Form S-1 · UP Fintech Holding Ltd

Tiger Brokers (UP Fintech)

Priced March 20, 2019 · $8.00 a share · Original on SEC EDGAR · PDF

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 our ADSs discussed under "Risk Factors," before deciding whether to buy our ADSs. This prospectus contains information from an industry report commissioned by us and prepared by Shanghai iResearch Co. Ltd, China, or iResearch, an industry research firm, to provide information regarding our industry and our market position among the online brokers focusing on global Chinese investors. We refer to this report as the "iResearch Report."

Our Business

We are a leading online brokerage firm focusing on global Chinese investors. We are the largest online broker focusing on global Chinese investors in terms of U.S. securities trading volume, with a market share of approximately 58.4% in 2017, according to the iResearch Report. Our proprietary trading platform enables investors to trade in equities and other financial instruments on multiple exchanges around the world. Our continuous focus on offering innovative products and services and a superior user experience has enabled us to become one of the most utilized and well-recognized online trading platforms for Chinese investors around the world. We have achieved RMB1.0 trillion cumulative trading volume on our platform within three years since the launch of our Tiger Trade APP, which represents the shortest timeframe among all online brokers focusing on global Chinese investors, according to the iResearch Report.

We have developed an innovative brokerage platform for Chinese investors globally, which can easily be accessed through our APP and website. We offer our customers comprehensive brokerage and value-added services, including trade order placement and execution, margin financing, account management, investor education, community discussion and customer support, all within a few taps or clicks. Our "mobile first" strategy backed by robust infrastructure and advanced technology further enables us to better serve and retain our customers as well as attract new customers.

We take pride in our proprietary and cutting-edge technology. Our proprietary infrastructure and advanced technology are able to support trades across multiple currencies, multiple markets, multiple products, multiple execution venues and multiple clearinghouses. Our proprietary technology is the backbone for our constant innovation and enables us to provide efficient and first-rate services in a cost-effective manner. Over 100 versions of updates have been applied to the Tiger Trade APP since its initial launch to address users' diversified needs and improve user experience. As a third-generation broker (as defined in the section entitled "Industry Overview") that supports highly diverse and frequent trading activities on our online trading platform, we have competitive advantages over traditional brokers given our more advanced technology capabilities, wider range of products and services and better user experience, according to the iResearch Report.

We have achieved substantial growth since the launch of our trading platform in August 2015, as illustrated by the charts below.

Apart from the substantial growth we have experienced, the turnover rate of our platform during the fourth quarter of 2018 was as high as 1,495.7%. Furthermore, the conversion rate and retention rate of customers were as high as 15.2% and 81.8% as of December 31, 2018 and in 2018, respectively.

We generate revenues primarily by charging our customers commission fees for trading of securities as well as earning interest income or financing service fees arising from or related to margin financing provided by ourselves or third parties to our customers for trading activities. Our total revenues were US$5.5 million, US$16.9 million and US$33.6 million in 2016, 2017 and 2018, respectively. We recorded net losses of US$10.8 million, US$7.9 million and US$44.3 million in 2016, 2017 and 2018, respectively.

Our Industry

Online brokers utilize APPs and websites to provide integrated online securities services, including customer acquisition, account opening, securities trading and other value-added services. Online brokers focusing on global Chinese investors refer to the online brokers who are able to provide all the services in the Chinese language and offer an user friendly experience that specifically fits Chinese investors' preferences. For the purpose of this prospectus, "Chinese investors" refer to the Chinese speaking population around the globe. According to the iResearch Report, with the increasing need to trade efficiently, the customer base trading through online brokers will grow at a faster pace than that through traditional brokers.

According to the iResearch Report, the market size of online brokerage in terms of U.S. stock trading volume reached US$5,427.2 billion in 2017, accounting for approximately 14.7% of total trading volume in the U.S. stock market, and is expected to reach approximately US$6,852.4 billion in 2018, accounting for approximately 15.0% of total trading volume in the U.S. stock market. The market size of online brokerage in terms of Hong Kong stock trading volume reached US$93.9 billion in 2017, accounting for approximately 3.4% of total trading volume in the Hong Kong stock market, and is expected to reach approximately US$149.6 billion in 2018, accounting for approximately 4.1% of total trading volume in the Hong Kong stock market.

