprise in China and limit our wholly-foreign owned enterprise’s ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional share incentive plans for our directors and employees under PRC law.
We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on the Group’s global income.
Under the PRC Enterprise Income Tax Law and its implementing rules, enterprises established under the laws of jurisdictions outside of China with “de facto management bodies” located in China may be considered PRC tax resident enterprises for tax purposes and may be subject to the PRC enterprise income tax at the rate of 25% on their global income. “De facto management body” refers to a managing body that exercises substantial and overall management and control over the production and operations, personnel, accounting and assets of an enterprise. The SAT issued the Notice Regarding the Determination of Chinese-Controlled Offshore-Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, on April 22, 2009, which was most recently amended on December 29, 2017. Circular 82 provides certain specific criteria for determining whether the “de facto management body” of a Chinese-controlled offshore-incorporated enterprise is located in China. Although Circular 82 only applies to offshore enterprises controlled by PRC enterprises, not those controlled by foreign enterprises or individuals, the determining criteria set forth in Circular 82 may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises. If we were to be considered a PRC resident enterprise, we would be subject to PRC enterprise income tax at the rate of 25% on our global income. In such case, the Group’s profitability and cash flow may be materially reduced as a result of its global income being taxed under the Enterprise Income Tax Law. We believe that none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”
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Dividends paid to our foreign investors and gains on the sale of the ADSs or Class A ordinary shares by our foreign investors may be subject to PRC tax.
Under the Enterprise Income Tax Law and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends paid to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have such establishment or place of business but the dividends are not effectively connected with such establishment or place of business, to the extent such dividends are derived from sources within the PRC. Any gain realized on the transfer of ADSs or Class A ordinary shares by such investors is also subject to PRC tax at a current rate of 10%, if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident enterprise, dividends paid on our Class A ordinary shares or ADSs, and any gain realized from the transfer of our Class A ordinary shares or ADSs, would be treated as income derived from sources within the PRC and would as a result be subject to PRC taxation. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to individual investors who are non-PRC residents and any gain realized on the transfer of ADSs or Class A ordinary shares by such investors may be subject to PRC tax (which in the case of dividends may be withheld at source) at a rate of 20%. Any PRC tax liability may be reduced by an applicable tax treaty. However, if we or any of our subsidiaries established outside China are considered a PRC resident enterprise, it is unclear whether in practice holders of the ADSs or Class A ordinary shares would be able to obtain the benefit of income tax treaties or agreements entered into between China and other countries or areas. If dividends paid to our non-PRC investors, or gains from the transfer of the ADSs or Class A ordinary shares by such investors, are deemed as income derived from sources within the PRC and thus are subject to PRC tax, the value of your investment in the ADSs or Class A ordinary shares may decline significantly.
We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises or other assets attributed to a Chinese establishment of a non-Chinese company, or immovable properties located in China owned by non-Chinese companies.
On February 3, 2015, the SAT issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or Bulletin 7, which was most recently amended on December 29, 2017. Pursuant to Bulletin 7, an “indirect transfer” of assets, including non-publicly traded equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. According to Bulletin 7, “PRC taxable assets” include assets attributed to an establishment in China, immovable properties located in China, and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. When determining whether there is a “reasonable commercial purpose” of the transaction arrangement, features to be taken into consideration include, without limitation: whether the main value of the equity interest of the relevant offshore enterprise derives from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business model and organizational structure; the replicability of the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment, the resulting gain is to be included with the enterprise income tax filing of the PRC establishment or place of business being transferred, and would consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immovable properties located in China or to equity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax of 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. Bulletin 7 does not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange. On October 17, 2017, the SAT promulgated the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Circular 37, which became effective on December 1, 2017 and was most recently amended on June 15, 2018. SAT Circular 37, among other things, simplified procedures of withholding and payment of income tax levied on non-resident enterprises.
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We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries or investments. Our Company may be subject to filing obligations or taxed if our Company is transferor in such transactions, and may be subject to withholding obligations if our Company is transferee in such transactions under Bulletin 7 and SAT Circular 37. For transfer of shares in our Company by investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under Bulletin 7 and SAT Circular 37. As a result, we may be required to expend valuable resources to comply with Bulletin 7 and SAT Circular 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these publications, or to establish that our Company should not be taxed under these publications, which may have a material adverse effect on the Group’s financial condition and results of operations.
PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from using the proceeds of our initial public offering and the concurrent private placement to make loans or additional capital contributions to our PRC subsidiaries.
In utilizing the proceeds of our initial public offering and the concurrent private placement, we, as an offshore holding company, are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries, which are treated as foreign-invested enterprises under PRC laws, through loans or capital contributions. However, loans by us to our PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE and capital contributions to our PRC subsidiaries are subject to the requirement of making necessary registration with competent governmental authorities in China.
SAFE promulgated the Circular on the Reforming of the Management Method of the Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 19, effective on June 1, 2015 and amended on December 30, 2019. According to SAFE Circular 19, the flow and use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of banks loans that have been transferred to a third party. Although SAFE Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments within the PRC, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether SAFE will permit such capital to be used for equity investments in the PRC in actual practice. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or SAFE Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises. Violations of SAFE Circular 19 and SAFE Circular 16 could result in administrative penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from our initial public offering and the concurrent private placement, to our PRC subsidiaries, which may adversely affect the Group’s liquidity and its ability to fund and expand its business in the PRC.
On October 23, 2019, SAFE promulgated the Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment, or SAFE Circular 28, which permits non-investment foreign-invested enterprises to use their capital funds to make equity investments in China, with genuine investment projects and in compliance with effective foreign investment restrictions and other applicable laws. However, there are still uncertainties in practice as to its interpretation and implementations in practice.
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In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans or future capital contributions by us to our PRC subsidiaries. As a result, uncertainties exist as to our ability to provide prompt financial support to our PRC subsidiaries when needed. If we fail to complete such registrations or obtain such approvals, our ability to use foreign currency, including the proceeds we receive from our initial public offering and the concurrent private placement, and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect the Group’s liquidity and the Group’s ability to fund and expand its business.
Fluctuations in exchange rates could result in foreign currency exchange losses and could materially reduce the value of your investment.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government, and Renminbi internationalization. For example, On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Following the removal of the U.S. dollar peg, the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. More recently, on November 30, 2015, the Executive Board of the International Monetary Fund, completed the regular five-year review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016, Renminbi is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the Renminbi depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. In 2017, the value of the Renminbi appreciated further by approximately 6.3% against the U.S. dollar. The value of the Renminbi continued to fluctuate in recent years. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.
All of the Group’s revenue and substantially all of its costs are denominated in Renminbi. Any significant revaluation of Renminbi may materially and adversely affect the Group’s results of operations and financial position reported in Renminbi when translated into U.S. dollars, and the value of, and any dividends payable on, the ADSs in U.S. dollars. To the extent that we need to convert U.S. dollars we receive from our initial public offering and the concurrent private placement into Renminbi for the Group’s operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our Class A ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount.
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The audit report included in this annual report is prepared by an auditor which the U.S. Public Company Accounting Oversight Board was unable to inspect and investigate completely before 2022 and, as such, our investors have been deprived of the benefits of such inspections in the past, and may be deprived of the benefits of such inspections in the future.
Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the U.S. and a firm registered with the U.S. Public Company Accounting Oversight Board, or the PCAOB, is required by the laws of the U.S. to undergo regular inspections by the PCAOB to assess its compliance with the laws of the U.S. and professional standards. According to Article 177 of the PRC Securities Law which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to overseas parties. In 2021, PCAOB made determinations that the positions taken by PRC authorities prevented the PCAOB from inspecting and investigating firms headquartered in Chinese Mainland and Hong Kong completely. On August 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the PRC, taking the first step toward opening access for the PCAOB to inspect and investigate completely registered public accounting firms headquartered in Chinese Mainland and Hong Kong, including our auditor. According to its announcement, the PCAOB sent staff to conduct on-site inspections and investigations in Hong Kong from September to November 2022 and conducted inspection field work and investigative testimony in a manner consistent with the PCAOB’s methodology and approach to inspections and investigations in the U.S. and globally. The PCAOB inspections have identified numerous deficiencies in the audit firms in China, which are consistent with the types and number of findings the PCAOB has encountered in other first-time inspections around the world, and the final inspection reports were completed and made public in 2023. If audit firms in China had been subject to such inspections in the past, such deficiencies may have been identified earlier and these audit firms, including our auditor, may have taken remedial measures to address any such deficiencies, and the historical inability of the PCAOB to inspect audit firms in China has deprived our investors of the benefits of such inspections. Because our auditor was not subject to such inspections before 2022, we cannot assure you that it will have sufficient time to fully address any deficiency that may be identified as part of the inspection process to improve future audit quality. The inability of the PCAOB to conduct complete inspections of auditors in China before 2022 may have made it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections, which could cause investors or potential investors in our ADSs to lose confidence in the quality of our consolidated financial statements.
