Form F-1/A AMTD Digital Inc.

June 16, 2021 5:24 PM EDT

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As filed with the Securities and Exchange Commission on June 16, 2021

Registration No. 333-256322

 

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

AMENDMENT NO. 2

TO

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

AMTD Digital Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Not Applicable

(Translation of Registrant’s Name into English)

 

 

 

Cayman Islands   6199   Not Applicable
(State or Other Jurisdiction of
Incorporation or Organization)
 

(Primary Standard Industrial
Classification Code Number)

25/F Nexxus Building

41 Connaught Road Central

Hong Kong

+852 3163 3298

  (IRS Employer
Identification Number)

 

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

 

Puglisi & Associates

850 Library Avenue, Suite 204

Newark, Delaware 19711

+1 (302) 738-6680

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

 

Copies to:

 

Z. Julie Gao, Esq.

Shu Du, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

c/o 42/F, Edinburgh Tower, The Landmark

15 Queen’s Road Central

Hong Kong

+852 3740-4700

 

David Zhang, Esq.

Steve Lin, Esq.

Kirkland & Ellis International LLP

c/o 26/F, Gloucester Tower, The Landmark

15 Queen’s Road Central

Hong Kong

+852 3761-3300

 

 

Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company  ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to Be Registered

 

Amount to Be
Registered(2)(3)

 

Proposed Maximum
Offering Price per
Share(3)

 

Proposed

Maximum
Aggregate

Offering Price(2)(3)

  Amount of
Registration Fee(4)

Class A ordinary shares, par value US$0.0001 per share(1)

  7,360,000   $20.50   US$150,880,000   US$16,461

 

 

 

(1)

American depositary shares issuable upon deposit of Class A ordinary shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No.333-256847). Every five American depositary shares represent two Class A ordinary shares.

(2)

Includes Class A ordinary shares that are issuable upon the exercise of the underwriters’ option to purchase additional ADSs. Also includes Class A ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public. These Class A ordinary shares are not being registered for the purpose of sales outside the United States.

(3)

Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(a) under the Securities Act of 1933.

(4) 

Previously paid.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS (Subject to Completion)

Dated June 16, 2021

16,000,000 American Depositary Shares

 

LOGO

AMTD Digital Inc.

Representing 6,400,000 Class A Ordinary Shares

 

 

This is the initial public offering of 16,000,000 American depositary shares, or ADSs, of AMTD Digital Inc. Every five ADSs represent two of our Class A ordinary shares, par value US$0.0001 per share. We anticipate that the initial public offering price per ADS will be between US$6.80 and US$8.20.

Prior to this offering, there has been no public market for the ADSs or our Class A ordinary shares. We have applied for listing the ADSs on the New York Stock Exchange under the ticker symbol “HKD.”

We are an “emerging growth company” under applicable U.S. federal securities laws and are eligible for reduced public company reporting requirements.

AMTD Digital Inc. was incorporated in September 2019 by our Controlling Shareholder as a holding company of our businesses. Upon the completion of the Offering, we will be a “controlled company” as defined under the NYSE Listed Company Manual because our Controlling Shareholder will hold more than 50% of the voting power for the election of directors.

As of the date of this prospectus, our outstanding share capital consists of Class A ordinary shares and Class B ordinary shares, and our Controlling Shareholder and certain other affiliates beneficially own all of our issued and outstanding Class B ordinary shares. These Class B ordinary shares will constitute approximately 32.7% of our total issued and outstanding ordinary shares and 90.7% of the aggregate voting power of our total issued and outstanding ordinary shares immediately after the completion of this offering, assuming that the underwriters do not exercise their option to purchase additional ADSs. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share is entitled to one vote, and is not convertible into Class B ordinary shares under any circumstances. Each Class B ordinary share is entitled to twenty votes, and is convertible into one Class A ordinary share at any time by the holder thereof.

 

 

Investing in the ADSs involves risks. See “Risk Factors” beginning on page 17.

 

 

PRICE US$         PER ADS

 

 

 

     Per ADS      Total  

Initial public offering price

   US$                  US$              

Underwriting discounts and commissions(1)

   US$                  US$              

Proceeds, before expenses, to us

   US$                  US$              

 

(1)

See “Underwriting” for additional disclosure regarding underwriting compensation payable by us.

We have granted the underwriters an option to purchase up to an additional 2,400,000 ADSs.

Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the ADSs against payment in U.S. dollars to purchasers on or about             , 2021.

 

 

AMTD

 

Loop Capital Markets   Maxim Group LLC   Livermore Holdings Limited

Prospectus dated             , 2021


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LOGO

AMTD Digital is a one-stop digital solutions platform in Asia, and a “fusion reactor” for great minds and ideas. AMTD International AMTD Digital AMTD Education AMTD Assets Through our SpiderNet, we align ourselves with clients, shareholders, business partners, and investee companies to build an ever-extending, interconnected network which creates value for all stakeholders in our ecosystem.


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LOGO

DIGITAL Financial Services A digital platform in Asia and a “fusion reactor” for the best entrepreneurs and ideas DIGITAL Investments DIGITAL Media, Content & Marketing SpiderNet Ecosystem Solutions is a one-stop digital solutions platform in Asia with businesses spanning multiple verticals AMTD Digital To build an un-paralleled, cross-market and intelligent digital financial services platform with the multi-sector scarce digital financial licenses in Asia. To serve as a super connector for Asia-based entrepreneurs and corporates, empowering and providing them with exclusive access to the AMTD SpiderNet. To create a one-stop multimedia platform promoting digital solutions content. Providing users and audiences access to a comprehensive content library. To focus on strategic investments as our core holding, our attractive and diverse investment portfolio showcases promising digital new economy companies in Asia.


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LOGO

AMTD DIGITAL MANAGEMENT Dr. Timothy Tong Chairman of the Board of Directors and Independent Director Neil Parekh Independent Director Dr. Frederic Lau Executive Director and President Mark Lo Executive Director and Chief Executive Officer Xavier Zee Chief Financial Officer


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TABLE OF CONTENTS

 

PROSPECTUS SUMMARY

     1  

THE OFFERING

     12  

SUMMARY CONSOLIDATED FINANCIAL DATA

     14  

RISK FACTORS

     17  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

     53  

USE OF PROCEEDS

     54  

DIVIDEND POLICY

     55  

CAPITALIZATION

     56  

DILUTION

     57  

ENFORCEABILITY OF CIVIL LIABILITIES

     59  

CORPORATE HISTORY AND STRUCTURE

     61  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     73  

INDUSTRY

     99  

BUSINESS

     129  

REGULATION

     156  

MANAGEMENT

     179  

PRINCIPAL SHAREHOLDERS

     185  

RELATED PARTY TRANSACTIONS

     188  

DESCRIPTION OF SHARE CAPITAL

     190  

DESCRIPTION OF AMERICAN DEPOSITARY SHARES

     200  

SHARES ELIGIBLE FOR FUTURE SALE

     209  

TAXATION

     211  

UNDERWRITING

     219  

EXPENSES RELATED TO THE OFFERING

     232  

LEGAL MATTERS

     233  

EXPERTS

     234  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     235  

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

     F-1  

No dealer, salesperson, or other person is authorized to give any information or to represent anything not contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the ADSs offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

Neither we nor any of the underwriters has done anything that would permit this offering or possession or distribution of this prospectus or any filed free writing prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus or any free writing prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ADSs and the distribution of this prospectus or any free writing prospectus outside of the United States.

Until             , 2021 (the 25th day after the date of this prospectus), all dealers that buy, sell, or trade ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

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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 invest in the ADSs. This prospectus contains information from an industry report that was commissioned by us and prepared by China Insights Consultancy Limited. We refer to this report as the CIC Report.

Our Mission

Our mission is to act as a fusion reactor for the best entrepreneurs and innovative ideas, fusing synergistically all elements within the AMTD SpiderNet ecosystem using digital means, harnessing and magnifying the power from each partner to create a force with meaningful and influential social, technological, and economic impact.

Overview

As the fusion reactor at the core of the AMTD SpiderNet ecosystem, we are one of the most comprehensive digital solutions platforms in Asia with businesses spanning multiple verticals, including digital financial services, SpiderNet ecosystem solutions, digital media, content, and marketing, and digital investments.

Digital transformation is the new normal to real economies and people’s daily life, and we believe that a multi-dimensional and integrated digital solutions platform is fundamental to our ability to empower and integrate the various digital businesses within our ecosystem. We aspire to understand and anticipate the needs of our clients, and provide them tailored digital solutions with a collaborative overlay. We acquire innovative technological capabilities by selectively cooperating with and investing in technology partners across Asia. The purpose is to build a solid foundation for our various business endeavors.

Our one-stop digital solutions platform operates four main business lines:

 

   

Digital Financial Services. Primarily through our controlled entities, investees, and business partners, we provide one-stop, cross-market and intelligent digital financial services for retail and corporate clients in Asia. We possess some of the most scarce digital financial licenses in Asia and provide a variety of digital financial services through the following:

 

   

AMTD Risk Solutions—the largest Hong Kong-based corporate insurance solution provider in terms of revenue of corporate insurance business in Hong Kong, according to the CIC Report. AMTD Risk Solutions Group, or AMTD RSG, our wholly-owned subsidiary, was a member of the Hong Kong Confederation of Insurance Brokers since October 2004 and was granted an insurance brokerage license issued by the Hong Kong Insurance Authority in September 2019, pursuant to the newly established statutory regime for regulation of insurance intermediaries which took over regulation of insurance agents and brokers from the self-regulatory bodies including Hong Kong Confederation of Insurance Brokers. See “Regulation—Hong Kong—Insurance Brokerage Regulatory Regime” for details on the new regulatory regime.

 

   

PolicyPal—a one-stop digital insurance technology platform for consumers and small- to mid-sized enterprise clients, or SME clients, in Singapore. We have acquired a controlling interest in PolicyPal Pte. Ltd. via our fusion-in program in August 2020. BaoXianBaoBao Pte. Ltd., the wholly-owned subsidiary of PolicyPal Pte. Ltd., is a registered insurance broker with respect to direct insurance and an exempt financial advisor in relation to advising on and arranging of



 

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investment products that are life policies in Singapore, other than for reinsurance. BaoXianBaoBao Pte. Ltd. is the first company to graduate from the MAS’s FinTech regulatory sandbox.

In addition, we have entered into agreements to acquire or apply for some of the most scarce digital financial licenses in Asia and provide a variety of digital financial services through the following:

 

   

Singa Bank (in application)—a digital wholesale banking platform to be established to provide comprehensive services to SME and corporate clients in Singapore. Our subsidiary, AMTD Digital Holdings Pte. Ltd., entered into a binding term sheet in December 2019 with Xiaomi, SP Group, and Funding Societies to establish a consortium in which we expect AMTD Digital Holdings Pte. Ltd. to be the largest shareholder. The consortium intends to pursue digital banking opportunities in Singapore through Singa Bank, the launch of which is subject to obtaining a digital wholesale banking license from the Monetary Authority of Singapore, or the MAS, and other regulatory requirements.

 

   

Applaud (in application)—in July 2020, one of our subsidiaries, AMTD Digital Solutions Pte. Ltd., together with PolicyPal Pte. Ltd., incorporated Applaud Digital Solutions Pte. Ltd., or Applaud, which is applying for a direct insurer (composite) license from the MAS.

 

   

CapBridge—a leading online private markets integrated capital raising and secondary liquidity platform for global growth companies and funds based in Singapore. We entered into a binding term sheet in June 2020 to acquire a controlling interest in CapBridge Financial Pte. Ltd. The transaction is subject to final negotiation of terms of the transaction, as well as MAS approval. Through CapBridge Financial Pte. Ltd.’s subsidiary, 1x Exchange Pte. Ltd., or 1exchange, Singapore’s first MAS-regulated private markets securities exchange, CapBridge Financial Pte. Ltd. and its subsidiaries, or CapBridge, provides a holistic approach that enhances capital flow for growth companies and improve liquidity options for private investors. 1exchange is a recognized market operator in Singapore. CapBridge Pte. Ltd., another subsidiary of CapBridge Financial Pte. Ltd., holds a capital markets services license in respect of dealing in capital markets products that are securities and collective investment schemes, and is an exempt financial advisor in respect of advising on investment products and issuing or promulgating analyses/reports on investment products that are securities and collective investment schemes.

To further enrich our comprehensive suite of financial services, we intend to continue acquiring complementary capabilities and/or licenses through acquiring and/or incubating FinTech companies.

 

   

SpiderNet Ecosystem Solutions. We serve as a super connector and digital accelerator for Asia-based entrepreneurs and corporates by connecting them to resources and technologies, and providing them with access to our unique AMTD SpiderNet ecosystem. Centered on our ecosystem-powered strategy, we empower entrepreneurs and corporates with capital, technologies, mentorship, connectivity, and other resources essential to accelerating and enhancing their business digital transformation and corporate development journeys.

Through a membership fee scheme, we provide our corporate clients with exclusive access to the AMTD SpiderNet ecosystem and its prestigious corporate members, prominent business executives and partners, creating strategic and synergistic opportunities. In addition, our digital solutions initiatives and programs in partnership with industry leaders and academic institutions serve to support industry professionals and foster next generation entrepreneurs in the region by equipping them with the latest trends and knowledge in the digital space. Our services help our ecosystem members to enhance connectivity, identify business synergies, and create valuable business propositions. We further deepen our relationship with corporate clients by facilitating synergies between their portfolio companies and other partners in the AMTD SpiderNet ecosystem.



 

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We have entered into an agreement with our Controlling Shareholder to provide Airstar Bank with the support from our SpiderNet ecosystem solutions services, including resources, capital support, and expertise in the financial services industry to support its business development and support them to gradually build up their own ecosystem for an annual service fee. Airstar Bank, a virtual bank jointly-established by our Controlling Shareholder and Xiaomi Corporation, or Xiaomi, is a comprehensive digital banking platform providing services to retail and corporate clients in Hong Kong. Airstar Bank holds one of the only eight virtual banking licenses issued by the Hong Kong Monetary Authority and commenced operations in June 2020. Our Controlling Shareholder holds 10% of equity interest in Airstar Bank as a controller under the Banking Ordinance of Hong Kong and we do not have any equity interest in Airstar Bank.

 

   

Digital Media, Content, and Marketing. We commenced our digital media, content, and marketing business in May 2020. We create and promote digital solutions content by investing and developing multimedia channels to provide users and audiences access to content medium through a comprehensive library of traditional and digital movies, podcasts, webinars and live videos offered by content providers and online media platforms since May 2020. Through our offering of digital media and content, we are able to spearhead industry trends and create effective marketing for our clients and ecosystem partners through innovative content creation, digital marketing platforms and cutting-edge technology. For example, we are a seed round investor of Forkast.News, a digital media platform founded by former Bloomberg News anchor Angie Lau in April 2021. The platform provides readers stories and analysis on blockchain, cryptocurrency, and emerging technology in the Asia-Pacific region. We will also strategically acquire DigFin, a journalism brand and a content agency established by Jamie DiBiasio, an award-winning financial journalist and author, whose stories analyze business models in digital finance, FinTech, and digital assets. Together with our Controlling Shareholder, we have been the founding grand sponsor of Singapore FinTech Festival, the largest FinTech event in the world with over 60,000 attendees each year for four consecutive years since 2017, and the sole strategic partner of Hong Kong FinTech Week, Hong Kong’s annual FinTech event, for three years in a row since 2018. We have organized, hosted and participated in hundreds of sessions, including keynote speeches, panels, and fireside chats, to share our insights and exchange knowledge. Many of our clients, and ecosystem members and partners were able to access these global events through collaboration with us and thus presented valuable marketing opportunities for them. Recently, we have invested in movie productions via digital formats. “Shock Wave 2” (拆弹专家2), a movie invested by us and co-produced by Universe Entertainment and Alibaba Picture in 2020, has grossed over RMB1.3 billion of box office as of February 10, 2021. We also invested in “The White Storm 3” (扫毒3) and “Redemption” (咎赎). We intend to continue to invest in more popular movie productions in order to maximize our reach to broader audiences for content sharing and marketing.