The online brokerage industry focusing on global Chinese investors is highly concentrated yet competitive. Service providers that have superior user experience, better technology, as well as stronger brand recognition and reputation in the industry are able to acquire customers more effectively. According to the iResearch Report, the market size of the online brokerage industry focusing on global Chinese investors in terms of both the U.S. and Hong Kong stock trading volume experienced rapid growth over the past three years.

According to the iResearch Report, we are the largest online broker focusing on global Chinese investors in terms of U.S. securities trading volume in 2017, with a market share of approximately 58.4%. We believe that our superior user experience, proprietary technology platform and strong brand recognition in the industry enable us to maintain our leadership in terms of U.S. securities trading services and further strengthen our competitiveness in terms of Hong Kong securities trading services for global Chinese investors.

Our Strengths

We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:

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    The platform of choice for trading U.S. securities online among global Chinese investors with the fastest growth;
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    High caliber customer base with great growth potential, engagement and stickiness;
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    Constant expansion and innovation of products and services to serve customers' evolving needs;
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    Unparalleled user experience and interactive investment community;
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    Robust infrastructure and advanced technology supporting all aspects of our business; and
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    Talented team backed by strong shareholder support.

Our Strategies

Our mission is to make investing more efficient through technology for everyone. We intend to achieve our mission by pursuing the following strategies:

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    Expand demographic coverage to serve global investors;
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    Attract more institutional investors;
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    Expand into the asset and wealth management business;
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    Strengthen our technology capabilities through continuous investment;
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    Further strengthen our brand equity; and
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    Attract and retain talent.

Our Challenges

Our ability to execute our strategies is subject to certain risks and uncertainties, including:

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    Limited operating history;
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    Our history of net losses;
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    Regulatory and legal uncertainties relating to our industry and business;
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    Potential failure of obtaining or maintaining necessary licenses, permits or approvals;
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    Reliance on external service providers and business partners;
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    Challenges to retain our management team and key talents;
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    Risks related to our know your client, or KYC, procedures and our customers' potential non-compliance of applicable laws and regulations; and
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    Uncertainties of securities markets and the competitive landscape of the industry in which we operate.

Our History

We are a Cayman Islands exempted company incorporated in January 2018. As of the date of this prospectus, our authorized share capital is US$50,000 divided into 5,000,000,000 shares. For more details of the history of our securities issuances, please see "Description of Share Capital—History of Securities Issuances."

We commenced our technology research and development in June 2014 through Ningxia Xiangshang Rongke Technology Development Co., LTD, or Ningxia Rongke.

Ningxia Rongke acquired a New Zealand registered financial service provider, Tiger Holdings Group Limited, formerly known as Transaction Holdings (N.I.) Limited, in August 2015, which is currently wholly owned by one of Ningxia Rongke's subsidiaries. In August 2016, Ningxia Rongke acquired Top Capital Partners Limited, or Top Capital Partners, also a registered financial service provider in New Zealand. Top Capital Partners is also accredited and approved by the New Zealand Stock Exchange, or the NZX, to provide investment advisory services in respect of transactions in NZX listed products. Substantially all of our revenues were generated from Tiger Holdings Group Limited in 2016 and 2017, and from Top Capital Partners in 2018.

Reorganization

To facilitate foreign investment in our business, starting from early 2018, we began to establish an offshore holding structure for our company. As part of the efforts, we incorporated a Cayman Islands exempted company, UP Fintech Holding Limited, or our company, as our offshore holding company in January 2018. In February 2018, we established Up Fintech International Limited in Hong Kong, or Up Fintech HK, as our intermediate holding company, which in turn established our WFOEs, Ningxia Xiangshang Yixin Technology Co., LTD, or Ningxia Yixin, in May 2018, and Beijing Xiangshang Yixin Technology Co., LTD, or Beijing Yixin, in July 2018.