In addition, while the PCAOB announced that it secured complete access to inspect and investigate registered public accounting firms headquartered in China and completed its annual inspection and investigation, we cannot assure you that the PCAOB will continue to have such access in the future. If the PCAOB is not able to inspect and investigate completely auditors in China for any reason, such as any change in the position of the governmental authorities in China in the future, our investors may be deprived of the benefits of such inspections again.
If the PCAOB determines that it is unable to inspect or investigate completely our auditor at any point in the future, our ADSs may be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, as amended, or the HFCA Act, and any such trading prohibition on our ADSs or threat thereof may materially and adversely affect the price of our ADSs and value of your investment.
The HFCA Act was signed into law on December 18, 2020 and amended pursuant to the Consolidated Appropriations Act, 2023 on December 29, 2022. Under the HFCA Act and the rules issued by the SEC and the PCAOB thereunder, if we have retained a registered public accounting firm to issue an audit report where the registered public accounting firm has a branch or office that is located in a foreign jurisdiction and the PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction, the SEC will identify us as a “covered issuer”, or SEC-identified issuer, shortly after we file with the SEC a report required under the Securities Exchange Act of 1934, or the Exchange Act (such as our annual report on Form 20-F), that includes an audit report issued by such accounting firm; and if we were to be identified as an SEC-identified issuer for two consecutive years, the SEC would prohibit our securities (including our shares or ADSs) from being traded on a national securities exchange or in the over-the-counter trading market in the United States.
In December 2021, the PCAOB made its determinations, or the 2021 determinations, pursuant to the HFCA Act that it was unable to inspect or investigate completely registered public accounting firms headquartered in Chinese Mainland or Hong Kong, including our auditor, Deloitte Touche Tohmatsu Certified Public Accountants LLP. After we filed our annual report on Form 20-F for the fiscal year ended December 31, 2021 that included an audit report issued by Deloitte Touche Tohmatsu Certified Public Accountants LLP on April 25, 2022, the SEC conclusively identified us as an SEC-identified issuer on May 26, 2022.
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Following the Statement of Protocol signed between the PCAOB and the China Securities Regulatory Commission and the Ministry of Finance of the PRC in August 2022 and the on-site inspections and investigations conducted by the PCAOB staff in Hong Kong from September to November 2022, the PCAOB Board voted in December 2022 to vacate the previous 2021 determinations, and as a result, our auditor, Deloitte Touche Tohmatsu Certified Public Accountants LLP, was no longer a registered public accounting firm that the PCAOB was unable to inspect or investigate completely, and we were not identified as an SEC-identified issuer thereafter. As of the date of this annual report, we do not expect to be identified as an SEC-identified issuer for the fiscal year ended December 31, 2025. However, the PCAOB may change its determinations under the HFCA Act at any point in the future. In particular, if the PCAOB finds its ability to completely inspect and investigate registered public accounting firms headquartered in Chinese Mainland or Hong Kong is obstructed by the PRC authorities in any way in the future, the PCAOB may act immediately to consider the need to issue new determinations consistent with the HFCA Act. We cannot assure you that the PCAOB will always have complete access to inspect and investigate our auditor, or that we will not be identified as an SEC-identified issuer again in the future.
If we are identified as an SEC-identified issuer again in the future, we cannot assure you that we will be able to change our auditor or take other remedial measures in a timely manner, and if we were to be identified as an SEC-identified issuer for two consecutive years, we would be delisted from the NYSE and our securities (including our shares and ADSs) will not be permitted for trading “over-the-counter” either. If our securities are prohibited from trading in the United States, there is no certainty that we will be able to list on a non-U.S. exchange or that a market for our shares will develop outside of the United States. Such a prohibition or any threat thereof would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our ADSs. Also, such a prohibition or any threat thereof would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects. Moreover, the implementation of the HFCA Act and other efforts to increase the U.S. regulatory access to audit information could cause investor uncertainty as to China-based issuers’ ability to maintain their listings on the U.S. national securities exchanges and the market price of the securities of China-based issuers, including us, could be adversely affected.
