Prospectus Summary
PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in the ADSs discussed under “Risk Factors,” before deciding whether to invest in the ADSs. This prospectus contains information from an industry report and a survey commissioned by us and prepared by Shanghai iResearch Consulting Co., Ltd., or iResearch, an independent research firm, to provide information regarding our industry and our market position in China. We refer to this report as “iResearch Report” and this survey as “iResearch Survey.” This prospectus also contains information available from iResearch that was not commissioned by us, which we cite and identify in this prospectus with the language “according to iResearch.”Mission
Our mission is to make fashion accessible to everyone.
Who We Are
We are a leading online fashion and lifestyle destination in China. We provide young people with a more accessible and enjoyable shopping experience for everyday fashion, particularly as they increasingly live their lives online. People shop not only to buy, but also for leisure, entertainment and to stay informed of the latest trends. Through innovative use of content, our platform provides a vibrant and dynamic community for people to discover and share the latest fashion trends with others, and offers our users a truly comprehensive shopping experience that is:
Our rich and diverse content distills styles and trends and guides our users along their shopping journey from discovery to purchase. This content mostly comes from our users, including a vibrant community of fashion influencers, as well as our in-house editorial team. Our platform provides our fashion influencers with access to actual products from our brand and merchant partners with which they can create engaging content. Our highly engaging content comprises live video broadcasts, short-form videos, photographs, and articles covering topics including product reviews, fashion tips, brand fitting room, celebrity on-screen and street runway. Our platform features an extensive portfolio of live video broadcasts, where fashion influencers continuously promote and review products to our users and interact with their audience. In September 2018, we had live video broadcasts totaling approximately 3,000 hours on a daily basis. We also place links to products within our content to encourage and facilitate purchases. For example, when a user sees a certain item featured in a live video broadcast or a short-form video, or sees it recommended by a friend or fashion influencer through a like or share, the user can directly purchase that item.
Users access our platform primarily through mobile, including our flagship Mogujie app, as well as through our Mini Programs on Weixin. Through our strategic partnership with Tencent, one of our principal shareholders and the owner of Weixin and QQ, we also have one of the few dedicated Weixin Pay and QQ Wallet entryways that help direct Tencent’s massive base of users to our platform when they look to fulfill their fashion- and lifestyle-related needs. Our highly engaged user base primarily consists of young females between the ages of 15 and 30. For the twelve months ended September 30, 2018, we had an average of 62.6 million mobile MAUs on our platform. In September 2018, on average, a user who clicked the live video broadcasts on our platform spent over 35 minutes per day on watching our live video broadcasts. In determining the number of such users, if an individual actively uses multiple devices or accounts to access our live video broadcasts simultaneously, such individual would be counted as multiple “users” in calculating the above average time spent.
We are a technology-driven company that has relentlessly pursued the development of industry-leading AI and big data analytics capabilities to improve operational efficiency and user experience. Our user data is multi-dimensional as it relates to our users’ shopping behaviors, fashion tastes and purchasing history, which enables us to provide better and more personalized experience for them.
Our content-driven platform allows us not only to guide users through their entire shopping journey but also to generate revenues at multiple points. This in turn helps us provide online marketing services to our merchants and brand partners. We also receive commissions from our merchants for transactions completed through our platform. Our total GMV increased by 24.6% from RMB11.8 billion for the year ended March 31, 2017 to RMB14.7 billion for the year ended March 31, 2018, and by 25.4% from RMB6.3 billion for the six months ended September 30, 2017 to RMB7.9 billion for the six months ended September 30, 2018. Our total revenues were RMB1,109.9 million and RMB973.2 million (US$141.7 million) for the years ended March 31, 2017 and 2018, respectively, and were RMB480.4 million and RMB489.5 million (US$71.3 million) for the six months ended September 30, 2017 and 2018, respectively. We incurred loss from operations of RMB1,071.3 million and RMB847.4 million (US$123.4 million) for the years ended March 31, 2017 and 2018, respectively, and RMB498.9 million and RMB308.4 million (US$44.9 million) for the six months ended September 30, 2017 and 2018, respectively. Our net loss was RMB939.1 million and RMB558.1 million (US$81.3 million) for the years ended March 31, 2017 and 2018, respectively, and was RMB427.9 million and RMB303.3 million (US$44.2 million) for the six months ended September 30, 2017 and 2018, respectively. Our adjusted EBITDA was negative RMB403.5 million and negative RMB384.2 million (US$55.9 million) for the years ended March 31, 2017 and 2018, respectively, and was negative RMB236.8 million and negative RMB172.0 million (US$25.0 million) for the six months ended September 30, 2017 and 2018, respectively. Our adjusted net loss was RMB476.1 million and RMB420.2 million (US$61.2 million) for the years ended March 31, 2017 and 2018, respectively, and was RMB252.3 million and RMB185.7 million (US$27.0 million) for the six months ended September 30, 2017 and 2018, respectively.