To enable our effective control over the PRC operating entities and their subsidiaries including Top Capital Partners (at the time), Ningxia Yixin entered into variable interest entity, or VIE, contractual arrangements with Ningxia Rongke, and Beijing Yixin entered into substantially similar VIE arrangements with Beijing Xiangshang Yiyi Technology Co., LTD, or Beijing Yiyi, which we collectively refer to as our VIEs in this prospectus, and their respective shareholders. These contractual arrangements enable us to exercise effective control over our VIEs and their respective subsidiaries, receive substantially all of the economic benefits of such entities, and have an exclusive option to purchase all or part of the equity interests in and assets of them to the extent permitted by the applicable laws and regulations. For more details, please see "History and Corporate Structure—Contractual Arrangements with the VIEs and Their Respective Shareholders."

In June 2018, we formed a wholly-owned subsidiary Up Fintech Global Holdings Limited in British Virgin Islands, or BVI, first as the holding company to hold our wholly-owned U.S. entity, Tiger Fintech Holdings Inc., or Tiger Fintech Holdings and later as the holding company to hold our subsidiaries in other jurisdictions. In August 2018, Tiger Fintech Holdings acquired 100% of the equity interests in Wealthn LLC, a registered investment advisor in the United States. Wealthn LLC provides investment advisory services for high-net-worth individuals, family offices and investment companies registered under the Investment Company Act of 1940 such as TigerShares Trust. In November 2018, Tiger Fintech Holdings completed the acquisition of 100% of the equity interests in US Tiger Securities, Inc. (formerly known as JFD Securities, Inc.), a U.S. registered broker-dealer.

In July 2018, we established another wholly-owned subsidiary Xiangshang Upfintech Holding Limited, a BVI company, to hold other operating companies including its wholly-owned operating entity in Singapore, Tiger Fintech (Singapore) Pte. Ltd., which was established in March 2018. In October 2018, Ningxia Rongke transferred all equity interests in Top Capital Partners to Tiger Fintech (Singapore) Pte. Ltd. As a result, Top Capital Partners is no longer held by our VIEs in China. In November 2018, Top Capital Partners acquired 100% of the equity interests in Fleming Funds Management Pty Ltd, which was established in Australia in January 2006 and has been authorized as a licensed financial services provider in Australia since July 2006.

In September 2018, we established JV Uptech Holding Limited in BVI as a holding company to expand our business in Hong Kong. In October 2018, JV Uptech Holding Limited acquired 100% of the equity interests in Kastle Limited, which, in January 2019, was granted a license to carry on trust and company service business in Hong Kong. In January 2019, we entered into an agreement to purchase 100% equity interest of Tung Chi Consulting Limited, a licensed insurance broker in Hong Kong.

Our Corporate Structure

The following diagram illustrates our corporate structure, including our significant subsidiaries, VIEs and our VIEs' subsidiaries, unless otherwise indicated, as of the date of this prospectus:

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Notes:

(1)
We have ultimate control over the Cayman fund managing entities through Uptech Global Holding Limited's ownership of 100% of the equity interests or at least a majority of the equity interests in the same. The Cayman fund managing entities serve as our vehicles to manage offshore funds.
(2)
Ningxia Rongke was formerly known as Beijing Xiangshang Rongke Technology Development Co., Ltd., through which we commenced our technology research and development in June 2014. Our directors and shareholders control Ningxia Rongke, and Mr. Tianhua Wu, our Chief Executive Officer and director, and Mr. Ming Dong, our employee and shareholder, together own 100% of the equity interests in Beijing Yiyi.
(3)
We carry out activities including technology research and development and Internet services in China through our VIEs, Ningxia Rongke and Beijing Yiyi, and their subsidiaries.
(4)
The contractual arrangements include the Powers of Attorney, the Equity Pledge Contracts, the Exclusive Business Cooperation Agreements, and the Exclusive Option Contracts, the Commitment Letters and the Spouse Consent Letters as described in "History and Corporate Structure—Contractual Arrangements with the VIEs and Their Respective Shareholders".
(5)
The subsidiaries incorporated in Hong Kong of Tiger Technology Corporation Limited are in the process of dissolution, which therefore were omitted here.