 

   

Digital Investments. We invest directly in various innovative technology companies to leverage, enhance and enrich the AMTD SpiderNet ecosystem by including them into our ecosystem. Currently, our investment portfolio includes minority interest holdings in the following:

 

   

Appier—a leading artificial intelligence technology company, which provides AI-based solutions for precision marketing.

 

   

DayDayCook—a leading content-driven lifestyle brand for young food lovers in Asia with over 60 million cumulative users across its online platforms.

 

   

WeDoctor—one of China’s largest technology-enabled healthcare solutions platforms providing seamless online and offline healthcare services with a mix of general practitioners and specialists.

 

   

AMTD ASEAN Solidarity Fund—We also established the AMTD ASEAN Solidarity Fund in partnership with ASEAN Financial Innovation Network, or the AFIN, in April 2020 with an initial capital of S$50 million to invest in innovative companies spanning across AI (Active.ai), card payment solutions (CardUp), cross-border payment platform (TranSwap), and SME financing



 

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solutions (Funding Societies). AFIN is a non-profit entity formed by the MAS, International Finance Corporation, a member of the World Bank Group, and the ASEAN Bankers Association, with the objectives of supporting financial innovation and inclusion around the world. In addition to providing funding, the solidarity fund will offer the FinTech companies full access to the AMTD SpiderNet ecosystem, which opens opportunities for them to collaborate with each other across ASEAN countries, Hong Kong, and China. Through the solidarity fund, we hold equity or debt interests in five FinTech companies, representatives of which include Active.ai, a cloud-based conversational AI platform; CardUp, a credit card enablement platform; Funding Societies, a SME digital financing platform, and TranSwap, a cross-border payment platform. We expect to make further investments through the solidarity fund.

 

   

MAS-SFA-AMTD FinTech Solidarity Grant—MAS-SFA-AMTD FinTech Solidarity Grant was jointly established in May 2020 by the MAS, SFA, and AMTD Charity Foundation with an amount of S$6 million to support FinTech companies in generating new businesses and pursuing growth strategies. As of the date of this prospectus, approximately 190 FinTech companies have benefited from our MAS-SFA-AMTD FinTech Solidarity Grant, which have formed a solid enhancement to our AMTD SpiderNet ecosystem.

We generate revenue primarily from fees and commissions from our digital financial services business and SpiderNet ecosystem solutions business during the fiscal years ended April 30, 2019 and 2020, and the nine months ended January 31, 2021. We have achieved tremendous growth since the launch of our SpiderNet ecosystem solutions business in December 2017 as a result of the continued expansion and monetization of AMTD SpiderNet ecosystem. Our revenue increased significantly from HK$14.6 million for the fiscal year ended April 30, 2019 to HK$167.5 million (US$21.6 million) for the fiscal year ended April 30, 2020, and from HK$133.3 million for the nine months ended January 31, 2020 to HK$145.5 million (US$18.8 million) for the nine months ended January 31, 2021. Our net profit increased significantly from HK$21.5 million for the fiscal year ended April 30, 2019 to HK$158.3 million (US$20.4 million) for the fiscal year ended April 30, 2020, and from HK$91.7 million for the nine months ended January 31, 2020 to HK$109.9 million (US$14.2 million) for the nine months ended January 31, 2021. We continue to deepen and monetize our relationship with clients by cross-selling solutions that fill their unique needs.

Our Strengths

We believe that the following strengths have contributed to our success:

 

   

entrepreneurial and ecosystem centric spirit entrenched in our DNA;

 

   

significant growth potential supported by new policies and regulations in digital finance in Singapore, Hong Kong, and elsewhere in Asia;

 

   

one of the most comprehensive digital financial services platforms equipped with scarce digital financial licenses in Asia, and is widely recognized as a leader and pioneer globally in digital financial services;

 

   

leading position and close collaboration with top partners in digital financial services;

 

   

unique SpiderNet ecosystem solutions business offering valuable propositions to entrepreneurs and corporates; and

 

   

attractive investment portfolio of promising digital companies in Asia.



 

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Our Strategies

We intend to achieve our mission and further grow our business by pursuing the following strategies:

 

   

continue to expand into new Asian markets and new digital financial sectors through obtaining new licenses and capabilities;

 

   

continue to identify and fusion-in promising digital financial players in Asia and beyond that complements our current services and capabilities;

 

   

further improve inter-connectivity between various digital financial businesses to maximize operational and economic values;

 

   

continue to deepen cooperation and monetization with other members of the AMTD SpiderNet ecosystem;

 

   

continually enhance our data analytics capabilities;

 

   

expand our media content and distribution channels for content promotion and marketing; and

 

   

continue to attract and retain top talents.

Corporate History and Structure

In January 2003, AMTD Group Company Limited (formerly known as Allday Enterprises Limited), our Controlling Shareholder, was founded by CK Hutchison Holdings Limited (SEHK: 0001) and Commonwealth Bank of Australia under the laws of the British Virgin Islands to provide financial services. Our Controlling Shareholder commenced our current insurance solutions business in October 2004. In 2015, our Controlling Shareholder commenced our current digital investments business in July 2016 and SpiderNet ecosystem solutions business in December 2017.

On September 12, 2019, AMTD Digital Inc. was incorporated under the laws of the Cayman Islands initially as a wholly-owned subsidiary of our Controlling Shareholder and, following the completion of a restructuring in December 2019, became a holding company of our digital financial services, SpiderNet ecosystem solutions, digital media, content, and marketing, and digital investments businesses. For further details, see “Corporate History and Structure—Restructuring.” We commenced our current digital media, content, and marketing business in May 2020.

After this offering, we will become a public company while we will continue to receive support from our Controlling Shareholder for a specified period of time. We will enter into a series of agreements with our Controlling Shareholder, including a master transaction agreement, a transitional services agreement, and a non-competition agreement, to govern the arrangements between us with clearly defined terms and conditions. We do not foresee any direct conflicts of interest with our Controlling Shareholder given our unique nature of business which is not similar to and does not compete with other businesses conducted by our Controlling Shareholder. For other potential conflicts of interest, see “Risk Factors—Risks Relating to Our Business and Industry—We may have conflicts of interest with our Controlling Shareholder or any of its controlling shareholders and, because of our Controlling Shareholder’s controlling ownership interest in our company, we may not be able to resolve such conflicts on terms favorable to us.”

Under our dual-class stock structure, our shares are divided into Class A and Class B ordinary shares. Except for voting rights (each Class A ordinary share shall entitle the holder thereof to one vote on all matters subject to vote at general meetings while each Class B ordinary share shall entitle the holder thereof to twenty votes on all matters subject to vote at general meetings) and conversion rights (each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof but Class A ordinary shares are not



 

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convertible into Class B ordinary shares under any circumstances), Class A and Class B ordinary shares rank pari passu with one another and have the same rights, preferences, privileges, and restrictions. Although Class B ordinary shares have super voting power, any rights attached to Class A ordinary shares can only be materially and adversely varied with the consent in writing of the holders of all Class A ordinary shares. Therefore, notwithstanding the fact that our Controlling Shareholder and certain other affiliates beneficially own all of our Class B ordinary shares and have the ability to control the outcome of matters put to a shareholder vote on general meetings, they do not have the right to conclude on proposals that will materially and adversely affect the rights of Class A ordinary shares in any way without affecting the rights of Class B ordinary shares in the same way unless with the approval of the holders of all Class A ordinary shares.



 

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The following diagram illustrates AMTD Digital Inc. and its subsidiaries in our corporate structure as of the date of this prospectus.

 

LOGO

 

Note:

(1) 

Subject to certain regulatory approval, capital injection will be made by all consortium partners according to the execution of shareholder’s agreement, AMTD Digital Holdings Pte. Ltd.’s shareholding will become 35.2%.



 

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Summary of Risk Factors

Investing in our ADSs involves significant risks. You should carefully consider all of the information in this prospectus before making an investment in our ADSs. These risks are discussed more fully in “Risk Factors.”

Risks Relating to Our Business and Industry

We are subject to risks and uncertainties relating to our business and industry, which include without limitation the following:

 

   

We operate in the emerging, dynamic, and competitive digital financial services industry, which makes it difficult for investors to evaluate our future prospects, and we cannot assure you that our current or future strategies will be successfully implemented or will generate sustainable profit.

 

   

We have a limited operating history and experience in our SpiderNet ecosystem solutions business, which makes it difficult to evaluate our business. We cannot assure you that the market for our services will develop as we expect or that we will be able to maintain the growth rate that we have experienced to date.

 

   

We and our Controlling Shareholder have a limited operating history and experience in the newly developed digital banking business in Asia, which makes it difficult to evaluate our business. We cannot assure you that the digital banking initiatives of our Controlling Shareholder and our company will develop or succeed as we expect.

 

   

We face additional risks as we offer new products and services, transact with a broader array of clients and counterparties, and expose ourselves to new geographical markets.

 

   

If we fail to develop market leading products or provide satisfactory services to address the rapidly evolving market in a timely manner, and if we are not able to implement successful enhancements and new features for our products and services, we may not be able to attract or retain clients.

 

   

Failure to maintain and enlarge our AMTD SpiderNet ecosystem including our client base or strengthen client engagement may adversely affect our business and results of operations.

 

   

Failure to obtain, renew, or retain licenses, permits, or approvals may affect our ability to conduct or expand our business.

 

   

We are subject to extensive and developing regulatory requirements, and noncompliance with or changes to these regulatory requirements may affect our business operations and financial results.

 

   

Our ADSs may be delisted under the Holding Foreign Companies Accountable Act if the Public Company Accounting Oversight Board, or the PCAOB, is unable to inspect auditors who are located in China. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections.

Risks Relating to Our Relationship with the Controlling Shareholder

We are subject to risks and uncertainties relating to our relationship with the Controlling Shareholder, which include without limitation the following:

 

   

We have limited experience operating as a stand-alone public company.

 

   

Our financial information included in this prospectus may not be representative of our financial condition and results of operations if we had been operating as a stand-alone company.

 

   

We may not continue to receive the same level of support from our Controlling Shareholder.



 

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Risks Relating to Our ADSs and This Offering

We are subject to risks and uncertainties relating to our ADSs and this offering, which include without limitation the following:

 

   

There has been no public market for the ADSs or our ordinary shares prior to this offering, and you may not be able to resell the ADSs at or above the price you paid, or at all.

 

   

The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors.

Implication 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, 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, where applicable, 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 remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenue of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the preceding three-year period, issued more than US$1.0 billion in non-convertible debt; or (iv) 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.

Implications of Being a Controlled Company

Upon the completion of this offering, our Controlling Shareholder and certain other affiliates will beneficially own 75.4% of our total issued and outstanding ordinary shares, representing 96.6% of the total voting power, assuming that the underwriters of this offering do not exercise their option to purchase additional ADSs, or 74.4% of our total issued and outstanding ordinary shares, representing 96.4% of the total voting power, assuming that the option is exercised in full. As a result, we will be a “controlled company” as defined under the NYSE Listed Company Manual because our Controlling Shareholder will hold more than 50% of the voting power for the election of directors. As a “controlled company,” we are permitted to elect not to comply with certain corporate governance requirements. Currently, all of the committees of the board of directors of the Company, including the audit committee, the nominating and corporate governance committee, and the compensation committee, consist of only independent directors, which is in compliance with applicable corporate governance requirements. With regard to our board structure, our board is currently comprised of two independent directors and two executive directors. We may seek to rely on the exemption from the requirement that the board of a listed company consists of a majority of independent directors after one year of the listing date that is available to a “controlled company.”

For any matter required to be passed by a ordinary resolution, it has to be passed by a simple majority of votes casted by the shareholders of the Company. As long as the total Class B ordinary shares account for at least 4.77% of our total issued and outstanding shares, which equals to approximately 3,225,385 shares as of the date of this prospectus and 3,530,665 immediately after the completion of this offering, assuming the underwriters do not exercise their option to purchase additional ADSs, these Class B ordinary shares will give the holders voting rights of at least 50.04%.



 

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For any matter required to be passed by a special resolution, it has to be passed by two-thirds or of the votes casted by the shareholders of the Company. As long as the total Class B ordinary shares account for at least 9.10% of our total issued and outstanding shares, which equals to approximately 6,153,251 shares as of the date of this prospectus and 6,735,651 immediately after the completion of this offering, assuming the underwriters do not exercise their option to purchase additional ADSs, these Class B ordinary shares will give the holders voting rights of at least 66.69%.

Implication of Being a Foreign Private Issuer

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 Securities and Exchange Commission, or 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 corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the New York Stock Exchange corporate governance listing standards.

Corporate Information

Our principal executive offices are located at 25/F Nexxus Building, 41 Connaught Road Central, Hong Kong. Our telephone number at this address is +852 3163 3298. Our registered office in the Cayman Islands is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, DE 19711.

Investors should contact us for any inquiries through the address and telephone number of our principal executive offices. Our website is www.amtdigital.net and our email address is ir@amtdigital.net. The information contained on our website is not a part of this prospectus.

Conventions That Apply to This Prospectus

Unless we indicate otherwise, all information in this prospectus assumes no exercise by the underwriters of their option to purchase up to 2,400,000 additional ADSs representing 960,000 Class A ordinary shares from us.

Except where the context otherwise requires and for purposes of this prospectus only:

 

   

“ADRs” refers to the American depositary receipts that evidence the ADSs;

 

   

“ADSs” refers to the American depositary shares, every five of which represent two Class A ordinary shares;

 

   

“AMTD Digital,” “we,” “us,” “our company,” or “our” refers to AMTD Digital Inc., a Cayman Islands exempted company with limited liability, and its subsidiaries;

 

   

“AMTD Group” refers to AMTD Group Company Limited and its subsidiaries;

 

   

“China” or “PRC” refers to the People’s Republic of China, excluding, for the purpose of this prospectus only, Taiwan region, Hong Kong, and Macau Special Administrative Region;

 

   

“Class A ordinary shares” refers to our class A ordinary shares with a par value of US$0.0001 per share;



 

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“Class B ordinary shares” refers to our class B ordinary shares with a par value of US$0.0001 per share;

 

   

“Controlling Shareholder” refers to AMTD Group Company Limited, a British Virgin Islands company;

 

   

“Greater Bay Area” refers to the Guangdong-Hong Kong-Macao Greater Bay Area in China comprising the two Special Administrative Regions of Hong Kong and Macao, and the nine municipalities of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, and Zhaoqing in Guangdong Province of China;

 

   

“HK$” or “Hong Kong dollars” refers to the legal currency of Hong Kong;

 

   

“Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;

 

   

“SEC” refers to the Securities and Exchange Commission;

 

   

“S$” or “Singapore dollars” refers to the legal currency of Singapore;

 

   

“shares” or “ordinary shares” refers to our Class A and Class B ordinary shares, par value US$0.0001 per share; and

 

   

“US$” or “U.S. dollars” refers to the legal currency of the United States.

