| SKADDEN, ARPS, SLATE, MEAGHER & FLOM | ||||
| PARTNERS JOHN ADEBIYI ¿ CHRISTOPHER W. BETTS EDWARD H.P. LAM ¿* CLIVE W. ROUGH ¿ JONATHAN B. STONE * ALEC P. TRACY * ¿ (ALSO ADMITTED IN ENGLAND & WALES) * (ALSO ADMITTED IN NEW YORK)
REGISTERED FOREIGN LAWYERS WILL H. CAI (CALIFORNIA) Z. JULIE GAO (CALIFORNIA) BRADLEY A. KLEIN (ILLINOIS) RORY MCALPINE (ENGLAND & WALES) GREGORY G.H. MIAO (NEW YORK) ALAN G. SCHIFFMAN (NEW YORK) |
42/F, EDINBURGH TOWER, THE LANDMARK 15 QUEEN’S ROAD CENTRAL, HONG KONG
TEL: (852) 3740-4700 FAX: (852) 3740-4727 www.skadden.com |
AFFILIATE OFFICES
BOSTON CHICAGO HOUSTON LOS ANGELES NEW YORK PALO ALTO WASHINGTON, D.C. WILMINGTON
BEIJING BRUSSELS FRANKFURT LONDON MOSCOW MUNICH PARIS SÃO PAULO SEOUL SHANGHAI SINGAPORE SYDNEY TOKYO TORONTO | ||
December 5, 2014
VIA EDGAR
Barbara C. Jacobs, Assistant Director
Matthew Crispino, Staff Attorney
Gabriel Eckstein, Staff Attorney
Stephen Krikorian, Accounting Branch Chief
Ryan Rohn, Staff Accountant
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
| Re: | Momo Inc. |
Amendment No. 2 to Registration Statement on Form F-1
(Registration No.: 333-199996)
Response to the Staff’s Comment Letter Dated December 3, 2014
Dear Ms. Jacobs, Mr. Crispino, Mr. Eckstein, Mr. Krikorian and Mr. Rohn:
On behalf of our client, Momo Inc., a foreign private issuer organized under the laws of the Cayman Islands (the “Company”), we submit to the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) this letter setting forth the Company’s responses to the comments contained in the Staff’s letter dated December 3, 2014.
The Staff’s comments are repeated below in bold and are followed by the Company’s responses. Capitalized terms used but not otherwise defined herein have the meanings set forth in the Registration Statement on Form F-1 last filed with the Commission on November 28, 2014.
The Company respectfully advises the Staff that it has commenced the marketing activities in connection with the offering on December 1, 2014, and the Company plans to request the Staff’s declaration of the effectiveness of its registration statement on or about December 10, 2014.
Notes to Consolidated Financial Statements
Note 10. Ordinary Shares, page F-28
| 1. | We have reviewed your response to prior comment 1. Please address the following items: |
| • | In the first paragraph of the response, you state that the restricted share agreements reflect the implied contractual agreement that the holders have the obligation to share the losses of the Company. Please clarify the nature of this statement. In this regard, explain in greater detail how you determined that an implied agreement is a contractual obligation. |
| • | Explain how you determined that the nonvested restricted shares share in residual net assets, and therefore, economically absorb losses. That is, since the shares of restricted stock have not vested, clarify how these shares absorb losses. ASC 260-10- 45-67 specifies when contractual obligations exist. Describe how the obligations you describe in your response correlate to this paragraph. |
| • | Your statement in the last paragraph of the response indicates that the obligation of the nonvested restricted shares is objectively determinable. Please clarify this statement and explain how you made this determination. |
| • | Please include some of the information included in your response in your footnote disclosure related to your nonvested restricted stock. |
In response to the Staff’s comments and the telephonic discussion between the Staff and the Company’s U.S. counsel on December 4, 2014, the Company will restate its basic net loss per share disclosures to allocate all net losses to the ordinary shares, as the nonvested restricted shares do not contain a contractual obligation to fund losses.
2
The Company respectfully advises the Staff that the Company believes that the nonvested restricted shares’ rights are commensurate with those of the ordinary shares with respect to dividends and other rights pursuant to the agreements governing these interests, including confirmation letters signed by the founders which clarified that the holders of the restricted shares and the ordinary shares have the same obligation to share in losses of the Company starting from the date the restriction was imposed on the shares. However, the Company acknowledges that there are no explicit terms stated in such agreements that provide for actual funding of the losses, and there is not contractual redemption right associated with the restricted shares. Accordingly, the two conditions specified in ASC260-10-45-67 which would permit allocating losses to the restricted shares are not present. As such, the Company has restated the disclosures of EPS to exclude the nonvested restricted shares from the computation of the basic EPS in each of the periods of net loss.