Our Corporate Information

The location of our principal executive offices is 18/F, Grandyvic Building, No. 1 Building, No. 16 Taiyanggong Middle Road, Chaoyang District, Beijing, 100020 PRC and our telephone number at this address is +86-10-56216660. Our registered office in the Cayman Islands is P.O. Box 2547, 23 Lime Tree Bay Avenue, Grand Cayman, KY1-1104, Cayman Islands. Our agent for service of process in the United States is Puglisi & Associates.

Investors should contact us for any inquiries through the address and telephone number of our principal executive offices. Our website is www.itiger.com. Information contained in, or accessible through, our website is not a part of, and is not incorporated into, this prospectus.

Implications of Being an "Emerging Growth 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, 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, or the Sarbanes-Oxley Act, 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. However, we have elected to "Opt Out" of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies.

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 our ADSs that are held by non-affiliates exceeded 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.

Conventions which Apply to this Prospectus

Except where the context otherwise requires and for the purposes of this prospectus only, the following is a glossary of certain terms used throughout this prospectus:

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    "China" or the "PRC" means the People's Republic of China, excluding, for the purposes of this prospectus only, Hong Kong, Macau and Taiwan.
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    "Chinese investors" refer to the Chinese speaking population around the globe.
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    "conversion rate" means the ratio of (i) the number of trading customers to (ii) the number of customer accounts.
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    "customer(s)" or "customer account(s)" means the registered users who have passed the KYC procedures and opened a trading account on our platform (including APP and website).
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    "customer(s) with deposits" means the customers who have deposited funds in their accounts on our platform.
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    "HK$" or "Hong Kong dollars" means the legal currency of Hong Kong.
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    "NZ$" or "New Zealand dollars" means the legal currency of New Zealand.
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    "our VIEs" means Ningxia Xiangshang Rongke Technology Development Co., LTD, or Ningxia Rongke, formerly known as Beijing Xiangshang Rongke Technology Development Co., LTD, and Beijing Xiangshang Yiyi Technology Co., LTD, or Beijing Yiyi; "VIE" or "VIEs" means a variable interest entity or variable interest entities.
    •
    "our WFOEs" means Ningxia Xiangshang Yixin Technology and Development Co., Ltd., or Ningxia Yixin, and Beijing Xiangshang Yixin Technology Co., Ltd., or Beijing Yixin,; "WFOE" or "WFOEs" means the wholly-foreign owned entity or wholly-foreign owned entities as provided in the relevant PRC laws and regulations.
    •
    "retention rate" means the ratio of (i) the number of trading customers in one period who continue to trade in the next period to (ii) the number of trading customers in the first period.
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    "RMB" or "Renminbi" means the legal currency of China.
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    "Singapore dollars" means the legal currency of Singapore.
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    "trading customer(s)" means the customers who have conducted at least one trading transaction on our platform.
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    "trading volume" means the total value of securities traded during a specific period of time.
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    "turnover rate" means the ratio of (i) total trading volume in a period to (ii) the average of the beginning and ending account balances of all customers in the same period.
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    "UP Fintech," "we," "us," "our" and "our company" means UP Fintech Holding Limited, our Cayman Islands holding company and its subsidiaries, its consolidated VIEs entity and the subsidiaries of the VIEs.
    •
    "user(s)" or "registered user(s)" means those who have registered on our platform (including APP and website) but not necessarily have opened a trading account.

Unless otherwise noted, the translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this prospectus were made at a rate of RMB6.8755 to US$1.0000, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on December 31, 2018 and the translations from Hong Kong dollars to U.S. dollars and from U.S. dollars to Hong Kong dollars in this prospectus were made at a rate of HK$7.83 to US$1.00, the exchange rate in effect as of December 31, 2018. We make no representation that Renminbi or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all.

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