Our reporting currency is Hong Kong dollars as most of our revenue is denominated in Hong Kong dollars. This prospectus contains translations of Hong Kong dollars into U.S. dollars solely for the convenience of the reader. The conversion of Hong Kong dollars into U.S. dollars are based on the exchange rates set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. Unless otherwise noted, all 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$7.7531 to US$1.00, the noon buying rate in effect as of January 29, 2021. On May 28, 2021, the noon buying rate for Hong Kong dollars was HK$7.7610 to US$1.00.



 

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THE OFFERING

 

Offering price

We currently estimate that the initial public offering price will be between US$6.80 and US$8.20 per ADS.

 

ADSs offered by us

16,000,000 ADSs (or 18,400,000 ADSs if the underwriters exercise their option to purchase additional ADSs in full).

 

ADSs outstanding immediately after this offering

16,000,000 ADSs (or 18,400,000 ADSs if the underwriters exercise their option to purchase additional ADSs in full).

 

Ordinary shares issued and outstanding immediately after this offering

74,018,142 ordinary shares, comprised of 49,816,142 Class A ordinary shares and 24,202,000 Class B ordinary shares (or 74,978,142 ordinary shares if the underwriters exercise their options to purchase additional ADSs in full, comprised of 50,776,142 Class A ordinary shares and 24,202,000 Class B ordinary shares).

 

The ADSs

Every five ADSs represent two Class A ordinary shares, par value US$0.0001 per share.

 

  The depositary will hold the shares underlying your ADSs through its custodian and you will have rights as provided in the deposit agreement.

 

  If we declare dividends on Class A ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our Class A ordinary shares, after deducting its fees and expenses in accordance with the terms set forth in the deposit agreement.

 

  You may surrender for cancellation your ADSs to the depositary to receive our Class A ordinary shares. The depositary will charge you fees for any cancellation. We may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs, you agree to be bound by the deposit agreement as amended.

 

  To better understand the terms of the ADSs, you should carefully read the “Description of American Depositary Shares” section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.

 

Option to purchase additional ADSs

We have granted to the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to an aggregate of 2,400,000 additional ADSs.

 

Listing

We have applied to have the ADSs listed on the New York Stock Exchange under the symbol “HKD.” The ADSs will not be listed on any other stock exchanges or traded on any automated quotation system.


 

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Payment and settlement

The ADSs are expected to be delivered against payment on             , 2021. They will be registered in the name of a nominee of The Depositary Trust Company, or DTC.

 

Depositary

The Bank of New York Mellon.

 

Use of Proceeds

We estimate that we will receive net proceeds of approximately US$107.9 million from this offering (or US$124.7 million if the underwriters exercise their option to purchase additional ADSs in full), after deducting the underwriting discounts, commissions, and estimated offering expenses payable by us and assuming an initial public offering price of US$7.50 per ADS, being the mid-point of the estimated range of the initial public offering price shown on the front cover of this prospectus.

 

  We plan to use the net proceeds that we receive from this offering to fulfill the capital requirements for future license applications and acquisitions, IT infrastructure and human resources, to support our business expansion and growth, and for general corporate purposes.

 

  See “Use of Proceeds” for additional information.

 

Lock-up

We, our directors, executive officers, and existing shareholders have agreed with the underwriters or our company, subject to certain exceptions, not to sell, transfer, or otherwise dispose of any ADSs, ordinary shares, or similar securities for a period of no less than 180 days after the date of this prospectus. See “Underwriting” for more information.

 

Dividends

See “Dividends” for a description of our dividend policy.

 

Risk Factors

See “Risk Factors” and other information included in this prospectus for a discussion of the risks you should carefully consider before investing in the ADSs.


 

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following summary consolidated statements of profit or loss and other comprehensive income data and summary consolidated cash flows data for the fiscal years ended April 30, 2019 and 2020 and summary consolidated statements of financial position data as of April 30, 2019 and 2020 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated statements of profit or loss and other comprehensive income data and summary consolidated cash flows data for the nine months ended January 31, 2020 and 2021 and summary consolidated statements of financial position data as of January 31, 2021 have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair presentation of our financial position and results of operations for the periods presented. You should read this “Summary Consolidated Financial Data” section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with International Financial Reporting Standards, or IFRS, issued by the International Accounting Standard Board, or IASB. Our historical results of operations are not necessarily indicative of results of operations expected for future periods.

The following table presents our summary consolidated statement of profit or loss and other comprehensive income data for the periods indicated.

 

    For the Fiscal Year Ended April 30,     For the Nine Months Ended January 31,  
    2019     2020     2020     2021  
    HK$     %     HK$     US$     %     HK$     %     HK$     US$     %  
    (in thousands, except for percentages and per share data)  

Summary Consolidated Statements of Profit or Loss and Other Comprehensive Income Data

                   

Revenue from contracts with customers

    14,554       100.0       167,547       21,610       100.0       133,307       100.0       145,530       18,771       100.0  

Employee benefits expense

    (9,169     (63.0     (15,168     (1,956     (9.1     (10,242     (7.7     (32,543     (4,197     (22.4

Advertising and promotion expense

    —       —       —       —       —       (22     (0.1     (2,422     (312     (1.6

Premises and office expenses

    (1,541     (10.6     (4,737     (611     (2.8     (3,567     (2.7     (4,308     (556     (3.0

Legal and professional expenses

    (2,650     (18.2     (1,952     (252     (1.2     (843     (0.6     (1,384     (179     (1.0

Depreciation and amortization

    —         —         —         —         —         —         —         (3,259     (420     (2.2

Other expenses

    (672     (4.6     (1,649     (213     (1.0     (1,354     (1.0     (3,179     (410     (2.1

Changes in fair value on financial assets measured at fair value through profit or loss (“FVTPL”)

    19,319       132.7       43,592       5,623       26.0       (1,933     (1.5     28,870       3,724       19.8  

Other income

    252       1.7       —         —         —         —         —         1,171       151       0.8  

Other gains and losses, net

    2,058       14.1       (5,586     (720     (3.3     (5,450     (4.1     (690     (89     (0.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit before tax

    22,151       152.1       182,047       23,481       108.6       109,896       82.3       127,786       16,483       87.8  

Income tax expense

    (607     (4.1     (23,715     (3,059     (14.1     (18,170     (13.6     (17,921     (2,311     (12.3
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the year/period

    21,544       148.0       158,332       20,422       94.5       91,726       68.7       109,865       14,172       75.5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Note:

*

The advertising and promotion expenses for the fiscal years ended April 30, 2019 and 2020 are insignificant and included in other expenses.



 

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    For the Fiscal Year Ended April 30,     For the Nine Months Ended January 31,  
    2019     2020     2020     2021  
    HK$     %     HK$     US$     %     HK$     %     HK$     US$     %  
    (in thousands, except for percentages and per share data)  

Item that may be reclassified subsequently to profit or loss:

                   

Exchange differences arising on translation of foreign operations

    —         —         —         —         —         —         —         819       106       0.6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income for the year/period

    —         —         —         —         —         —         —         819       106       0.6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year/period

    21,544       148.0       158,332       20,422       94.5       91,726       68.7       110,684       14,278       76.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the year/period attributable to:

                   

- Owners of the Company

    17,601       120.9       151,362       19,523       90.3       84,756       63.5       111,550       14,388       76.7  

- Non-controlling interests

    3,943       27.1       6,970       899       4.2       6,970       5.2       (1,685     (216     (1.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    21,544       148.0       158,332       20,422       94.5       91,726       68.7       109,865       14,172       75.5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (expense) for the year/period attributable to:

                   

- Owners of the Company

    17,601       120.9       151,362       19,523       90.3       84,756       63.5       111,968       14,443       77.0  

- Non-controlling interests

    3,943       27.1       6,970       899       4.2       6,970       5.2       (1,284     (165     (0.9
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    21,544       148.0       158,332       20,422       94.5       91,726       68.7       110,684       14,278       76.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share

                   

Basic

    0.48         3.77       0.49         2.26         2.22       0.29    

Diluted

    N/A         3.77       0.49         2.26         2.22       0.29    

After the completion of the restructuring in December 2019, AMTD Digital Inc. became the holding company of our digital financial services, SpiderNet ecosystem solutions, and digital investments businesses, which have been operated under the common control of our Controlling Shareholder.



 

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The following table presents our summary consolidated statements of financial position data as of the dates indicated.

 

     As of April 30,      As of January 31,  
     2019      2020      2021  
     HK$      HK$      US$      HK$      US$  
     (in thousands)  

Summary Consolidated Statements of Financial Position Data

              

Total non-current assets

     183,538        208,696        26,918        445,312        57,437  

Total current assets

     5,709,271        3,386,366        436,775        3,525,869        454,769  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     5,892,809        3,595,062        463,693        3,971,181        512,206  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total non-current liabilities

     —          25,276        3,260        40,036        5,164  

Total current liabilities

     5,770,695        2,295,632        296,092        2,419,864        312,116  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     5,770,695        2,320,908        299,352        2,459,900        317,280  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Equity attributable to owners of the Company

     95,004        1,274,154        164,341        1,481,533        191,089  

Non-controlling interests

     27,110        —          —          29,748        3,837  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total equity

     122,114        1,274,154        164,341        1,511,281        194,926  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total equity and liabilities

     5,892,809        3,595,062       
463,693
 
     3,971,181        512,206  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents our summary consolidated cash flows data for the periods indicated.

 

     For the Fiscal Year Ended April 30,     For the Nine Months Ended January 31,  
     2019     2020     2020     2021  
     HK$     HK$     US$     HK$     HK$      US$  
     (in thousands)  

Summary Consolidated Cash Flows Data

         

Net cash generated from operating activities

     24,556       213,755       27,570       178,032       60,740        7,834  

Net cash (used in)/from investing activities

     (3,071,469     (674,500     (86,997     (62,399     110,190        14,212  

Net cash from financing activities

     2,682,623       651,191       83,991       560,952       82,497        10,641  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net (decrease)/increase in cash and cash equivalents

     (364,290     190,446       24,564       676,585       253,427        32,687  

Cash and cash equivalents at the beginning of the year/period

     370,054       5,764       743       5,764       196,210        25,307  

Effect of foreign exchange rate changes

     —         —         —         —         1,280        165  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash and cash equivalents at the end of the year/period

     5,764       196,210       25,307       682,349       450,917        58,159  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 


 

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RISK FACTORS

An investment in our ADSs involves significant risks. You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our ADSs. Any of the following risks could have a material adverse effect on our business, financial condition, and results of operations. In any such case, the market price of our ADSs could decline, and you may lose all or part of your investment.

Risks Relating to Our Business and Industry

We operate in the emerging, dynamic, and competitive digital financial services industry, which makes it difficult for investors to evaluate our future prospects, and we cannot assure you that our current or future strategies will be successfully implemented or will generate sustainable profit.

We primarily operate in Asia’s digital financial services industry. The digital financial services industry is relatively new and rapidly evolving, business models continue to evolve, and the industry may not develop as we anticipate. The regulatory framework in Singapore and Hong Kong governing the digital financial services industry is also developing and may remain uncertain in the near future. As our business develops and in response to the evolving client needs and market competition, we need to continuously introduce new products and services, improve our existing products and services, or adjust and optimize our business model. In response to new regulatory requirements or industry standards, or in connection with the introduction of new products, we may need to impose more rigorous risk management systems and policies, which may negatively affect the growth of our business. Any significant change to our business model may not achieve expected results and may materially and adversely affect our financial condition and results of operations. It is therefore difficult to accurately predict our future prospects.

You should consider our business and prospects in light of the risks and challenges that we encounter or may encounter as an entrant in the newly emerging and rapidly evolving market in which we operate and our limited operating history. These risks and challenges include our ability to, among other things:

 

   

maintain the value proposition of AMTD SpiderNet ecosystem;

 

   

build a well-recognized and respected brand;

 

   

acquire and/or operate existing or future digital financial licenses;

 

   

establish and expand our client base;

 

   

maintain and enhance our relationships with our business partners;

 

   

attract, retain, and motivate talented employees;

 

   

anticipate and adapt to changing market conditions and competitive landscape;

 

   

manage our future growth;

 

   

ensure that the performance of our products and services meets client expectations;

 

   

maintain or improve our operational efficiency;

 

   

navigate a complex and evolving regulatory environment;

 

   

defend ourselves in any legal or regulatory actions against us;

 

   

enhance our technology infrastructure and maintain the security of our system and the confidentiality of the information provided and utilized across our system;

 

   

avoid and remedy operating errors as a result of human or system errors; and

 

   

identify and address conflicts of interest.

 

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If we fail to address any or all of these risks and challenges, if we fail to educate business partners and clients about the value of our platform and services, if the market for our products and services does not develop as we expect, if we fail to address the needs of our target clients, or if we are not able to effectively tackle other risks and challenges that we may encounter, our business and results of operations may be adversely affected.

We have a limited operating history and experience in our SpiderNet ecosystem solutions business, which makes it difficult to evaluate our business. We cannot assure you that the market for our services will develop as we expect or that we will be able to maintain the growth rate that we have experienced to date.

We commenced operations of our SpiderNet ecosystem solutions business in December 2017, primarily providing clients with exclusive paid membership access to the AMTD SpiderNet. Since then we have achieved rapid growth in terms of client base and revenue. For the fiscal years ended April 30, 2019 and 2020, and the nine months ended January 31, 2021, our SpiderNet ecosystem solutions business accounted for 40.4%, 94.1%, and 92.7% of our total revenue, respectively. However, our limited operating history in our SpiderNet ecosystem solutions business may not be indicative of our future growth or financial results. There is no assurance that we will be able to maintain our historical growth rates in future periods. Our growth prospects should be considered in light of the risks and uncertainties that fast-growing companies with a limited operating history and experience in our industry may encounter, including, among others, risks and uncertainties regarding our ability to:

 

   

enrich the AMTD SpiderNet ecosystem;

 

   

identify business synergies and enhance connectivity for our clients;

 

   

enrich our content offerings;

 

   

retain existing clients and attract new clients;

 

   

offer customized and comprehensive services tailored to corporates’ needs throughout their lifecycles;

 

   

upgrade existing technology and infrastructure and develop new technologies;

 

   

successfully compete with other companies that are currently in, or may in the future enter, our industry or similar industries; and

 

   

observe and strategize on the latest market trends.

All of these endeavors involve risks and will require significant allocation of management and employee resources. We cannot assure you that we will be able to effectively manage our growth or implement our business strategies effectively. If the market for our services does not develop as we expect or if we fail to address the needs of this dynamic market, our business, results of operations, and financial condition will be materially and adversely affected.

We and our Controlling Shareholder have a limited operating history and experience in the newly developed digital banking business in Asia, which makes it difficult to evaluate our business. We cannot assure you that the digital banking initiatives of our Controlling Shareholder and our company will develop or succeed as we expect.