Annex A attached hereto shows the proposed changes the Company will make in the next filing. Once the Staff confirms no objection to these changes, the Company will file an amendment to the Registration Statement on Monday, December 8, 2014 to reflect these changes.
Note 13. Net Loss Per Share, page F-35
| 2. | We note your response and revised disclosure to prior comment 2. It is unclear why certain lines are not included in both the table on page F-36 and on page F-37. Specifically, the line item, “Weighted average shares used in computing net loss per participating nonvested restricted share” does not appear to be included in the table on page F-37. Similarly, “Share issuable upon exercise of share options” does not appear to be included in the table on page F-36. Similar concerns apply to your tables on pages F-73 and F-74. Please advise. |
The Company respectfully advises the Staff that as discussed in the Company’s response to comment 1 above, the nonvested restricted shares are not included in the calculation of the basic EPS. The Company has restated its disclosure accordingly, and eliminated the previous disclosure which allocated losses to the nonvested restricted shares.
The Company also respectfully advises the Staff that because the Company incurred losses for the years ended December 31, 2012 and 2013 and the nine-month periods ended September 30, 2013 and 2014, all options are antidilutive for the calculation of diluted EPS. Hence, the “Shares issuable upon exercise of share options” are not included in the calculation of diluted EPS in the tables on pages F-36 and F-73, but the number of potential ordinary shares excluded from the computation of the diluted net loss per ordinary share has been included in the tables on pages F-37 and F-74.
3
Notes to Unaudited Condensed Consolidated Financial Statements
Note 18. Subsequent Events, page F-76
| 3. | We have reviewed your response to prior comment 3. Tell us the status of the determination of fair value for these stock options and the amount of unrecognized stock based compensation. The amounts appear material and should be included in the filing. |
The Company respectfully advises the Staff that as the October 2014 option grant was made close to its proposed initial public offering, accordingly, and in response to the Staff’s comment, the Company has utilized US$6.75, which is the mid-point of the estimated initial public offering range indicated on the front cover of the preliminary prospectus for the offering, as the estimated fair value per share underlying the options granted in October 2014.
In response to the Staff’s comment, the Company proposes to add the following disclosure on pages 24 and 86 of the Registration Statement:
In October 2014, we granted to our employees options to purchase 2,963,500 ordinary shares with an exercise price of $0.0002 per share and a vesting period of four years. . Given the proximity of the grant to our proposed initial public offering, we plan to use US$6.75, which is the mid-point of the estimated initial public offering range indicated on the front cover page of this prospectus, as the fair value per share underlying the options granted in October 2014. As a result, we expect to incur approximately US$20 million share-based compensation expense in connection with the October 2014 option grant over the four-year vesting period.
Exhibit Index, page II-7
Exhibit 5.1
| 4. | We are unable to concur with your response that the language in parenthesis on page 4 of the legal opinion is a necessary limitation for purposes of opining that your shares are non-assessable. Please file a revised opinion that omits this limitation. |
In response to the Staff’s comment, and based on the telephonic discussion between the Staff and the Company’s Cayman Islands counsel on December 4, 2014, the Company plans to file a revised Exhibit 5.1 opinion in the form attached hereto as Annex B in connection with the next filing. Once the Staff confirms no objection to the form of the revised Exhibit 5.1 opinion, the Company will file the executed revised Exhibit 5.1 opinion in connection with the next filing of the Registration Statement on Monday, December 8, 2014.
* * *
4
If you have any questions regarding the above responses, please contact the undersigned by phone at +852-3740-4863 or via e-mail at julie.gao@skadden.com or Jeffrey Fu, the audit engagement partner at Deloitte Touche Tohmatsu Certified Public Accountants LLP, by telephone at +86 10-8520-7159 or via email at jfu@deloitte.com.cn. Deloitte Touche Tohmatsu Certified Public Accountants LLP is the independent registered public accounting firm of the Company.
| Very truly yours, |
| /s/ Z. Julie Gao |
| Z. Julie Gao |
Enclosures
| cc: | Yan Tang, Chief Executive Officer, Momo Inc. |
Jonathan Xiaosong Zhang, Chief Financial Officer, Momo Inc.
Jeffrey Fu, Partner, Deloitte Touche Tohmatsu Certified Public Accountants LLP
David Zhang, Esq., Partner, Kirkland & Ellis International LLP
ANNEX A
ANNEX B
| Our ref Direct tel |
DLK/692329-000001/7476571v4 +852 2971 3006 derrick.kan@maplesandcalder.com |
Momo Inc.