Additional remedial measures could be imposed on certain PRC-based accounting firms, including our independent registered public accounting firm, in administrative proceedings instituted by the SEC, as a result of which our financial statements may be determined to not be in compliance with the requirements of the Exchange Act, if at all.
In December 2012, the SEC brought administrative proceedings against the PRC-based “big four” accounting firms, including our independent registered public accounting firm, alleging that they had violated U.S. securities laws by failing to provide audit work papers and other documents related to certain other PRC-based companies under investigation by the SEC. On January 22, 2014, an initial administrative law decision was issued, censuring and suspending these accounting firms from practicing before the SEC for a period of six months. The decision was neither final nor legally effective until reviewed and approved by the SEC, and on February 12, 2014, the PRC-based accounting firms appealed to the SEC against this decision. In February 2015, each of the four PRC-based accounting firms agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC. The settlement required the firms to follow detailed procedures to seek to provide the SEC with access to such firms’ audit documents via the CSRC. If the firms did not follow these procedures or if there is a failure in the process between the SEC and the CSRC, the SEC could impose penalties such as suspensions, or it could restart the administrative proceedings. Under the terms of the settlement, the underlying proceeding against the four PRC-based accounting firms was deemed dismissed with prejudice four years after entry of the settlement. The four-year mark occurred on February 6, 2019. While we cannot predict if the SEC will further challenge the four PRC-based accounting firms’ compliance with U.S. law in connection with U.S. regulatory requests for audit work papers or if the results of such challenge would result in the SEC imposing penalties such as suspensions.
In the event that the PRC-based “big four” accounting firms become subject to additional legal challenges by the SEC or PCAOB, depending upon the final outcome, listed companies in the U.S. with major PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about any such future proceedings against these audit firms may cause investor uncertainty regarding China-based, U.S.-listed companies and the market price of the ADSs may be adversely affected.
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If our independent registered public accounting firm were denied, even temporarily, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit and issue an opinion on the Group’s consolidated financial statements, its consolidated financial statements could be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to delisting of the ADSs from the NYSE or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of the ADSs in the U.S.
The ability of U.S. authorities to bring actions for violations of U.S. securities law and regulations against us, our directors, executive officers or the expert named in this annual report may be limited. Therefore, you may not be afforded the same protection as provided to investors in U.S. domestic companies.
The SEC, the U.S. Department of Justice, or the DOJ, and other U.S. authorities often have substantial difficulties in bringing and enforcing actions against non-U.S. companies such as us, and non-U.S. persons, such as our directors and executive officers in China. Due to jurisdictional limitations, matters of comity and various other factors, the SEC, the DOJ and other U.S. authorities may be limited in their ability to pursue bad actors, including in instances of fraud, in emerging markets such as China. We conduct the Group’s operations mainly in China and our assets are mainly located in China. In addition, a majority of our directors and executive officers reside within China. There are significant legal and other obstacles for U.S. authorities to obtain information needed for investigations or litigation against us or our directors, executive officers or other gatekeepers in case we or any of these individuals engage in fraud or other wrongdoing. In addition, local authorities in China may not fully assist U.S. authorities and overseas investors in connection with legal proceedings. As a result, if we, our directors, executive officers or other gatekeepers commit any securities law violation, fraud or other financial misconduct, the U.S. authorities may not be able to conduct effective investigations or bring and enforce actions against us, our directors, executive officers or other gatekeepers. Therefore, you may not be able to enjoy the same protection provided by various U.S. authorities as it is provided to investors in U.S. domestic companies.
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China, based on the United States or other foreign laws, against us, our directors, executive officers or the expert named in this annual report. Therefore, you may not be able to enjoy the protection of such laws in an effective manner.
The Group conducts its operations mainly in China, and its assets are mainly located in China. In addition, a majority of our directors and executive officers reside within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon us, our directors and executive officers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. Even if you obtain a judgment against us, our directors, executive officers or the expert named in this annual report in a U.S. court or other court outside China, you may not be able to enforce such judgment against us or them in China. China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts in the United States, the United Kingdom, Japan or most other western countries. Therefore, recognition and enforcement in China of judgments of a court in any of these jurisdictions may be difficult or impossible. In addition, you may not be able to bring original actions in China based on the U.S. or other foreign laws against us, our directors, executive officers or the expert named in this annual report. As a result, shareholder claims that are common in the U.S., including class actions based on securities law and fraud claims, are difficult or impossible to pursue as a matter of law and practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the Unities States have not been efficient in the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to overseas parties. While detailed interpretation of or implementation rules under Article 177 of the PRC Securities Law is not yet available, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by investors in protecting your interests. If an investor is unable to bring a U.S. claim or collect on a U.S. judgment, the investor may have to rely on legal claims and remedies available in China or other overseas jurisdictions where a China-based issuer, such as our Company, may maintain assets. The claims and remedies available in these jurisdictions are often significantly different from those available in the United States and difficult to pursue. Therefore, you may not be able to effectively enjoy the protection offered by the U.S. laws and regulations that are intended to protect public investors.