Airstar Bank, a virtual bank jointly established by our Controlling Shareholder and Xiaomi, provides digital banking services in Hong Kong. Airstar Bank launched a pilot trial of its digital banking services to a limited and selected number of clients, including deposit, loan, and fast payment and remittance in March 2020, and fully launched its platform to the general public in June 2020. It will gradually expand its product and service offerings as its business develops. We have entered into an agreement with our Controlling Shareholder to provide Airstar Bank with the support from our SpiderNet ecosystem solutions services, including resources, capital support, and expertise in the financial services industry to support its business development and support them to gradually build up their own ecosystem for an annual service fee. Airstar Bank expects to rely on the industry experience and technological and operational support of our business partner, Xiaomi, to provide online

 

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banking services to retail and corporate clients. The existing client base of Xiaomi and AMTD Group will also initially be a key target customer segment for Airstar Bank. Although we expect Airstar Bank to continuously improve its product designs and services based on client feedback, we cannot assure you that Airstar Bank will be able to achieve the expected results with respect to its product and service offerings.

Our subsidiary, AMTD Digital Holdings Pte. Ltd., entered into a binding term sheet in December 2019 with Xiaomi, SP Group, and Funding Societies to establish a consortium in which we expect AMTD Digital Holdings Pte. Ltd. to be the largest shareholder. The consortium intends to pursue digital banking opportunities in Singapore through Singa Bank, the launch of which is subject to obtaining a digital wholesale banking license from the MAS and other regulatory requirements. The MAS had previously announced that they planned to grant up to five digital banking licenses. As of the date of this prospectus, four had been granted to other applicants and MAS will review and consider granting more such licenses in the future. We and Xiaomi are pursuing to obtain the fifth digital banking license. We expect to provide online banking products and services through Singa Bank. However, we cannot assure you that we will be successful in obtaining a digital wholesale banking license within a certain time frame or at all, or that Singa Bank will be established, or such digital banking operations will be launched as planned.

The limited operating history and experience of our Controlling Shareholder and our company in digital banking exposes us to uncertain risks and challenges. We cannot assure you that the online platforms of Airstar Bank and Singa Bank (upon obtaining relevant licenses) will be accepted by our clients or that the market for our new products and services will develop as we expect. If Singa Bank is not eventually established or launched, or if Airstar Bank or Singa Bank is unable to achieve the expected results with respect to the new business development initiatives, our business prospects could be materially and adversely affected.

We face additional risks as we offer new products and services, transact with a broader array of clients and counterparties, and expose ourselves to new geographical markets.

We are committed to providing new products and services in order to strengthen our market position in the industries that we operate in. We expect to expand our product and service offerings as permitted by relevant regulatory authorities, transact with new clients not in our traditional client base, and enter into new markets. For example, our client base for our digital financial services business consisted primarily of corporate and other institutional clients, but the recent acquisition of PolicyPal Pte. Ltd. and/or its subsidiaries, or PolicyPal, in August 2020 has expanded our client base to cover retail clients.

In addition, our Controlling Shareholder operates its digital banking business in Hong Kong, and we plan to commence our digital banking business in Singapore. We aim to continue our expansion into Southeast Asia and the Greater Bay Area as we grow our business and as regulations permit. For more details, see “Business—Our Growth Strategies.” In the future, we expect to consolidate the financial results of Singa Bank into our financial statements following its establishment, which is subject to regulatory approvals. As such, our historical financial results may not be indicative of our future financial results, and investors may find it difficult to evaluate our business.

We completed the acquisition of PolicyPal in August 2020 and expect to complete the acquisition of CapBridge in the first half of 2021, subject to final negotiation of terms of the transaction, as well as MAS approval. These activities expose us to new and increasingly challenging risks, including, but not limited to:

 

   

we may have insufficient experience or expertise in offering new products and services and dealing with inexperienced counterparties and clients may harm our reputation;

 

   

we may be subject to stricter regulatory scrutiny, or increasing exposure to credit risks, market risks, compliance risks, and operational risks;

 

   

we may be unable to provide clients with adequate levels of service for our new products and services;

 

   

our new products and services may not be accepted by our clients or meet our profitability expectations; and

 

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our new products and services may be quickly copied by our competitors so that its attractiveness to our clients may be diluted.

If we are unable to achieve the expected results with respect to our offering of new products and services, our new client base, and in new geographical markets, our business, financial condition, and results of operations could be materially and adversely affected.

If we fail to develop market leading products or provide satisfactory services to address the rapidly evolving market in a timely manner, and if we are not able to implement successful enhancements and new features for our products and services, we may not be able to attract or retain clients.

Our success depends on our ability to attract or retain clients through the provision of a strong value proposition of our SpiderNet ecosystem, high-quality products, and satisfactory services, and to generate recurring business from existing clients. To attract and retain clients, we need to further enrich our product and service offerings by producing and providing new high-quality products and satisfactory services in a cost-effective and timely manner. Furthermore, we need to anticipate and quickly respond to changing client preferences and development in the market trends. We make bespoke recommendations of insurance products and services to clients based on their needs, and we also develop insurance products in cooperation with our insurer partners to meet the evolving needs of insurance solutions clients. Our ability to provide these products and services is dependent on our industry expertise and innovative ideas and technologies. However, we cannot assure you that the products and services that we design and develop on our own or together with our insurer partners will cater to the needs of potential or existing clients, sustain for a period of time that we expect them to, or be welcomed or accepted by the market at all. If we fail to cater to the needs and preferences of our clients or deliver high-quality product or provide satisfactory service in an efficient manner, or our clients cannot find their desired products or services at attractive prices and terms, they may turn to other channels for their needs and we may suffer from reduced client base. If we are unable to grow our client base or increase client satisfaction, our business, financial condition, and results of operations may be materially and adversely affected.

Failure to maintain and enlarge our AMTD SpiderNet ecosystem including our client base or strengthen client engagement may adversely affect our business and results of operations.

Our revenue growth depends on our ability to maintain and enlarge our client base and strengthen client engagement so that more of our clients will use our products and services more often and contribute to our revenue growth. Our clients may not continue to use our solutions once their existing contract expires or they may not purchase additional solutions from us. This risk is especially apparent in circumstances where it is inexpensive for them to switch service providers. Our ability to maintain and enlarge our client base and strengthen our client engagement will depend on many factors, some of which are out of our control, including:

 

   

our ability to continually innovate our technologies to keep pace with rapid technological changes;

 

   

our ability to continually innovate our solutions in response to evolving client demands and expectations and intense market competition;

 

   

our ability to customize solutions for our clients;

 

   

client satisfaction with our solutions, including any new solutions that we may develop, and the competitiveness of our pricing and payment terms; and

 

   

the effectiveness of our solutions in helping our clients improve efficiency, enhance service quality, and reduce costs.

In addition, historically, we have derived a significant number of our clients either through referrals from the Controlling Shareholder or through the AMTD SpiderNet ecosystem. We may not be able to develop clients organically as rapidly or at the same pace as we have historically done through referrals. In addition, if we do not receive as many client referrals from the Controlling Shareholder or the AMTD SpiderNet ecosystem as we have historically, we may not be able to grow our client base as quickly or at all.

 

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Failure to obtain, renew, or retain licenses, permits, or approvals may affect our ability to conduct or expand our business.

Financial services is a highly-regulated industry, and we are required to obtain applicable licenses, permits, and approvals from different regulatory authorities in order to conduct or expand our business. Various governmental authorities in Singapore and Hong Kong have promulgated various regulations on the financial services, including regulations requiring digital banking license, insurance brokerage license, and exempt financial advisor status. We have obtained our insurance brokerage license issued by the Hong Kong Insurance Authority through AMTD Risk Solutions Group Limited. In Singapore, BaoXianBaoBao Pte. Ltd., a digital insurance platform in which we hold a 51% equity interest, is a registered insurance broker with respect to direct insurance and exempt financial advisor in relation to advising on investment products that are life policies and arranging of life policies, other than for reinsurance (and has notified the MAS of the same), and offering technology services to insurance partners. In July 2020, AMTD Digital Solutions Pte. Ltd. and PolicyPal Pte. Ltd. incorporated Applaud to apply for a direct insurer (composite) license from the MAS. In addition, we and several business partners have jointly applied, in the name of Singa Bank, for a digital wholesale banking license in Singapore with the MAS. The MAS had previously announced that they planned to grant up to five digital banking licenses. As of the date of this prospectus, four had been granted to other applicants and MAS will review and consider granting more such licenses in the future. We and Xiaomi are pursuing to obtain the fifth digital banking license. We cannot assure you that Singa Bank will successfully obtain the license. Furthermore, any dropout of our business partners in our license application consortia or any change in the relevant regulatory environment could materially and adversely affect our chance to successfully obtain the relevant licenses. Failure by Singa Bank to obtain the digital wholesale banking license and by Applaud to obtain the direct insurer (composite) license from the MAS may impair our ability to expand our digital financial services business to Singapore, which may materially and adversely affect our business and prospects. Additionally, there is no assurance that the Singapore or Hong Kong regulatory authorities will not issue new regulations governing the financial product and service industry that might require us or our business partners to obtain additional licenses, permits, or approvals for our current or future business operations, which may materially and adversely affect our business operations and financial condition. Failure to obtain additional licenses under current or new regulations may also impair our ability to expand our businesses across new geographical regions.

We are subject to extensive and developing regulatory requirements, and noncompliance with or changes to these regulatory requirements may affect our business operations and financial results.

The digital financial services industry is highly regulated in Asia. In the Singapore and Hong Kong markets where we currently or plan to operate, the government or other regulatory authorities regulate the financial services industry extensively. A number of regulatory authorities, such as the MAS, the Hong Kong Monetary Authority, and Hong Kong Insurance Authority, oversee different aspects of the financial services business in Singapore and Hong Kong, and promulgate and enforce laws and regulations that cover banking, insurance, stored-value facilities, and money-lending services, including entry into such businesses, scope of permitted activities, licenses and permits for various operations, and pricing. See “Regulation.”

As the digital financial services industry is an emerging and evolving market, the applicable laws, rules, and regulations are continually developing and evolving. Compliance with these regulations is complicated, time consuming, and expensive. Any changes in the relevant rules and regulations may result in an increase in our cost of compliance, or might restrict our business activities. Our ability to comply with all applicable laws and regulations is largely dependent on the relevant internal compliance system, as well as the relevant license holder’s ability to attract and retain qualified compliance personnel. While we maintain systems and procedures designed to ensure that we comply with applicable laws and regulations, we cannot assure you that we are able to prevent all possible violations. If we fail to comply with the applicable rules and regulations, we may face fines or restrictions on our business activities, or even a suspension or revocation of some or all of our licenses that allow us to carry on our business activities. In addition, we consider the digital wholesale banking license of the planned Singa Bank, if successfully obtained, as a competitive advantage in the digital financial services

 

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industry. If the regulatory authorities in Singapore change their rules and regulations on digital banking licenses affecting the digital banking operations, or delay granting new digital banking licenses, our business and prospects may be materially and adversely affected.

We are subject to regular and ad hoc regulatory inspections. If the results of the inspections reveal any noncompliance or misconduct, the regulatory authorities may take disciplinary action such as imposing monetary fines, or even revocation or suspension of license. Any material disciplinary actions taken against or penalties imposed on us or our business partners in the future could have an adverse impact on our business operations and financial results.

Our digital financial services business is subject to intense competition, and we may fail to compete successfully against existing or new competitors, which may reduce demand for our services, reduce operating margins, and further result in loss of market share, departures of qualified employees, and increased capital expenditures.

The digital financial services industry is intensely competitive and subject to rapid change, and we expect it to remain so. We currently compete primarily in Singapore and Hong Kong, and on the basis of a number of factors, including the ability to adapt to evolving financial needs of a broad spectrum of clients, our ability to identify market demands and business opportunities, the quality of our services, our employees, the range and price of our products and services, our innovation, our reputation, and the strength of our relationships. If we fail to compete effectively against our competitors, our business, financial conditions, results of operations, and prospects will be materially and adversely affected.

Digital banking, digital insurance, digital payment, and digital asset exchange, as integral parts of our digital financial services business, generally requires us to react promptly to the evolving demand of our clients and be able to provide innovative financial solutions tailored to their needs. If we are unable to differentiate ourselves from our competitors, drive value for our clients, or effectively align our resources with our goals and objectives, we may not be able to compete effectively. Our competitors may introduce their own value-added services or solutions more effectively than we do, which could adversely impact our growth. Failure to compete effectively against any of these competitive threats could have a material adverse effect on us. In addition, the highly competitive nature of our industry could lead to increased pricing pressure which could have a material impact on our overall business and results of operations. We may not be able to compete effectively with our competitors at all times and always be able to provide innovative financial solutions that promptly and accurately address our clients’ needs. If this were to happen, our ability to attract new or retain existing clients will suffer, which would materially and adversely affect our revenue and earnings.

Some of our competitors include other digital and traditional financial institutions and, within the insurance solutions industry, our competitors include (i) other online insurance product and service platforms, (ii) traditional insurance intermediaries, including agents, brokers, and consultants, (iii) online direct sales channels of large insurance companies, (iv) major internet companies that have commenced insurance distribution businesses, and (v) other online insurance technology companies. Some of our competitors have far broader financial and other resources and significant name recognition than us and have the ability to offer a wider range of products, which may enhance their competitive position. They may also offer services which we do not currently provide or more attractive products, which may put us at a competitive disadvantage and could result in pricing pressures or lost opportunities, which in turn could materially and adversely affect our results of operations. In addition, we may be at a competitive disadvantage with regard to some of our competitors that have larger client bases, and more professionals.

Our Controlling Shareholder and we may have limited control over Airstar Bank.

Our Controlling Shareholder has limited control over Airstar Bank in light of our Controlling Shareholder’s ownership of 10% of equity interest in Airstar Bank and lack of any contractual arrangements providing our

 

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Controlling Shareholder and us with any rights or control over Airstar Bank. Although we believe that we exert our influence through the directors whom we have nominated on Airstar Bank’s board of directors, including Frederic Lau, we do not have the necessary power to mandate or block material corporate actions of Airstar Bank. In addition, we do not consolidate the financial results of Airstar Bank into our financial statements. If Airstar Bank fails to carry out business in a compliant manner, incurs overly excessive amount of debt or goes bankrupt, or its business operations decline, our reputation and prospects may be adversely affected. We are subject to the risk that the controlling shareholder or the board of directors of Airstar Bank may act in a manner that does not serve our interests. The general operational risks, such as inadequate or failing internal control of Airstar Bank, may also expose us and our Controlling Shareholder to reputational and other risks. Furthermore, Airstar Bank or its controlling shareholder may fail to abide by their agreements with us, for which we may have limited or no recourse. Failure of Airstar Bank to perform their obligations or to achieve their expected results, or any negative publicity, whether or not substantiated, may adversely affect our reputation and brand. If any of the foregoing were to occur, our business and reputation could be materially and adversely affected.

We depend on our cooperation with our business partners and participants in the AMTD SpiderNet ecosystem. Our business may be negatively affected if such partners do not continue their relationship with us or if their operations fail.

We cooperate with various business partners and participants in the AMTD SpiderNet ecosystem in developing our various businesses. The AMTD SpiderNet ecosystem is a key contributor to our large and expanding client base. If we are not able to attract new partners to our ecosystem, retain our existing ecosystem partners, or renew our existing contracts with major ecosystem partners on terms favorable to us, we may not be able to increase our client base, which will hinder our business growth. Additionally, we may rely on our partners to drive the growth of our client base, and we may incur significant client acquisition costs in the future. The occurrence of any of these circumstances may significantly hinder our ability to carry out our business operations and increase our client base, and may significantly increase our expense and thus our business, financial condition, results of operation, and prospects may be materially and adversely affected.

A significant portion of our income is contributed by a limited number of clients. If we cannot retain these clients for any reason or expand our client base, our income may decrease and our financial condition and results of operations may be materially and adversely affected.