How is MOGU Different?
We believe the following competitive strengths contribute to our success and differentiate us from our competitors:
Our Growth Strategies
We intend to pursue our mission to make fashion accessible to everyone and continue to grow our fashion platform through the following key growth strategies:
Our Industry
Growth of mobile shopping. Young people in China have grown up using mobile internet and are increasingly spending more time on mobile internet for their social interaction, shopping, information sharing and entertainment, among others. According to iResearch Report, young people born between 1985 and 2009 spent an average of 4.8 hours a day on mobile internet in 2017 and this figure is expected to increase. Young females in particular are generally passionate about the latest fashion and beauty trends and used to online shopping. According to a survey conducted by iResearch in June 2018, or iResearch Survey, approximately 2,500 young females of ages between 15 and 32 responded that they spent approximately 19.7% of their time on mobile internet for shopping. Additionally, young females in China tend to start shopping by first browsing fashion content online or with their friends before deciding what to buy. Online fashion content and social interaction help them discover what they want and influence their ultimate purchases.
Online Fashion Content: Driven by the growing availability and affordability of 4G networks, online fashion content has become more real-time and multi-dimensional. It has evolved from just articles and photographs to more interactive formats, such as short-form videos and live video broadcasts. Short-form videos present content and products to consumers in greater detail and are increasingly popular in China. Live video broadcasts allow more personal, real-time interactions between hosts and audience. These new formats are effective in helping consumers better understand the products, particularly whether such products are suitable to them, and ultimately driving merchants’ sales.
Online fashion content and information are delivered through a variety of channels. Amongst these, dedicated fashion platforms typically have the most up-to-date information on fashion trends and styles. According to iResearch Survey, Mogujie is well recognized in China as a leading fashion content platform for young people.
Content Monetization: Marketing and e-commerce are among the most common ways for monetizing online fashion content. According to iResearch Survey, a majority of the respondents often made purchases because of the fashion content they viewed. They also prefer content platforms where they can buy directly once they have decided what to buy. The respondents appreciate Mogujie’s one-stop shopping capabilities that help bridge fashion content and purchase.
Marketing: According to iResearch Report, online fashion marketing expenditure in China reached approximately RMB190.6 billion (US$27.8 billion) in 2017 and is expected to grow at a CAGR of 22.5% to RMB525.4 billion (US$76.5 billion) in 2022. New and diverse content formats also provide various opportunities to more naturally and seamlessly embed products. Embedded advertising has a stronger influence on consumers than traditional display- or search-based advertising. As a result, merchants are focusing more on the use of online content to tap into their target markets.
E-commerce: According to iResearch Report, the online penetration rate of fashion retail is expected to increase from 21.2% in 2017 to 32.5% in 2022. The GMV of China’s fashion e-commerce market was RMB2,546.2 billion (US$370.7 billion) in 2017 and is expected to further increase to RMB6,967.6 billion (US$1,014.5 billion) in 2022, representing a CAGR of 22.3% from 2017.
Our Challenges
We face risks and uncertainties in realizing our business objectives and executing our strategies, including those relating to our ability to:
In addition, we face risks and uncertainties related to our corporate structure and doing business in China, including:
In addition, you may also face risks involved in investing in the ADSs, including:
See “Risk Factors” and other information included in this prospectus for a discussion of these and other risks and uncertainties that we and you may face.