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Risks Related to Our ADSs
The trading price of our ADSs has been and is likely to continue to be volatile, which could result in substantial losses to holders of our ADSs.
The trading price of our ADSs has been and is likely to continue to be volatile and could fluctuate widely in response to a variety of factors, many of which are beyond our control. The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. In particular, the stock prices of other companies with business operations located mainly in China that have listed their securities in the United States may affect the prices of and trading volumes for our ADSs. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial price declines in the trading prices of their securities. The trading performances of other Chinese companies’ securities after their offerings, including technology companies and transaction service platforms, may affect the attitudes of investors toward Chinese companies listed in the United States, which consequently may impact the trading performance of our ADSs, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have conducted any inappropriate activities. Furthermore, securities markets may from time to time experience significant price and volume fluctuations that are not related to the Group’s operating performance, such as the large decline in share prices in the U.S., China and other jurisdictions in late 2008, early 2009, the second half of 2011, 2015 and the first quarter of 2020. In addition, a portion of our ADSs may be traded by short sellers, which may further increase the volatility of the trading price of our ADSs. All these fluctuations and incidents may have a material and adverse effect on the trading price of our ADSs.
In addition to the above factors, the price and trading volume of our ADSs may be highly volatile due to multiple factors, including the following:
• regulatory developments affecting us or our industry;
• announcements of studies and reports relating to the quality of the Group’s service offerings or those of our competitors;
• changes in the economic performance or market valuations of other providers of similar services;
• actual or anticipated fluctuations in the Group’s quarterly results of operations and changes or revisions of its expected results;
• changes in financial estimates by securities research analysts;
• announcements by us or our competitors of new service offerings, acquisitions, strategic relationships, joint ventures, capital raisings or capital commitments;
• additions to or departures of our senior management;
• fluctuations of exchange rates between the Renminbi and the U.S. dollar;
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• release or expiry of lock-up or other transfer restrictions on our ordinary shares or ADSs;
• sales or perceived potential sales of additional Class A ordinary shares or ADSs; and
• short selling reports published by short sellers and other short selling activities.
We may fail to meet our publicly announced guidance or other expectations about the Group’s business, which could cause our stock price to decline.
We may from time to time provide guidance regarding the Group’s expected financial and business performance. Correctly identifying key factors affecting business conditions and predicting future events is inherently an uncertain process, and our guidance may not ultimately be accurate in all respects. Our guidance is based on certain assumptions, such as those relating to anticipated transaction activities on the FTA platform, fee rates and operating costs and expenses. If our guidance varies from actual results, the market value of our ADSs could decline significantly.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about the Group’s business, the market price for our ADSs and their trading volume could decline.
The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about the Group or its business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades our ADSs or publishes inaccurate or unfavorable research about the Group’s business, the market price for our ADSs would likely decline. If one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ADSs to decline.
Because we cannot guarantee any future payment of cash dividends, you may not receive any return on your investment unless you sell your ADSs for a price greater than that which you paid for them.
We cannot guarantee any future payment of cash dividends. Therefore, you should not rely on an investment in our ADSs as a source for any future dividend income.
Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, the Group’s future results of operations and cash flow, its capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, the Group’s financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in the ADSs will likely depend entirely upon any future price appreciation of such securities. There is no guarantee that our ADSs will appreciate in value in the future or even maintain the price at which you purchased such securities. You may not realize a return on your investment in the ADSs and you may even lose your entire investment in such securities.
Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline.
Sales of our ADSs in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to decline significantly. Shares held by our existing shareholders may be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the U.S. Securities Act of 1933, as amended, or the Securities Act. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ADSs.