For the fiscal years ended April 30, 2019 and 2020, and the nine months ended January 31, 2021, the top five clients in terms of overall income contribution aggregately accounted for 56.6%, 78.0%, and 49.9% of our total revenue, respectively. Although we plan to continue to expand our client base, launch more tailor-made products and solutions, and generate income from a wider range of clients, we cannot guarantee you that we will be able to succeed, and that such client concentration will decrease. If we fail to retain our top clients, our overall income may decrease and our financial condition and results of operations may be materially and adversely affected.

Our businesses depend on key management executives and professional staff, and our business may suffer if we are unable to recruit and retain them.

Our businesses depend on the skills, reputation, and professional experience of our key management executives, the network of resources and relationships they generate during the ordinary course of their activities, and the synergies among the diverse fields of expertise and knowledge held by our senior professionals. Therefore, the success of our business depends on the continued services of these individuals. If we lose their services, we may not be able to execute our existing business strategy effectively, and we may have to change our current business direction. These disruptions to our business may take up significant energy and resources of our company, and materially and adversely affect our future prospects.

Moreover, our business operations depend on our professional staff, our most valuable assets. Their skills, reputation, professional experience, and client relationships are critical elements in obtaining and executing client

 

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engagements. We devote considerable resources and incentives to recruiting and retaining these personnel. However, the market for quality professional staff is increasingly competitive. We expect to face significant competition in hiring such personnel. Additionally, as we mature, current compensations scheme to attract employees may not be as effective as in the past. The intense competition may require us to offer more competitive compensation and other incentives to our talent, which could materially and adversely affect our financial condition and results of operations. As a result, we may find it difficult to retain and motivate these employees, and this could affect their decisions about whether or not they continue to work for us. If we do not succeed in attracting, hiring and integrating quality professional staff, or retaining and motivating existing personnel, we may be unable to grow effectively.

We may undertake acquisitions, share swaps, investments, joint ventures, or other strategic alliances in the digital financial services industry, which could present unforeseen integration difficulties or costs and may not enhance our business as we expect.

Our strategy includes plans to grow both organically and through acquisitions, share swaps, participation in joint ventures or other strategic alliances in the digital financial services industry. Joint ventures and strategic alliances may expose us to new operational, regulatory and market risks, as well as risks associated with additional capital requirements. We may not be able, however, to identify suitable future acquisition or share swap candidates or alliance partners. Even if we identify suitable candidates or partners, the evaluation, negotiation, and monitoring of the transactions could require significant management attention and internal resources and we may be unable to complete an acquisition, share swap, or alliance on terms commercially acceptable to us. Even when acquisitions or share swaps are completed, we may encounter difficulties in integrating the acquired entities and businesses, achieving expected synergies, or aligning the interests of our businesses, such as difficulties in retention of clients and personnel, implementation of our business plan for the combined business or to achieve anticipated revenue or profitability targets, challenge of integration and effective deployment of operations or technologies, for acquisitions in which the acquired company’s financial performance is incorporated into our financial results (either in full or in part), the dependence on the acquired company’s accounting, financial reporting, internal controls and processes, and assumption of unforeseen or hidden material liabilities or regulatory noncompliance issues. Any of these events could disrupt our business plans and strategies, which in turn could have a material adverse effect on our financial condition and results of operations. Such risks could also result in our failure to derive the intended benefits of the acquisitions, share swaps, digital investments, joint ventures or strategic alliances, and we may be unable to recover our investment in such initiatives. We expect that acquisitions and share swaps will continue to be a key part of business strategy. Our success in this regard will depend on ability to identify and compete for appropriate acquisition candidates and to complete the transactions we decide to pursue with favorable results. We cannot assure you that we could successfully mitigate or overcome these risks.

Completion of our proposed acquisitions is subject to a number of conditions, including certain regulatory approvals for which the receipt and timing cannot be guaranteed or predicted.

As part of our fusion-in program, we have entered, and may continue to enter, into binding term sheets for proposed acquisitions with which we may decide not to proceed. For example, we have entered into a binding term sheet in June 2020 pursuant to which we will acquire a controlling interest in CapBridge Financial Pte. Ltd., the holding company of a leading online capital raising platform based in Singapore for global growth companies. The acquisition of CapBridge is integral to our plans to help companies in various stages of development in our AMTD SpiderNet ecosystem raise private capital, as well as to conduct direct private listings and employee share options trading via 1exchange, a digital asset exchange platform licensed by the MAS. We have also entered into two binding term sheets in July 2020 pursuant to which we will acquire a controlling interest the holding company of a leading one-stop QR code payment aggregator and payment gateway provider in Singapore. The completion of our acquisitions is subject to final negotiation of terms of the transaction and a number of conditions, including regulatory approvals from the MAS and satisfaction of our closing obligations. We cannot assure you that these conditions will be met within a certain timeframe or at all. If we fail to complete our acquisitions, our business and prospects may be materially and adversely affected.

 

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We may not be able to ensure the accuracy and completeness of third-party insurance product information and the effectiveness of our recommendation of insurance products.

Our insurance brokerage clients rely on the third-party insurance product information we provide. While we believe that such information is generally accurate, complete and reliable, there can be no assurance that the accuracy, completeness, or reliability of the information can be maintained in the future. We are legally required to provide certain disclosures to our clients, including how we are paid as an insurance broker. If we provide any inaccurate or incomplete information, or we fail to present accurate or complete information of any insurance products which could lead to our clients’ failure to get the protection or us being warned or punished by regulatory authorities, our reputation could be harmed and we could experience reduced client engagement, which may adversely affect our business and financial performance.

We may not be able to recommend suitable insurance products to our clients. The data provided to us by our clients, insurer partners, and other channels may not be accurate or up to date. Our risk consultation team may not fully understand our clients’ insurance and risk management needs and recommend suitable products to them. If our clients are recommended insurance solutions that do not suit their protection or related needs, or such solutions are ineffective, they may lose trust in us. Our insurance clients and insurer partners may consequently be reluctant to continue to engage or partner with us. As a result, our business, reputation, financial performance, and prospects will be materially and adversely affected.

Because the brokerage income we earn on the sale of insurance products is based on premiums, and commission fee rates agreed between us and our insurer partners, any decrease in these premiums or commission fee rates may have an adverse effect on our results of operations.

We derive a significant portion of revenue in our insurance solutions business from commission fees paid to us out of the premiums that insurer partners charge our clients for coverage. The commission fee rates are negotiated between insurer partners and us, and are typically based on the premiums that the insurer products charge. Commission fee rates and premiums can change based on the prevailing economic, regulatory, taxation, competitive, and other possible factors that affect our commission fee agreement with insurer partners. These factors, which are not within our control, include the capacity of insurer partners to place new business, profits of insurer partners, client demand for insurance products, the availability of comparable products from other insurance companies at lower costs, and the availability of alternative insurance products, such as government benefits and self-insurance plans, to clients. Because we do not determine, and cannot predict, the timing or extent of premium or commission fee rate changes, we cannot predict the effect any of these changes may have on our operations. Any decrease in premiums or commission fee rates may significantly affect our financial condition and results of operations.

Unfavorable financial market and economic conditions could materially and adversely affect our business, financial condition, and results of operations.

As a digital financial services firm with business exposure and operations in Singapore and Hong Kong, our businesses are or will be materially affected by conditions in the financial markets and economic conditions in Singapore, Hong Kong, and throughout the world. Financial markets and economic conditions could be negatively impacted by many factors beyond our control, such as inability to access credit markets, rising interest rates or inflation, terrorism, political uncertainty, pandemic, social unrest, fiscal policy of Singapore, Hong Kong, or other governments and the timing and nature of any regulatory reform. The rising political tensions between the United States and China, which is caused by, among other things, trade disputes, the COVID-19 outbreak, sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the PRC central government and the executive orders issued by the U.S. government in August 2020 that prohibit certain transactions with certain selected leading Chinese internet companies as well as their products, may also give rise to uncertainties in global economic conditions and adversely affect general investor confidence. The global spread of coronavirus disease (COVID-19) in a significant number of countries

 

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around the world has resulted in, and may intensify, global economic distress, and the extent to which it may affect our results of operations will depend on future developments, which are highly uncertain and cannot be predicted. Social unrest such as protests or demonstrations could disrupt economic activities and adversely affect our business. For example, the political unrest in Hong Kong in the second half of 2019 had led to a decrease in inbound tourism to Hong Kong, decreased consumer spending, and an overall impact on the domestic economy. There can be no assurance that these protests and other economic, social, or political unrest in the future will not have a material adverse effect on our financial condition and results of operations. Unfavorable financial market and economic conditions in Singapore, Hong Kong, and elsewhere in the world could negatively affect our clients’ business, including their ability to pay for our products and services, and materially reduce demand for our products and services and increase price competition among financial services firms seeking engagements, and thus could materially and adversely affect our business, financial condition, and results of operations. In addition, our profitability could be adversely affected due to our fixed costs and the possibility that we would be unable to reduce our variable costs without reducing revenue or within a timeframe sufficient to offset any decreases in revenue relating to changes in market and economic conditions.

We make investments using our own capital and do not expect to realize any profits from these investments for a considerable period of time.

Our investments consist of investments in equity securities of private companies using our own capital. We make investment decisions based on a number of factors, including how the investment can contribute to the AMTD SpiderNet ecosystem, rather than purely targeting for investment returns, and currently have no plans to dispose of our current investments. We may make unsound investment decisions for this reason or due to fraudulent and concealed, inaccurate or misleading statements from a target company in the course of our due diligence, which could lead us to mistakenly estimate the value of the target company and affect our ability to derive profit from such investments. In addition, our understanding and judgment of the industry in which the target company operates may be mistaken and result in unwise investment decisions.

We make investments in digital finance and new economy sectors in Asia and are subject to concentration risks. Our investment portfolio may be concentrated in certain sectors, geographic regions, individual investments, or types of securities that may or may not be listed. Any significant decline in the value of our investment portfolio may therefore adversely impact our business, results of operations, and financial condition.

In addition, we have limited control over all of our investee companies. Even if we have a board seat in certain investee companies, we do not have the necessary power to mandate or block material corporate actions. If these investee companies fail to carry out business in a compliant manner, incur overly excessive amount of debt or go bankrupt, or the business operations decline, the fair value of our investment in these companies may deteriorate or, in extreme cases, decrease to zero. We are subject to the risk that the majority shareholders or the management of these investee companies may act in a manner that does not serve our interests. The general operational risks, such as inadequate or failing internal control of these investee companies, may also expose our investments to risks. Furthermore, these investee companies may fail to abide by their agreements with us, for which we may have limited or no recourse. Our investees may not declare dividend, or even if they do, we may not be able to secure liquidity conveniently until we receive such dividend. Failure of our investees to perform their obligations or to achieve their expected results, or any negative publicity, whether or not substantiated, may adversely affect our reputation and brand. If any of the foregoing were to occur, our business, reputation, financial condition and results of operations could be materially and adversely affected.

Our digital investments business is subject to liquidity risks.

All of our digital investments are in the form of securities that are not publicly traded and are subject to liquidity risks. In many cases, there may be prohibition by contract or by applicable laws from selling such securities for a period of time or there may not be a public market for such securities. Accordingly, under certain conditions, we may be forced to either sell securities at lower prices than we had expected to realize or defer,

 

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potentially for a considerable period of time, sales that we had planned to make. Investing in these securities can involve a high degree of risk, and we may lose some or all of the principal amount of such investments.

Our results of operations may be materially affected by fluctuations in the fair value of our equity investments in our investee companies.

We have made equity investments in private companies and recognize changes in fair value on financial assets measured at FVTPL on our consolidated statement of profit or loss. For the fiscal years ended April 30, 2019 and 2020, and the nine months ended January 31, 2021, changes in fair value on financial assets measured at FVTPL from our digital investments business and digital media, content, and marketing business accounted for 89.7%, 27.5%, and 26.3% of our profit for the year, respectively. Fair value of our equity investments is subject to market fluctuations due to changes in the market prices of securities, interest rates, or other market factors, such as liquidity. While we may seek to hedge the market risk for some of these investments, an effective hedge may not be available, and if available, may not be fully effective. We measure their fair value based on an assessment of each underlying security, considering rounds of financing, third-party transactions, and market-based information, including comparable company transactions, trading multiples, and changes in market outlook.

Our international expansion is subject to various risks.

We primarily operate in Singapore and Hong Kong, but have been pursuing and will continue to pursue international expansion strategies, initially in Southeast Asia and the Greater Bay Area. International expansion may expose us to additional risks, including:

 

   

ever changing global environment, including changes in U.S. and international trade policies;

 

   

challenges associated with relying on local partners in markets that are not as familiar to us, including joint venture partners to help us establish our business;

 

   

difficulties managing operations in new regions, including complying with the various regulatory and legal requirements;

 

   

different approval or licensing requirements;

 

   

recruiting sufficient suitable personnel in new markets;

 

   

challenges in providing services and solutions as well as support in these new markets;

 

   

challenges in attracting business partners and clients;

 

   

potential adverse tax consequences;

 

   

foreign exchange losses;

 

   

limited protection for intellectual property rights;

 

   

inability to effectively enforce contractual or legal rights; and

 

   

local political, regulatory and economic instability or wars, civil unrest, and terrorist incidents.

If we are unable to effectively avoid or mitigate these risks, our ability to expand our business internationally will be affected and our operations thus will be limited to only the Singapore and Hong Kong markets, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We depend on our cooperation with insurer partners. Our business may be negatively affected if our insurer partners do not continue their relationship with us or if their operations fail.

Our insurance solutions business is, to a significant extent, dependent on our continued and healthy relationship with our insurer partners, and may be negatively affected if our insurer partners terminate their

 

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relationship with us or fail to meet performance obligations. Certain insurer partners have been associated with a significant portion of our revenue generated from clients in the past. Our ability to attract clients depends on the quantity and quality of insurance products offered by insurer partners. Our arrangements with our insurer partners are typically not exclusive, and they may have similar arrangements with our competitors. Our partners may terminate their relationships with us or decide to exclusively or preferentially cooperate with our competitors. There can be no assurance that we can maintain relationships with our existing insurer partners on commercially desirable terms. If our insurer partners terminate their relationship with us, our supply of products and services may be interrupted and affect our ability to maintain existing clients and secure new clients.

If our insurer partners or the reinsurance company partners fail to properly fulfill their obligations as insurers under the insurance policies sold by us, it may affect our ability to maintain existing clients and secure new clients. If our insurer partners or the reinsurance companies with whom they or we partner become insolvent, our clients may not be able to realize the protection expected from the insurance policies, which will negatively affect our reputation and, in turn, our performance and financial results.

Our business is subject to various cybersecurity and other operational risks.

We face various cybersecurity and other operational risks relating to our businesses on a daily basis. We rely heavily on financial, accounting, communication and other data processing systems as well as the people who operate them to securely process, transmit and store sensitive and confidential client information, and communicate globally with our staff, clients, partners, and third-party vendors. We also depend on various third-party software and cloud-based storage platforms as well as other information technology systems in our business operations. These systems, including third-party systems, may fail to operate properly or become disabled as a result of tampering or a breach of our network security systems or otherwise, including for reasons beyond our control.