20th Floor, Block B
Tower 2, Wangjing SOHO
No. 1 Futongdong Street
Chaoyang District, Beijing 100102
People’s Republic of China
[—] 2014
Dear Sirs
Momo Inc.
We have acted as Cayman Islands legal advisers to Momo Inc. (the “Company”) in connection with the Company’s registration statement on Form F-1, including all amendments or supplements thereto (the “Registration Statement”), filed with the Securities and Exchange Commission under the U.S. Securities Act of 1933, as amended to date relating to the offering by the Company of certain American Depositary Shares (the “ADSs”) representing the Company’s Class A Ordinary Shares of par value US$0.0001 each (the “Shares”).
We are furnishing this opinion as Exhibit 5.1 to the Registration Statement.
| 1 | Documents Reviewed |
For the purposes of this opinion, we have reviewed only originals, copies or final drafts of the following documents:
| 1.1 | The certificate of registration by way of continuation of the Company dated 17 July 2014 and the certificate of incorporation on change of name of the Company dated 28 July 2014. |
| 1.2 | The amended and restated memorandum and articles of association of the Company as adopted by a special resolution passed on 11 July 2014 and effective upon continuation in the Cayman Islands on 17 July 2014 (the “Pre-IPO M&A”). |
| 1.3 | The second amended and restated memorandum and articles of association of the Company as conditionally adopted by a special resolution passed on 28 November 2014 and effective immediately upon the completion of the Company’s initial public offering of its Shares represented by ADSs (the “IPO M&A”). |
| 1.4 | The written resolutions of the directors of the Company dated 7 November 2014 and 28 November 2014 (the “Directors’ Resolutions”). |
| 1.5 | The written resolution of the shareholders of the Company held on 28 November 2014 (the “Shareholders’ Resolutions”). |
| 1.6 | A certificate from a Director of the Company, a copy of which is attached hereto (the “Director’s Certificate”). |
| 1.7 | A certificate of good standing dated 27 November 2014, issued by the Registrar of Companies in the Cayman Islands (the “Certificate of Good Standing”). |
| 1.8 | The Registration Statement. |
| 2 | Assumptions |
The following opinions are given only as to, and based on, circumstances and matters of fact existing and known to us on the date of this opinion letter. These opinions only relate to the laws of the Cayman Islands which are in force on the date of this opinion letter. In giving these opinions we have relied (without further verification) upon the completeness and accuracy of the Director’s Certificate and the Certificate of Good Standing. We have also relied upon the following assumptions, which we have not independently verified:
| 2.1 | Copy documents or drafts of documents provided to us are true and complete copies of, or in the final forms of, the originals. |
| 2.2 | The genuineness of all signatures and seals. |
| 2.3 | There is nothing under any law (other than the law of the Cayman Islands) which would or might affect the opinions set out below. |
| 3 | Opinion |
Based upon the foregoing and subject to the qualifications set out below and having regard to such legal considerations as we deem relevant, we are of the opinion that:
| 3.1 | The Company has been duly registered by way of continuation as an exempted company with limited liability and is validly existing and in good standing under the laws of the Cayman Islands. |
| 3.2 | The authorised share capital of the Company, with effect immediately upon the completion of the Company’s initial public offering of the Shares represented by ADSs, will be US$100,000 divided into 800,000,000 of a par value of US$0.0001 each, 100,000,000 Class B Ordinary Shares of a par value of US$0.0001 each and 100,000,000 shares of a par value of US$0.0001 each of such classes as may be determined by the directors of the Company. |
| 3.3 | The issue and allotment of the Shares have been duly authorised and when allotted, issued and paid for as contemplated in the Registration Statement, the Shares will be legally issued and allotted, fully paid and non-assessable (meaning that no further sums are payable by the holder of such Shares to the Company or to the Company’s creditors solely because it is the holder of any Shares). As a matter of Cayman law, a share is only issued when it has been entered in the register of members (shareholders). |
| 3.4 | The statements under the caption “Taxation” in the prospectus forming part of the Registration Statement, to the extent that they constitute statements of Cayman Islands law, are accurate in all material respects and that such statements constitute our opinion. |
2
| 4 | Qualifications |
Except as specifically stated herein, we make no comment with respect to any representations and warranties which may be made by or with respect to the Company in any of the documents or instruments cited in this opinion or otherwise with respect to the commercial terms of the transactions the subject of this opinion.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our name under the headings “Enforceability of Civil Liabilities”, “Taxation” and “Legal Matters” and elsewhere in the prospectus included in the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the Rules and Regulations of the Commission thereunder.
Yours faithfully
Maples and Calder
Encl
3