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In addition, certain holders of our Class A ordinary shares have the right to cause us to register the sale of their shares under the Securities Act upon the occurrence of certain circumstances. Registration of these shares under the Securities Act would result in ADSs representing these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of ADSs representing these registered shares in the public market could cause the price of our ADSs to decline significantly.
Holders of our ADSs may have fewer rights than holders of our Class A ordinary shares and must act through the depositary to exercise those rights.
Holders of ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying Class A ordinary shares in accordance with the provisions of the deposit agreement. Under our memorandum and articles of association, the minimum notice period required to convene a general meeting will be ten days.
When a general meeting is convened, the holders of ADSs may not receive sufficient notice of a shareholders’ meeting to permit the withdrawal of the underlying Class A ordinary shares represented by their ADSs to allow them to cast their votes with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting materials to holders of ADSs or carry out the voting instructions of the holders of ADSs in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of ADSs in a timely manner, but there can be no assurance that holders of ADSs will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of ADSs may not be able to exercise their right to vote and may lack recourse if the underlying Class A ordinary shares represented by their ADSs are not voted as they requested. In addition, holders of ADSs will not be able to call a shareholders’ meeting.
The rights of our ADS holders to pursue claims against the depositary are limited by the terms of the deposit agreement, and the deposit agreement may be amended or terminated without their consent.
Under the deposit agreement, any action or proceeding against or involving the depositary, arising out of or based upon the deposit agreement or the transactions contemplated thereby or by virtue of owning the ADSs may only be instituted in a state or federal court in New York, New York, and holders of our ADSs will have irrevocably waived any objection which they may have to the laying of venue of any such proceeding, and irrevocably submitted to the exclusive jurisdiction of such courts in any such action or proceeding. The depositary may, in its sole discretion, require that any dispute or difference arising from the relationship created by the deposit agreement be referred to and finally settled by an arbitration conducted under the terms described in the deposit agreement, although the arbitration provisions do not preclude you from pursuing claims under the Securities Act or the Exchange Act in state or federal courts. Also, we and the depositary may amend or terminate the deposit agreement without the consent of holders of ADSs. If holders of ADSs continue to hold their ADSs after an amendment to the deposit agreement, they will be deemed to have agreed to be bound by the deposit agreement as amended.
The right of our ADS holders to participate in any future rights offerings may be limited, which may cause dilution to their holdings of our ADSs.
We may, from time to time, distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to holders of ADSs in the U.S. unless we register both the distribution and sale of the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. Under the deposit agreement, the depositary will not make rights available to holders of ADSs unless both the distribution and sale of the rights and the underlying securities to be distributed to holders of ADSs are either registered under the Securities Act or exempt from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective and we may not be able to establish a necessary exemption from registration under the Securities Act. Accordingly, holders of ADSs may be unable to participate in our rights offerings in the future and may experience dilution in their holdings.
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Holders of our ADSs may not receive cash dividends or other distributions if the depositary determines it is illegal or impractical to make them available to them.
The depositary will pay cash distribution on the ADSs only to the extent that we decide to distribute dividends on our Class A ordinary shares or other deposited securities, and we cannot guarantee any future payment of cash dividends. To the extent that there is a distribution, the depositary of the ADSs has agreed to pay to holders of our ADSs the cash dividends or other distributions it or the custodian receives on our Class A ordinary shares or other deposited securities after deducting its fees and expenses. Holders of ADSs will receive these distributions in proportion to the number of Class A ordinary shares their ADSs represent. However, the depositary may, at its discretion, decide that it is illegal or impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may decide not to distribute such property to holders of ADSs.
We have incurred and expect to continue to incur significant costs as a public company, which could lower the Group’s profits or make it more difficult to run its business.
As a public company, we have incurred and expect to continue to incur significant legal, accounting and other expenses that we did not incur as a private company to ensure that we comply with the various requirements on corporate governance practices imposed by the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the NYSE.
For example, we have increased the number of independent directors and adopted policies regarding internal controls and disclosure controls and procedures. We have also incurred additional costs associated with our public company reporting requirements. In March 2024, the SEC adopted final rules on climate-related disclosure, or the climate disclosure rules, which require issuers to make a significant amount of climate-related disclosure, including, among others, material Scope 1 and Scope 2 greenhouse gas, or GHG, emissions, climate-related financial metrics, climate-related strategy, governance, targets and goals. The climate disclosure rules also include phased-in attestation requirements for GHG disclosure. The climate disclosure rules are being challenged in the U.S. courts. In April 2024, the SEC voluntarily stayed the implementation of the climate disclosure rules pending judicial review in the Eighth Circuit. On March 27, 2025, the SEC voted to cease legal defense of the climate disclosure rules in the court. Despite of these developments on the climate disclosure rules, we cannot rule out the possibility that such rules or a revised version thereof may eventually come into effect. We expect that the rules and regulations applicable to public companies in the U.S. will continue to cause us to incur elevated legal and financial compliance costs, devote substantial management effort to ensure compliance and make some corporate activities more time-consuming and costly. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.