Our clients typically provide us with sensitive and confidential information as part of our business arrangements. We are susceptible of attempts to obtain unauthorized access of such sensitive and confidential client information. We also may be subject to cyber-attacks involving leak and destruction of sensitive and confidential client information and our proprietary information, which could result from an employee’s or agent’s failure to follow data security procedures or as a result of actions by third parties, including actions by government authorities. Although cyber-attacks have not had a material impact on our operations to date, breaches of our or third-party network security systems on which we rely could involve attacks that are intended to obtain unauthorized access to and disclose sensitive and confidential client information and our proprietary information, destroy data or disable, degrade or sabotage our systems, often through the introduction of computer viruses and other means, and could originate from a wide variety of sources, including state actors or other unknown third parties. The increase in using mobile technologies can heighten these and other operational risks.

We cannot assure you that we or the third parties on which we rely will be able to anticipate, detect or implement effective preventative measures against frequently changing cyber-attacks. We may incur significant costs in maintaining and enhancing appropriate protections to keep pace with increasingly sophisticated methods of attack. In addition to the implementation of data security measures, we require our employees to maintain the confidentiality of the proprietary information that we hold. If an employee’s failure to follow proper data security procedures results in the improper release of confidential information, or our systems are otherwise compromised, malfunctioning or disabled, we could suffer a disruption of our business, financial losses, liability to clients, regulatory sanctions, and damage to our reputation.

We operate in businesses that are highly dependent on proper processing of financial transactions. We also rely on third-party service providers for certain aspects of our business. Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair our operations, affect our reputation and adversely affect our businesses.

 

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The technologies we use for the operation of our business are new and require continuous developments and upgrades. We cannot assure you that these technologies will fully support our business.

We regard technology as critical to our ability to provide high-quality products and superior client services in our businesses and operations. We rely on our business partners and investees in developing the sophisticated and innovative technology systems that we use for our business activities. We expect these technologies to support the smooth performance of key functions in our platform. To adapt to evolving client needs, requirements of our business partners, and emerging industry trends, we may need to continue to invest in new technologies or the upgrade of existing technologies to deliver our products and services. We have a number of strategic initiatives involving investments in or partnerships with technology companies as well as investments in technology systems and infrastructure to support our growth strategy. These investments may be costly, may not be profitable or may be less profitable than what we have experienced historically. If these business partners or investees fail to perform their obligations or otherwise cease to work with us, our ability to execute on our strategic initiatives could be adversely affected. If our efforts to invest in the development of new technologies or the upgrade of existing technologies are unsuccessful, our business, financial condition, and results of operations may be materially and adversely affected. In addition, the maintenance and processing of various operating and financial data is essential to our data analytical capabilities and the day-to-day operation of our business. Our ability to provide products and services and to conduct day-to-day business operations depend, in part, on our ability to maintain and make timely and cost-effective enhancement and introduce innovative functions which can meet changing business and operational needs. Failure to do so could put us at a disadvantage to our competitors and cause economic losses. We can provide no assurance that we will be able to keep up with technological improvements or that the technology developed by others will not render our services less competitive or attractive.

The proper functioning of our online platform and technology infrastructure is essential to our business. Any errors in or disruption to our IT systems and infrastructure and those on which we rely could materially affect our ability to maintain the satisfactory performance of our platform and deliver consistent services to our clients.

Our business is dependent on the ability of our IT systems and those of our business partners, vendors, and investee companies to timely process a large amount of information and transactions. We expect to rely on AFIN’s API Exchange platform and other third parties to deploy digital solutions for the planned Singa Bank’s future digital banking platform in Singapore, subject to successfully obtaining a digital wholesale banking license from the MAS and meeting other regulatory requirements. We may also rely on PolicyPal’s IT systems and infrastructure to provide digital financial services to clients in Singapore and Hong Kong as well as CapBridge to provide the same upon completion of our acquisition. The reliability, availability and satisfactory performance of our IT systems and those on which we rely are critical to our success, our ability to attract and retain clients and our ability to maintain a satisfactory user experience and client service. Our servers and those of our business partners and investee companies may be vulnerable to computer viruses, traffic spike that exceeds the capacity of our or their servers, electricity power interruptions, physical or electronic break-ins, and similar disruptions, which could lead to system interruptions, website slowdown and unavailability, delays in transaction processing, loss of data, and the inability to accept and fulfill client orders.

Our software, hardware, and systems and those on which we rely may contain undetected errors that could have a material adverse effect on our business, particularly to the extent such errors are not detected and remedied quickly. The solutions we provide are designed to process complex transactions and deliver reports and other information related to those transactions, all at high volumes and processing speeds. Since clients use our services for important aspects of their businesses, any errors, defects, disruptions in services, or other performance problems with our services could hurt our reputation and damage our clients’ businesses. Software and system errors, or human error, could delay or inhibit settlement of payments, result in over-settlement, cause reporting errors, or prevent us from collecting transaction fees. We can provide no assurance that we, our business partners or our investee companies will not experience unexpected human errors, system errors or

 

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interruptions in the future. We can provide no assurance that our current security mechanisms and those of our business partners and investee companies will be sufficient to protect our and their IT systems and technology infrastructure from any third-party intrusions, electricity power interruptions, viruses and hacker attacks, information and data theft, and other similar activities. Any such future occurrences could damage our reputation and result in a material decrease in our revenue.

Maintaining and upgrading the technology infrastructure on which we rely require significant investment of time and resources, including adding new hardware, updating software, and recruiting and training new engineering personnel. During updates, systems on which we rely may experience interruptions, and the new technologies and infrastructures may not be fully integrated with the existing systems timely, or at all. Any failure to maintain and improve the technology infrastructure on which we rely could result in unanticipated system disruptions, slower response times, impaired quality of user experience and delays in reporting accurate operating and financial information, which, in turn, could materially and adversely affect our business, financial condition and results of operations.

Any negative publicity with respect to us, our directors, officers, employees, shareholders, or other beneficial owners, our peers, business partners, or our industry in general, may materially and adversely affect our reputation, business, and results of operations.

Our reputation and brand recognition play an important role in earning and maintaining the trust and confidence of our existing and prospective clients. Our reputation and brand are vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate. Negative publicity about us, such as alleged misconduct, other improper activities, or negative rumors relating to our business, shareholders, or other beneficial owners, founders, affiliates, directors, officers, or other employees, can harm our reputation, business, and results of operations, even if they are baseless or satisfactorily addressed. There has been media report that our founder was alleged to have not adhered to certain internal policies during his previous employment. These allegations, even if unproven or meritless, may lead to inquiries, investigations, or other legal actions against us by any regulatory or government authorities. Any regulatory inquiries or investigations and lawsuits against us, and perceptions of conflicts of interest, inappropriate business conduct by us or perceived wrong doing by any key member of our management team, among other things, could substantially damage our reputation regardless of their merits, and cause us to incur significant costs to defend ourselves. As we reinforce our ecosystem and stay close to our clients and other “AMTD SpiderNet” stakeholders, any negative market perception or publicity on our business partners that we closely cooperate with, or any regulatory inquiries or investigations and lawsuits initiated against them, may also have an impact on our brand and reputation, or subject us to regulatory inquiries or investigations or lawsuits. Moreover, any negative media publicity about the industries in which we operate in general or product or service quality problems of other firms in such industries, including our competitors, may also negatively impact our reputation and brand. If we are unable to maintain a good reputation or further enhance our brand recognition, our ability to attract and retain clients, third-party partners, and key employees could be harmed and, as a result, our business, financial position, and results of operations would be materially and adversely affected.

Our operations may be subject to transfer pricing adjustments by competent authorities.

We may use transfer pricing arrangements to account for business activities between us and our Controlling Shareholder, the different entities within our consolidated group, or other related parties. We cannot assure you that the tax authorities in the jurisdictions where we operate would not subsequently challenge the appropriateness of our transfer pricing arrangements or that the relevant regulations or standards governing such arrangements will not be subject to future changes. If a competent tax authority later finds that the transfer prices and the terms that we have applied are not appropriate, such authority may require us or our subsidiaries to re-assess the transfer prices and re-allocate the income or adjust the taxable income. Any such reallocation or adjustment could result in a higher overall tax liability for us and may adversely affect our business, financial condition, and results of operations.

 

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Our risk management and internal control systems, as well as the risk management tools available to us, may not fully protect us against various risks inherent in our business.

We follow our comprehensive internal risk management framework and procedures to manage our risks, including, but not limited to, reputational, legal, regulatory, compliance, operational, market, liquidity, and credit risks. However, our risk management policies, procedures, and internal controls may not be adequate or effective in mitigating our risks or protecting us against unidentified or unanticipated risks. In particular, some methods of managing risks are based upon observed historical market behavior and our experience in the financial industry. These methods may fail to predict future risk exposures, which could be significantly greater than those indicated by our historical measures. Other risk management methods depend upon an evaluation of available information regarding operating and market conditions and other matters, which may not be accurate, complete, up-to-date, or properly evaluated. In addition, the capital markets are constantly developing, the information and experience that we rely on for our risk management methods may become quickly outdated as capital markets and regulatory environment continue to evolve. Although we have not experienced any material deficiencies or failure in our risk management and internal control systems and procedures since we commenced our current businesses in 2004 other than a material weakness in our internal control over financial reporting identified as of April 30, 2019 and 2020, any such deficiencies or failure in our risk management and internal control systems and procedures may adversely affect our ability to identify or report our deficiencies or non-compliance. For a discussion of risks relating to the material weakness in our internal control over financial reporting, see “—Risks Relating to Our Business and Industry—We have identified a material weakness in our internal control over financial reporting, and if we fail to implement and maintain an effective system of internal control to remediate our material weakness over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations, or prevent fraud.” In addition, failure of our employees to effectively enforce such risk management and internal controls procedures, or any of the foregoing risks, may have a material and adverse effect on our business, financial condition and operating results.

Fraud or misconduct by our directors, officers, employees, shareholders, agents, clients, or other third parties could harm our reputation and business and may be difficult to detect and deter.

It is not always possible to detect and deter fraud or misconduct by our directors, officers, employees, shareholders, agents, clients or other third parties. The precautions that we take to detect and prevent such activity may not be effective in all cases, and we may suffer significant reputational harm and financial loss for any fraud misconduct by any of these individuals. The potential harm to our reputation and to our business caused by such fraud or misconduct is impossible to quantify.

There is a risk that our directors, officers, employees, shareholders, agents, clients or other third parties could engage in fraud or misconduct that materially and adversely affects our business, including a decrease in returns on our own invested capital. We are subject to a number of obligations and standards arising from our businesses. The violation of these obligations and standards by any of our directors, officers, employees, shareholders, agents, clients or other third parties could materially and adversely affect us and our investors. For example, our businesses require that we properly handle confidential information. If our directors, officers, employees, shareholders, agents, clients or other third parties were to improperly use or disclose confidential information, we could suffer serious harm to our reputation, financial position, and existing and future business relationships. If any of our directors, officers, employees, shareholders, agents, clients or other third parties were to engage in fraud or misconduct or were to be accused of such fraud or misconduct, our business and reputation could be materially and adversely affected.

We may be subject to litigation and regulatory investigations and proceedings and may not always be successful in defending ourselves against such claims or proceedings.

We face significant litigation and regulatory risks, especially operating in the financial services and insurance industries, including the risk of lawsuits and other legal actions relating to compliance of regulatory

 

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requirements in areas such as information disclosure, sales practices, product design, fraud and misconduct, as well as protection of sensitive and confidential client information. From time to time we may be subject to lawsuits and arbitration claims in the ordinary course of our business brought by external parties or disgruntled current or former employees, inquiries, investigations, and proceedings by regulatory and other governmental agencies. Actions brought against us, with or without merits, may result in administrative measures, settlements, injunctions, fines, penalties, negative publicities, or other results adverse to us that could have material adverse effect on our reputation, business, financial condition, results of operations, and prospects. Even if we are successful in defending ourselves against these actions, the costs of such defense may be significant.

In market downturns, the number of legal claims and amount of damages sought in litigation and regulatory proceedings may increase. In addition, our affiliates may also encounter litigation, regulatory investigations and proceedings for the practices in their business operations. Our clients may also be involved in litigation, investigation or other legal proceedings, some of which may relate to deals that we have advised, whether or not there has been any fault on our part.

We may not be able to fully detect money laundering and other illegal or improper activities in our business operations on a timely basis or at all, which could subject us to liabilities and penalties.

We are required to comply with applicable anti-money laundering and anti-terrorism laws and other regulations in the jurisdictions where we operate. The anti-money laundering laws and regulations in Singapore, Hong Kong, the United States, and China require us to establish sound internal control policies and procedures with respect to anti-money laundering monitoring and reporting activities. Although we have adopted policies and procedures aimed at detecting, and preventing being used for, money-laundering activities by criminals or terrorist-related organizations and individuals or improper activities (including but not limited to market manipulation and aiding and abetting tax evasion), such policies and procedures may not completely eliminate instances where our networks may be used by other parties to engage in money laundering and other illegal or improper activities. If we fail to fully comply with applicable laws and regulations, the relevant government agencies may impose fines and other penalties on us, which may adversely affect our business.

We regularly encounter potential conflicts of interest, and our failure to identify and address such conflicts of interest could adversely affect our business.

We face the possibility of actual, potential, or perceived conflicts of interest in the ordinary course of our business operations. Conflicts of interest may exist between (i) our different businesses; (ii) us and our clients; (iii) our clients; (iv) us and our employees; (v) our clients and our employees, or (vi) us and our controlling shareholders and their controlling entities. As we expand the scope of our business and our client base, it is critical for us to be able to timely address potential conflicts of interest, including situations where two or more interests within our businesses naturally exist but are in competition or conflict. We have put in place internal control and risk management procedures that are designed to identify and address conflicts of interest. However, appropriately identifying and managing actual, potential, or perceived conflicts of interest is complex and difficult, and our reputation and our clients’ confidence in us could be damaged if we fail, or appear to fail, to deal appropriately with one or more actual, potential, or perceived conflicts of interest. It is possible that actual, potential, or perceived conflicts of interest could also give rise to client dissatisfaction, litigation, or regulatory enforcement actions. Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation, which could materially and adversely affect our business in a number of ways, including a reluctance of some potential clients and counterparties to do business with us. Any of the foregoing could materially and adversely affect our reputation, business, financial condition, and results of operations.

 

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The current tensions in international economic relations may negatively affect the demand for our services, and our results of operations and financial condition may be materially and adversely affected.

Recently there have been heightened tensions in international economic relations, such as the one between the United States and China. The U.S. government has recently imposed, and has recently proposed to impose additional, new, or higher tariffs on certain products imported from China to penalize China for what it characterizes as unfair trade practices. China has responded by imposing, and proposing to impose additional, new, or higher tariffs on certain products imported from the United States. For example, September 17, 2018, former President Trump announced his decision to impose a 10% tariff on the third list of US$200 billion in imports from China to the United States effective September 24, 2018. On May 8, 2019, the U.S. government announced it would increase these tariffs to 25%. These tariffs are in addition to two earlier rounds of tariffs implemented against Chinese products on June 6, 2018 and August 16, 2018 that amount to tariffs on US$50 billion of Chinese products imported into the United States. On May 13, 2019, China responded by imposing tariffs on certain U.S. goods on a smaller scale, and proposed to impose additional tariffs on U.S. goods. On January 15, 2020, the United States and China entered into a phase one trade deal.