Corporate History and Structure
We launched our online fashion platform under the Mogujie brand in February 2011. Our holding company, MOGU Holdings Limited, was incorporated in the Cayman Islands in June 2011. MOGU Holdings Limited was subsequently renamed Meili Inc. in June 2016. In November 2018, we renamed our company as MOGU Inc.
In June 2011, we incorporated MOGU (HK) Limited in Hong Kong. In July 2016, we renamed it Meili Group Limited, or Meili HK. In November 2011, Meili HK established a wholly-owned PRC subsidiary, Hangzhou Shiqu Information and Technology Co., Ltd., or Hangzhou Shiqu. In the same month, we obtained control over Hangzhou Juangua Network Co., Ltd., or Hangzhou Juangua, through Hangzhou Shiqu by entering into a series of contractual arrangements with Hangzhou Juangua and its shareholders.
In February 2016, we acquired Meiliworks Limited and its subsidiaries (including Meilishuo (Beijing) Network Technology Co., Ltd.) and consolidated affiliated entities, or Meilishuo, a leading online fashion platform in China, through a series of transactions. In the same month, we obtained control over Beijing Meilishikong Network and Technology Co., Ltd., or Beijing Meilishikong, which was incorporated in July 2010, through Hangzhou Shiqu by entering into a series of contractual arrangements with Beijing Meilishikong and its shareholders.
The following diagram illustrates our corporate structure, including our significant subsidiaries and consolidated affiliated entities, as of the date of this prospectus:
Notes:Implications of Being an Emerging Growth Company, a Foreign Private Issuer and a Controlled Company
As a company with less than US$1.07 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act.
An emerging growth company may take advantage of specified reduced reporting and other requirements compared to those that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. We will rely on such exemption afforded by the JOBS Act.
We will remain an emerging growth company until the earliest of (a) the last day of the fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the preceding three-year period, issued more than US$1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of the ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
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 of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers. Moreover, 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. In addition, as a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the New York Stock Exchange listing rules. See “Risk Factors—Risks Related to the ADSs and This Offering—As a company incorporated in the Cayman Islands, 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 comply fully with the NYSE corporate governance listing standards.”
Upon the completion of this offering, our outstanding shares will consist of Class A ordinary shares and Class B ordinary shares, and we will be a “controlled company” within the meaning of New York Stock Exchange listing rules because Mr. Qi Chen, our co-founder, the chairman of our board of directors and our chief executive officer, will beneficially own all of our then issued and outstanding Class B ordinary shares and will be able to exercise over 50% of our total voting power. See “Risk Factors—Risks Related to the ADSs and This Offering—We will be a “controlled company” within the meaning of the New York Stock Exchange listing rules and, as a result, can rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.”
Enforceability of Civil Liabilities
We are an exempted company with limited liability incorporated under the laws of the Cayman Islands. Substantially all of our operations are conducted in China, and substantially all of our assets are located in China. In addition, a majority of our directors and executive officers are nationals or residents of jurisdictions other than the United States and most of their assets are located outside the United States. The laws of the Cayman Islands and of the PRC may render you unable to enforce a judgment against our assets or the assets of our directors and executive officers. For more information regarding the relevant laws of the Cayman Islands and the PRC, see “Enforceability of Civil Liabilities.”
Corporate Information
Our principal executive offices are located at Zheshang Wealth Center, 12/F, Building No. 1, No. 99 Gudun Road, Xihu District, Hangzhou, 310012, People’s Republic of China. Our telephone number at this address is +86 571 8605-2790. Our registered office in the Cayman Islands is located at offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.mogu-inc.com. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711.
Conventions that Apply to this Prospectus
Unless otherwise indicated or the context otherwise requires, references in this prospectus to:
GMV. As a prudent matter aimed at eliminating any influence on our GMV of irregular transactions, we exclude from our calculation of GMV transactions over a certain amount (RMB100,000) and transactions by users over a certain amount (RMB1,000,000) per day;
Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.