Holders of our ADSs may be subject to limitations on transfer of their ADSs.
Our ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
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Our memorandum and articles of association provide that the courts of the Cayman Islands and the U.S. federal courts will be the exclusive forums for substantially all disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for complaints against us or our directors, officers or employees.
Our memorandum and articles of association provide that, unless otherwise agreed by us, (i) the federal courts of the United States shall have exclusive jurisdiction to hear, settle and/or determine any dispute, controversy or claim arising under the provisions of the Securities Act or the Exchange Act, which are referred to as the “US Actions;” and (ii) save for such US Actions, the courts of the Cayman Islands shall have exclusive jurisdiction to hear, settle and/or determine any dispute, controversy or claim whether arising out of or in connection with our articles of association or otherwise, including without limitation:
• any derivative action or proceeding brought on behalf of our Company,
• any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to our Company or our shareholders,
• any action asserting a claim under any provision of the Companies Act, Cap. 22 (Act 3 of 1961, as consolidated and revised), as amended, of the Cayman Islands (the “Cayman Companies Act”), or our articles of association, including but not limited to any purchase or acquisition of shares, security or guarantee provided in consideration thereof, or
• any action asserting a claim against our Company which if brought in the United States would be a claim arising under the internal affairs doctrine (as such concept is recognized under the laws of the United States).
These exclusive-forum provisions may increase a shareholder’s cost and limit the shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. Any person or entity purchasing or otherwise acquiring any of our shares or other security, such as the ADSs, whether by transfer, sale, operation of law or otherwise, shall be deemed to have notice of and have irrevocably agreed and consented to these provisions. There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. It is possible that a court could find this type of provisions to be inapplicable or unenforceable, and if a court were to find this provision in our memorandum and articles of association to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could have adverse effect on the Group’s business and financial performance. In particular, under Section 22 of the Securities Act, federal and state courts have concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing our Class A ordinary shares provides that, subject to the depositary’s right to require a claim to be submitted to arbitration, the federal or state courts in the City of New York have exclusive jurisdiction to hear and determine claims arising under the deposit agreement and in that regard, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. If we or the depositary oppose a jury trial demand based on the above-mentioned jury trial waiver, the court will determine whether the waiver is enforceable in the facts and circumstances of that case in accordance with applicable state and federal law. While to our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement. In determining whether to enforce a jury trial waiver provision, courts will consider a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before investing in the ADSs. If you or any other holder or beneficial owner of ADSs brings a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action. Nevertheless, if this jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the deposit agreement with a jury trial.
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The depositary for the ADSs will give us a discretionary proxy to vote our Class A ordinary shares underlying our ADSs if holders of our ADSs do not vote at shareholders’ meetings, except in limited circumstances, which could adversely affect the interests the holders of our ADSs.
Under the deposit agreement for the ADSs, if holders of our ADSs do not vote, the depositary will give us a discretionary proxy to vote our Class A ordinary shares underlying the ADSs at shareholders’ meetings unless:
• we have instructed the depositary that we do not wish a discretionary proxy to be given;
• we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;
• a matter to be voted on at the meeting would materially and adversely affect the rights of shareholders; or
• the voting at the meeting is to be made on a show of hands.
The effect of this discretionary proxy is that if any holders of our ADSs do not vote at shareholders’ meetings, they cannot prevent our Class A ordinary shares underlying such ADSs from being voted, except under the circumstances described above. This may make it more difficult for shareholders to influence the management of our Company. Holders of our ordinary shares are not subject to this discretionary proxy.
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.
We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Cayman Companies Act and the common law of the Cayman Islands.