In addition, political tensions between the United States and China have escalated due to, among other things, trade disputes, the COVID-19 outbreak, sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the PRC central government and the executive orders issued by the U.S. government in August 2020 that prohibit certain transactions with certain selected leading Chinese internet companies as well as their products. Rising political tensions could reduce levels of trades, investments, technological exchanges, and other economic activities between the two major economies. Such tensions between the United States and China, and any escalation thereof, may have a negative impact on the general, economic, political, and social conditions in China and, in turn, adversely impacting our business, financial condition, and results of operations.

Amid these tensions, the U.S. government has imposed and may impose additional measures on entities in China, including sanctions. As a financial services firm with business exposure and operations in Singapore and Hong Kong, our businesses are materially affected by the financial markets and economic conditions in Singapore, Hong Kong, China, and elsewhere in the world. Escalations of the tensions that affect trade relations may lead to slower growth in the global economy in general, which in turn could negatively affect our clients’ businesses and materially reduce demand for our services, thus potentially negatively affect our business, financial condition, and results of operations.

We may need additional financing but may not be able to obtain it on favorable terms or at all.

We may require additional financing for further growth and development of our business, including any investments or acquisitions we may decide to pursue. If our existing resources are insufficient to satisfy our requirements, we may seek to issue equity or debt securities or obtain new or expanded credit facilities. Our ability to obtain external financing in the future is subject to a variety of uncertainties, including our future financial condition, results of operations, cash flows, share price performance, liquidity of international capital and lending markets, and the Singapore and Hong Kong financial industry. We cannot assure you that we will be able to secure financing in a timely manner or in amounts or on terms favorable to us, or at all. Any failure to raise needed funds on terms favorable to us, or at all, could severely restrict our liquidity as well as have a material adverse effect on our business, financial condition, and results of operations. Moreover, any issuance of equity or equity-linked securities could result in significant dilution to our existing shareholders.

We may be subject to legal or regulatory liability if we are unable to protect the personal and sensitive data and confidential information of our clients.

We collect, store, and process certain personal and sensitive data from our clients, particularly under our insurance solutions business, and we make certain personal information provided by clients or third party data

 

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providers available to insurer or other partners with client consent. We also collect, store, and process operating data and other information from our clients under our SpiderNet ecosystem solutions business. We are required to protect the personal and sensitive data and confidential information of our clients under applicable laws, rules and regulations. While we have taken steps to protect the personal and sensitive data and confidential information of clients that we have access to, our security measures could be breached. In addition, we enter into non-disclosure agreements with potential business partners from time to time which may contain personal and sensitive data and confidential information of our clients. Any breach or leakage of such non-disclosure agreements by our potential business partners may subject us to liability. The relevant authorities may impose sanctions or issue orders against us if we fail to protect the personal and sensitive data and confidential information of our clients, and we may have to compensate our clients if we fail to do so. We routinely transmit and receive personal and sensitive data and confidential information of our clients through the internet and other electronic means. Any inability to adequately address privacy concerns, even if unfounded, or to comply with applicable privacy or data protection laws, regulations and privacy standards, or any misuse or mishandling of such personal and sensitive data and confidential information could result in additional cost, legal liabilities, regulatory actions, and reputational damage to us, which could in turn inhibit the use of our platform, and materially and adversely affect our business prospects and results of operation.

If our insurance coverage is insufficient, we may be subject to significant costs and business disruption.

We currently have insurance coverage such as professional indemnity insurance for certain of our regulated activities, and property, office, computer insurance, employee compensation and benefits, and travel insurance through policies maintained by our Controlling Shareholder. We are in the process of purchasing directors and officers insurance and do not plan on purchasing key-man insurance coverage. We consider our insurance coverage to be reasonable in light of the nature of our business, but we cannot assure you that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under the current insurance policies on a timely basis, or at all. If we incur any loss that is not covered by our Controlling Shareholder’s insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected.

We have identified a material weakness in our internal control over financial reporting, and if we fail to implement and maintain an effective system of internal control to remediate our material weakness over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations, or prevent fraud.

Prior to this offering, we have been a private company with limited accounting personnel and other resources with which to address our internal control. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. In the course of auditing our consolidated financial statements as of and for the years ended April 30, 2019 and 2020, we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting as well as other control deficiencies as of April 30, 2019 and 2020, in accordance with the standards established by the U.S. Public Company Accounting Oversight Board. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness identified is relating to lack of internal audit function and audit committee to monitor, evaluate and communicate internal control deficiencies. We plan to implement a number of measures to address the material weakness that has been identified. For a discussion of these measures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting.” We cannot assure you, however, that these measures may fully address the material weakness in our internal control over financial reporting or that we may not identify additional material weaknesses or significant deficiencies in the future.

 

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Upon completion of this offering, we will become a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, will require that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending April 30, 2021. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal control or the level at which our control is documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational, and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain adequate system of internal control over financial reporting, as these standards are modified, supplemented, or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

We may face intellectual property infringement claims, which could be time-consuming and costly to defend and may result in the loss of significant rights by us.

Although we have not been subject to any litigation, pending or threatened, alleging infringement of third parties’ intellectual property rights, we cannot assure you that such infringement claims will not be asserted against us in the future. Third parties may own copyrights, trademarks, trade secrets, ticker symbols, internet content, and other intellectual properties that are similar to ours in jurisdictions where we currently have no active operations. If we expand our business to or engage in other commercial activities in those jurisdictions using our own copyrights, trademarks, trade secrets, and internet content, we may not be able to use these intellectual properties or face potential lawsuits from those third parties and incur substantial losses if we fail to defend ourselves in those lawsuits. We have policies and procedures in place to reduce the likelihood that we or our employees may use, develop, or make available any content or applications without the proper licenses or necessary third-party consents. However, these policies and procedures may not be effective in completely preventing the unauthorized posting or use of copyrighted material or the infringement of other rights of third parties.

Intellectual property litigation is expensive and time-consuming and could divert resources and management attention from the operation of our business. If there is a successful claim of infringement, we may be required to alter our services, cease certain activities, pay substantial royalties and damages to, and obtain one or more licenses from third parties. We may not be able to obtain those licenses on commercially acceptable terms, or at all. Any of those consequences could cause us to lose revenue, impair our client relationships and harm our reputation.

 

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Any failure to protect our intellectual property could harm our business and competitive position.

We maintain a number of registered domain names and, although we do not currently own any registered trademarks, we may in the future acquire new intellectual property such as trademarks, copyrights, domain names, and know-how. We will rely on a combination of intellectual property laws and contractual arrangements to protect our intellectual property rights. It is possible that third parties may copy or otherwise obtain and use our trademarks without authorization or otherwise infringe on our rights. We may not be able to successfully pursue claims for infringement that interfere with our ability to use our trademarks, website, or other relevant intellectual property or have adverse impact on our brand. We cannot assure you that any of our intellectual property rights would not be challenged, invalidated, or circumvented, or such intellectual property will be sufficient to provide us with competitive advantages. In addition, other parties may misappropriate our intellectual property rights, which would cause us to suffer economic or reputational damages.

We may incur losses or experience disruption of our operations as a result of unforeseen or catastrophic events, including the emergence of an epidemic, pandemic, social unrest, terrorist attacks, or natural disasters.

Our business could be materially and adversely affected by catastrophic events or other business continuity problems, such as natural or man-made disasters, pandemics, social unrest, war, riots, terrorist attacks, or other public safety concerns. If we were to experience a natural or man-made disaster, disruption due to social or political unrest, or disruption involving electronic communications or other services used by us or third parties with which we conduct business, the continuity of our operations will partially depend on the availability of our people and office facilities and the proper functioning of our computer, software, telecommunications, transaction processing, and other related systems. A disaster or a disruption in the infrastructure that supports our businesses, a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, or a disruption that directly affects our business exposure and operations in Singapore and Hong Kong, could have a material adverse impact on our ability to continue to operate our business without interruption. Our business could also be adversely affected if our employees are affected by epidemics, pandemics, natural or man-made disasters, disruptions due to social or political unrest or disruption involving electronic communications. In addition, our results of operations could be adversely affected to the extent that any epidemic or pandemic harms the Singapore, Hong Kong, or global economy in general. The incidence and severity of disasters, epidemics or pandemics or other business continuity problems are unpredictable, and our inability to timely and successfully recover could materially disrupt our businesses and cause material financial loss, regulatory actions, reputational harm, or legal liability.

In addition, although the recent outbreak of COVID-19 may increase demand for online financial solutions, digital media marketing, and other online-based products and services, its impact, including impact on our employees, clients, business partners, and third-party service providers, could have a material and adverse effect on our business, financial condition, and results of operations. This outbreak of COVID-19 has caused, and may continue to cause, companies in Singapore, Hong Kong, and the rest of the world, including us and certain of our business partners, to implement temporary adjustment of work schedules and travel plans, mandating employees to work from home and collaborate remotely. As a result, we may experience lower efficiency and productivity, internally and externally, which may adversely affect our service quality. Moreover, our business operations depend on our professional staff and the continued services of these individuals. If any of our employees is suspected of having contracted COVID-19, we may be required to apply quarantines or suspend our operations. The extent to which this outbreak impacts our results of operations will depend on future developments, which are highly uncertain and unpredictable, including new information which may emerge concerning the severity of this outbreak and future actions we take, if any, to contain this outbreak or treat its impact, among others.

 

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Our ADSs may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect auditors who are located in China. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections.

The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over the counter trading market in the U.S.

Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this prospectus, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in Greater China, with operations in and who performs audit operations of registrants in China, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities, the work of our auditor as it relates to those operations is currently not inspected by the PCAOB.

In May 2013, the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the CSRC and the PRC Ministry of Finance, which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by the PCAOB in the PRC or by the CSRC or the PRC Ministry of Finance in the United States. The PCAOB continues to be in discussions with the CSRC and the PRC Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered with the PCAOB and audit Chinese companies that trade on U.S. exchanges.

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. We will be required to comply with these rules if the SEC identifies us as having a “non-inspection” year under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA Act, including the listing and trading prohibition requirements described above.

The SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from Chinese Companies to the then President of the United States. This report recommended the SEC implement five recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCA Act. However, some of the recommendations were more stringent than the HFCA Act. For example, if a company was not subject to PCAOB inspection, the report recommended that the transition period before a company would be delisted would end on January 1, 2022.

The SEC has announced that the SEC staff is preparing a consolidated proposal for the rules regarding the implementation of the HFCA Act and to address the recommendations in the PWG report. It is unclear when the SEC will complete its rulemaking and when such rules will become effective and what, if any, of the PWG recommendations will be adopted. The implications of this possible regulation in addition the requirements of the HFCA Act are uncertain. Such uncertainty could cause the market price of our ADSs to be materially and adversely affected, and our securities could be delisted or prohibited from being traded “over-the-counter” earlier than would be required by the HFCA Act. If our securities are unable to be listed on another securities exchange by then, such a delisting would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of our ADSs.

 

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The PCAOB’s inability to conduct inspections in China prevents it from fully evaluating the audits and quality control procedures of our independent registered public accounting firm. As a result, we and investors in our ADSs are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause investors and potential investors in our stock to lose confidence in the audit procedures of our auditor and reported financial information and the quality of our financial statements.

Fluctuations in the value of Renminbi and regulatory controls on the convertibility and offshore remittance of Renminbi may adversely affect our results of operations and financial condition.

Some of our clients are Chinese institutions or corporates, and they are subject to the relevant controls of the PRC government as well as risks relating to foreign currency exchange rate fluctuations. The change in value of Renminbi against Hong Kong dollars and other currencies is affected by various factors, such as changes in political and economic conditions in China. Any significant revaluation of Renminbi may materially and adversely affect the cash flows, revenue, earnings, and financial position of our Chinese clients. In addition, the PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, currency remittance out of China. Since 2016, the PRC government has tightened its foreign exchange policies and stepped up its scrutiny of outbound capital movement. In addition, under the existing regulations on offshore investment, approval from or registration with appropriate government authorities is required when Renminbi is to be converted into foreign currency for the purpose of offshore investment. Revaluation of the Renminbi and PRC laws and regulations in connection with the convertibility of the Renminbi into foreign currencies or offshore remittance of the Renminbi may limit the ability of our Chinese clients to engage our services, which may in turn have a material adverse effect on our results of operations and financial condition.

We may be affected by the currency peg system in Hong Kong.

Since 1983, Hong Kong dollars have been pegged to the U.S. dollars at the rate of approximately HK$7.80 to US$1.00. We cannot assure you that this policy will not be changed in the future. If the pegging system collapses and Hong Kong dollars suffer devaluation, the Hong Kong dollar cost of our expenditures denominated in foreign currency may increase. This would in turn adversely affect the operations and profitability of our business.

Increases in labor costs may adversely affect our business and results of operations.

The economy in Singapore, Hong Kong, and globally has experienced general increases in inflation and labor costs in recent years. As a result, average wages in Singapore, Hong Kong, and certain other regions are expected to continue to increase. In addition, we are required by Singapore and Hong Kong laws and regulations to pay various statutory employee benefits, including mandatory provident fund to designated government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to fines and other penalties. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs or pass on these increasing labor costs, our financial condition, and results of operations may be adversely affected.

Risks Relating to Our Relationship with the Controlling Shareholder

We have limited experience operating as a stand-alone public company.

AMTD Digital Inc. was incorporated in September 2019 as a wholly-owned subsidiary of our Controlling Shareholder. Our Controlling Shareholder also controls AMTD International Inc., or AMTD International, a

 

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leading Hong Kong-headquartered comprehensive financial institution dual-listed on both the NYSE and SGX-ST (NYSE: HKIB; SGX: HKB). However, we have limited experience conducting our operations as a stand-alone public company. Prior to this offering, our Controlling Shareholder has provided us with financial, administrative, human resources, and legal services, and also has provided us with the services of a number of its executives and employees. After we become a stand-alone public company, we expect our Controlling Shareholder to continue to provide us with certain support services, but to the extent our Controlling Shareholder does not continue to provide us with such support, we will need to create our own support system. We may encounter operational, administrative, and strategic difficulties as we adjust to operating as a stand-alone public company. This may cause us to react more slowly than our competitors to industry changes and may divert our management’s attention from running our business or otherwise harm our operations.

In addition, since we are becoming a public company, our management team will need to develop the expertise necessary to comply with the numerous regulatory and other requirements applicable to public companies, including requirements relating to corporate governance, listing standards and securities and investor relationships issues. As a stand-alone public company, our management will have to evaluate our internal controls system with new thresholds of materiality, and to implement necessary changes to our internal controls system. We cannot guarantee that we will be able to do so in a timely and effective manner.

Our financial information included in this prospectus may not be representative of our financial condition and results of operations if we had been operating as a stand-alone company.

Prior to our establishment, the operations of our insurance solutions, SpiderNet ecosystem solutions, and digital investments businesses were carried out by companies owned or controlled by our Controlling Shareholder. For all periods presented, our consolidated financial statements include all assets, liabilities, revenue, expenses, and cash flows that were directly attributable to our insurance solutions, SpiderNet ecosystem solutions, and digital investments businesses whether held or incurred by our Controlling Shareholder or by us. With respect to costs of operations of the insurance solutions, SpiderNet ecosystem solutions, and digital investments businesses, an allocation of certain costs and expenses of our Controlling Shareholder were also included. These allocations were made using a proportional cost allocation method by considering the proportion of revenue and actual usage metrics, among other things attributable to us. We made numerous estimates, assumptions, and allocations in our historical financial statements because our Controlling Shareholder did not account for us, and we did not operate as a stand-alone company for any period prior to the completion of this offering. Although our management believes the assumptions underlying our financial statements and the above allocations are reasonable, our financial statements may not necessarily reflect our results of operations, financial position, and cash flows as if we operated as a stand-alone public company during the periods presented. See “Corporate History and Structure—Our Relationship with the Controlling Shareholder” for our arrangements with our Controlling Shareholder and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the notes to our consolidated financial statements included elsewhere in this prospectus for our historical cost allocation. In addition, upon becoming a stand-alone public company, we will gradually establish our own financial, administrative, and other support systems to replace our Controlling Shareholder’s systems, the cost of which could be significantly different from cost allocation with our Controlling Shareholder for the same services. Therefore, you should not view our historical results as indicators of our future performance.