The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law may be narrower in scope or less developed than they would be under statutes or judicial precedent in some jurisdictions in the U.S. In particular, the Cayman Islands have a less developed body of securities laws than the U.S. For example, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Under the memorandum and articles of association of the Company, no shareholder (other than a director) shall have any right of inspecting any accounting record or book or document of the Company except as conferred by the Cayman Companies Act or authorized by the board of directors or the shareholders in general meeting, but the register of shareholders shall be open for inspection by members and the public at such place at which the register is kept for such times and on such days as the board of directors shall determine. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with a proxy contest.
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As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the U.S.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the U.S. that are applicable to U.S. domestic issuers, including: (i) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q, quarterly certifications by the principal executive and financial officers or current reports on Form 8-K; (ii) the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange Act requiring principal shareholders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iv) the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the NYSE. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. For example, U.S. domestic issuers are required to file annual reports within 60 to 90 days from the end of each fiscal year. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
We are a “controlled company” as defined under the NYSE Listed Company Manual. As a result, we qualify for, and may rely on, exemptions from certain corporate governance requirements that would otherwise provide protection to shareholders of other companies.
We are a “controlled company” as defined under the NYSE Listed Company Manual because Mr. Peter Hui Zhang, our founder, chairman and chief executive officer, holds more than 50% of the aggregate voting power of our Company. For so long as we remain a controlled company, we may rely on exemptions from certain corporate governance rules, including (i) the requirement that a majority of the board of directors consist of independent directors, (ii) the requirement that the compensation of our officers be determined or recommended to our board of directors by a compensation committee that is comprised solely of independent directors, and (iii) the requirement that director nominees be selected or recommended to the board of directors by a majority of independent directors or a nominating committee comprised solely of independent directors. Currently, we do not plan to utilize the exemptions available for controlled companies, but will rely on the exemption available for foreign private issuers to follow our home country governance practices instead. See “—We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.” If we cease to be a foreign private issuer or if we cannot rely on the home country governance practice exemption for any reason, we may decide to invoke the exemptions available for a controlled company as long as we remain a controlled company. As a result, holders of our Class A ordinary shares and ADSs will not have the same protection afforded to shareholders of companies that are subject to all the NYSE corporate governance requirements.
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If we are a passive foreign investment company for United States federal income tax purposes for any taxable year, United States holders of our ADSs or Class A ordinary shares could be subject to adverse United States federal income tax consequences.
A non-United States corporation will be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (generally determined based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income. Based on the composition of the Group’s income and assets and the value of its assets, including goodwill (which we have determined based on the trading price of our ADSs), we believe there is a risk that we were a PFIC for 2025. However, our PFIC status for 2025 is not entirely clear and you are urged to consult your own tax advisors in this regard. The determination of whether we are a PFIC is made annually. Accordingly, it is possible that our PFIC status may change due to changes in the Group’s asset or income composition or changes in the value of the Group’s assets. The composition of the Group’s assets and income may be affected by how, and how quickly, the Group uses the cash and liquid assets that it currently holds. In addition, fluctuations in the trading price of our ADSs (which may be volatile) may affect the value of the Group’s goodwill, and therefore may affect our PFIC status. The ultimate determination of our PFIC status for any year cannot be made until the end of that year and will depend, in part, on the trading price of our ADSs for the relevant quarterly testing dates. Therefore, there can be no assurance that we will not be a PFIC for 2026 or any future taxable year.
If we are a PFIC for any taxable year during which a United States person holds ADSs or Class A ordinary shares, certain adverse United States federal income tax consequences could apply to such United States person. For example, if we are a PFIC, our United States investors may become subject to increased tax liabilities under United States federal income tax laws and regulations and will become subject to burdensome reporting requirements. See “Item 10. Additional Information — E. Taxation — Certain United States Federal Income Tax Considerations—Passive Foreign Investment Company.”
As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the NYSE corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the NYSE corporate governance listing standards.
We are an exempted company incorporated in the Cayman Islands, and our ADSs are listed on the NYSE. The NYSE market rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from the NYSE corporate governance listing standards.
Among other things, we are not required under the NYSE corporate governance listing standards to: (i) have a majority of the board be independent; (ii) have a compensation committee or a nominating and corporate governance committee consisting entirely of independent directors; (iii) have a minimum of three members on the audit committee; (iv) obtain shareholders’ approval for issuance of securities in certain situations; (v) have regularly scheduled executive sessions with only independent directors each year; or (vi) hold annual shareholders meetings.
We intend to rely on all of the exemptions described above. As a result, you may not be provided with the benefits of certain corporate governance requirements of the NYSE.