We may not continue to receive the same level of support from our Controlling Shareholder.

We have benefitted significantly from our Controlling Shareholder’s strong market position and brand recognition, as well as its expertise in the insurance solutions business. We may enter into a series of agreements with our Controlling Shareholder relating to our ongoing business operations and service arrangements with our Controlling Shareholder in the future, we cannot assure you we will continue to receive the same level of support from our Controlling Shareholder after we become a stand-alone public company. Our current clients may react negatively to our restructuring. This effort may not be successful, which could materially and adversely affect our business.

 

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Our agreements with our Controlling Shareholder or any of its controlling shareholders may be less favorable to us than similar agreements negotiated between unaffiliated third parties. In particular, our non-competition agreement with our Controlling Shareholder limits the scope of business that we are allowed to conduct.

We expect to enter into a series of agreements with our Controlling Shareholder and the terms of such agreements may be less favorable to us than would be the case if they were negotiated with unaffiliated third parties. In particular, under the non-competition agreement that we expect to enter into with our Controlling Shareholder, we agree during the non-competition period (which will end on the later of (1) two years after the first date when our Controlling Shareholder ceases to own in aggregate at least 20% of the voting power of our then outstanding securities and (2) the fifth anniversary of the completion of this offering) not to compete with our Controlling Shareholder in the businesses currently conducted by our Controlling Shareholder, except that we may own non-controlling equity interest in any company competing with our Controlling Shareholder. Such contractual limitations significantly affect our ability to diversify our revenue sources and may materially and adversely impact our business and prospects should the growth of our businesses slow down. In addition, pursuant to our master transaction agreement that we expect to enter into with our Controlling Shareholder, we agree to indemnify our Controlling Shareholder for liabilities arising from litigation and other contingencies related to our business and assumed these liabilities as part of our restructuring. The allocation of assets and liabilities between our Controlling Shareholder and our company may not reflect the allocation that would have been reached by two unaffiliated parties. Moreover, so long as our Controlling Shareholder continues to control us, we may not be able to bring a legal claim against our Controlling Shareholder or its controlling shareholders in the event of contractual breach, notwithstanding our contractual rights under the agreements described above and other inter-company agreements we may enter into from time to time.

Upon the completion of this offering, we will be a “controlled company” within the meaning of the NYSE Listed Company Manual and, as a result, can rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.

Upon the completion of this offering, our Controlling Shareholder will continue to control a majority of the voting power of our issued outstanding ordinary shares. As a result, we will be a “controlled company” within the meaning of the NYSE Listed Company Manual. Under these rules, a listed company of which more than 50% of the voting power for the election of directors is held by an individual, group, or another company is a “controlled company” and will be permitted to elect not to comply with certain corporate governance requirements, including the requirement that a majority of the board of directors consist of independent directors, the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors, and the requirement that we have a compensation committee that is composed entirely of independent directors. As we may intend to rely on some or all of the exemptions available to issuers like us, our shareholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the New York Stock Exchange.

We may have conflicts of interest with our Controlling Shareholders or any of its controlling shareholders and, because of our Controlling Shareholder’s controlling ownership interest in our company, we may not be able to resolve such conflicts on terms favorable to us.

Immediately upon the completion of this offering, our Controlling Shareholder will beneficially own 66.0% of our outstanding ordinary shares, representing 80.4% of our total voting power, assuming the underwriters of this offering do not exercise their option to purchase additional ADSs. Accordingly, our Controlling Shareholder will continue to be our controlling shareholder immediately upon the completion of this offering and may have significant influence in determining the outcome of any corporate actions or other matters that require shareholder approval, such as mergers, consolidations, change of our name, and amendments of our memorandum and articles of association.

The concentration of ownership and voting power may cause transactions to occur in a way that may not be beneficial to you as a holder of our ADSs in this offering and may prevent us from doing transactions that would

 

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be beneficial to you. Conflicts of interest may arise between our Controlling Shareholder or any of its controlling shareholders and us in a number of areas relating to our past and ongoing relationships. Potential conflicts of interest that we have identified include the following:

 

   

Indemnification arrangements with our Controlling Shareholder. We expect to enter into a master transaction agreement under which we agree to indemnify our Controlling Shareholder with respect to lawsuits and other matters relating to our digital financial services, SpiderNet ecosystem solutions, digital media, contents, and marketing, and digital investments businesses, including operations of those businesses when we were a private company and a subsidiary of our Controlling Shareholder. These indemnification arrangements could result in our having interests that are adverse to those of our Controlling Shareholder, for example, with respect to settlement arrangements in litigation. In addition, under these arrangements, we agreed to reimburse our Controlling Shareholder for liabilities incurred (including legal defense costs) in connection with any third party claim if it is ultimately determined that we are obligated to indemnify our Controlling Shareholder with respect to such third party claim.

 

   

Non-competition arrangements with our Controlling Shareholder. We expect to enter into a non-competition agreement under which our Controlling Shareholder agrees not to compete with us in our digital financial services, SpiderNet ecosystem solutions, digital media, content, and marketing, and digital investments businesses, except for owning non-controlling equity interest in any company competing with us. We agree not to compete with our Controlling Shareholder in the respective businesses currently conducted by our Controlling Shareholder, except that we may own non-controlling equity interests in any company competing with our Controlling Shareholder.

 

   

Employee recruiting and retention. Because we, our Controlling Shareholder and AMTD International are engaged in financial service-related businesses in Hong Kong, we may compete with our Controlling Shareholder and AMTD International in the hiring of new employees. We expect to enter into a non-competition agreement and have a non-solicitation arrangement with our Controlling Shareholder and AMTD International that restricts us, our Controlling Shareholder and AMTD International from hiring any of each other’s employees.

 

   

Our board members or executive officers may have conflicts of interest. Our director and president, Frederic Lau, is also the vice chairman of our Controlling Shareholder. Our director and chief executive officer, Mark Chi Hang Lo, is also the group vice president of our Controlling Shareholder. Our chief financial officer, Xavier Ho Sum Zee, is also the group chief financial officer of our Controlling Shareholder and the co-chief financial officer of AMTD International. As a result, they may not have sufficient capacity to perform their duties in our company. These overlapping relationships could create, or appear to create, conflicts of interest when these persons are faced with decisions with potentially different implications for our Controlling Shareholder and us.

 

   

Sale of shares or assets in our company. Upon expiration of the lock-up period and subject to certain restrictions under relevant securities laws and stock exchange rules, as well as other relevant restrictions, our Controlling Shareholder may decide to sell all or a portion of our shares that it holds to a third party, including to one of our competitors, thereby giving that third party substantial influence over our business and our affairs. In addition, our Controlling Shareholder may decide, or be obligated under any of its applicable debt covenant, to sell all or a portion of our shares or our assets in the event of default of our Controlling Shareholder or any of its controlling shareholders under any applicable debt or other obligations or otherwise becomes insolvent. Such a sale of our shares or our assets could be contrary to the interests of our employees or our other shareholders. In addition, our Controlling Shareholder may also discourage, delay, or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our ADSs.

 

   

Allocation of business opportunities. Business opportunities may arise that both we and our Controlling Shareholder find attractive, and which would complement our respective businesses. Although we expect to enter into a master transaction agreement under which our Controlling Shareholder agrees not

 

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to pursue investment opportunities without first presenting them to us, our Controlling Shareholder may discourage, delay, or prevent a profitable investment opportunity before our board of directors or shareholders and subsequently decide to pursue investment opportunities or take business opportunities for itself, which would prevent us from taking advantage of those opportunities. These actions may be taken even if they are opposed by our other shareholders, including those who purchase ADSs in this offering.

 

   

Developing business relationships with our Controlling Shareholder’s competitors. So long as our Controlling Shareholder remains as our controlling shareholder, we may be limited in our ability to do business with its competitors. This may limit our ability to market our services for the best interests of our company and our other shareholders.

Risks Relating to Our ADSs and This Offering

There has been no public market for the ADSs or our ordinary shares prior to this offering, and you may not be able to resell the ADSs at or above the price you paid, or at all.

Prior to this offering, there has been no public market for the ADSs or our ordinary shares. Although we intend to apply to have the ADSs listed on the New York Stock Exchange, we cannot assure you that a liquid public market for the ADSs will develop. If an active public market for the ADSs does not develop following the completion of this offering, the market price of the ADSs may decline and the liquidity of the ADSs may decrease significantly.

The initial public offering price for the ADSs will be determined by negotiation between us and the underwriters based on several factors, and we cannot assure you that the price at which the ADSs are traded after this offering will not decline below the initial public offering price. As a result, investors in the ADSs may experience a significant decrease in the value of their ADSs due to insufficient or a lack of market liquidity of the ADSs.

The trading price of the ADSs may be volatile, which could result in substantial losses to investors.

The trading price of the ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen due to broad market and industry factors, such as performance and fluctuation in the market prices or underperformance or deteriorating financial results of other listed companies based in Hong Kong. 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 Hong Kong companies’ securities after their offerings may affect the attitudes of investors towards Hong Kong-based, U.S.-listed companies, which consequently may affect the trading performance of the 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 Hong Kong companies may also negatively affect the attitudes of investors towards Hong Kong 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 our operating performance, which may materially and adversely affect the trading price of the ADSs.

In addition to the above factors, the price and trading volume of the ADSs may be highly volatile due to multiple factors, including the following:

 

   

regulatory developments affecting us or our industry;

 

   

variations in our revenue, profit, and cash flow;

 

   

changes in the economic performance or market valuations of other financial services firms;

 

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actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results;

 

   

changes in financial estimates by securities research analysts;

 

   

detrimental negative publicity about us, our services, our officers, directors, Controlling Shareholder, other beneficial owners, our business partners, or our industry;

 

   

announcements by us or our competitors of new service offerings, acquisitions, strategic relationships, joint ventures, capital raises, or capital commitments;

 

   

additions to or departures of our senior management;

 

   

litigation or regulatory proceedings involving us, our officers, directors, or Controlling Shareholders;

 

   

the rising political tension between the United States and China caused by, among other things, trade disputes and the COVID-19 outbreak;

 

   

release or expiry of lock-up or other transfer restrictions on our outstanding shares or the ADSs; and

 

   

sales or perceived potential sales of additional ADSs or ordinary shares.

Any of these factors may result in large and sudden changes in the volume and price at which the ADSs will trade.

In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

If securities or industry analysts do not publish or publish inaccurate or unfavorable research about our business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline.

The trading market for the ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades the ADSs or publishes inaccurate or unfavorable research about our business, the market price for the 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 the ADSs to decline.

The sale or availability for sale of substantial amounts of the ADSs or Class A ordinary shares in the public market could adversely affect their market price.

Sales of substantial amounts of the ADSs or Class A ordinary shares in the public market after the completion of this offering, or the perception that these sales could occur, could adversely affect the market price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. The ADSs sold in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended, or the Securities Act, and shares held by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. Immediately after the completion of this offering, there will be 74,018,142 ordinary shares (including Class A ordinary shares represented by ADSs) outstanding, or 74,978,142 ordinary

 

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shares (including Class A ordinary shares represented by ADSs) if the underwriters exercise their option to purchase additional ADSs in full. In connection with this offering, we, our officers, directors, and existing shareholders have agreed not to sell any of our ordinary shares or the ADSs or are otherwise subject to similar lockup restrictions for no less than 180 days after the date of this prospectus, subject to certain exceptions. However, the underwriters may release these securities from these restrictions at any time, subject to applicable regulations of the Financial Industry Regulatory Authority, Inc. 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 the ADSs. See “Underwriting” and “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling our securities after this offering.

Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.

Under our dual-class share structure, our ordinary shares consist of Class A ordinary shares and Class B ordinary shares. In respect of matters requiring the votes of shareholders, holders of Class B ordinary shares will be entitled to twenty votes per share, while holders of Class A ordinary shares will be entitled to one vote per share based on our dual-class share structure. We will sell ADS representing Class A ordinary shares in this offering. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer, assignment, or disposition of any Class B ordinary shares by a holder thereof to any person other than our founder, Calvin Choi, or any other person or entity designated by Mr. Choi, such Class B ordinary shares are automatically and immediately converted into an equal number of Class A ordinary shares.

As of the date of this prospectus, our Controlling Shareholder and certain other affiliates beneficially own all of our issued and outstanding Class B ordinary shares. These Class B ordinary shares will constitute approximately 32.7% of our total issued and outstanding ordinary shares and 90.7% of the aggregate voting power of our total issued and outstanding ordinary shares immediately after the completion of this offering due to the disparate voting powers associated with our dual-class share structure, assuming that the underwriters do not exercise their option to purchase additional ADSs. See “Principal Shareholders.” As a result of the dual-class share structure and the concentration of ownership, holders of Class B ordinary shares will have considerable influence over matters such as decisions regarding mergers, consolidations, and the sale of all or substantially all of our assets, election of directors, and other significant corporate actions. Such holders may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay, or prevent a change in control of our company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of the ADSs. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover, or other change of control transactions that holders of Class A ordinary shares and ADSs may view as beneficial.

The dual-class structure of our ordinary shares may adversely affect the trading market for the ADSs.

S&P Dow Jones and FTSE Russell have recently announced changes to their eligibility criteria for inclusion of shares of public companies in certain indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than 5% of total voting power from being added to such indices. In addition, several shareholder advisory firms have announced their opposition to the use of multiple class capital structures. As a result, the dual class structure of our ordinary shares may prevent the inclusion of the ADSs in such indices and may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for the ADSs. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of the ADSs.

 

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Because the amount, timing, and whether or not we distribute dividends at all is entirely at the discretion of our board of directors, you must rely on price appreciation of the ADSs for return on your investment.

Although we currently intend to distribute dividends in the future, the amount, timing, and whether or not we actually distribute dividends at all is entirely at the discretion of our board of directors.

Our board of directors has complete discretion as to whether to distribute dividends. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. In either case, all dividends are subject to certain restrictions under the Cayman Islands law, namely that our company may only pay dividends out of retained profits or share premium, and provided that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. 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, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiary, our 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 the ADSs. We cannot assure you that the ADSs will appreciate in value after this offering or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in the ADSs and you may even lose your entire investment in the ADSs.

Because our initial public offering price is substantially higher than our pro forma net tangible book value per share, you will experience immediate and substantial dilution.

If you purchase ADSs in this offering, you will pay more for your ADSs than the amount paid by existing shareholders for their ordinary shares on a per ADS or per share basis. As a result, you will experience immediate and substantial dilution of approximately US$5.01 per ADS or US$12.54 per share (assuming no exercise of outstanding options to acquire ordinary shares), representing the difference between (i) our pro forma as adjusted net tangible book value per ADS of US$2.49 as of January 31, 2021 after giving effect to this offering, and (ii) the assumed initial public offering price per share of US$7.50 per ADS (the midpoint of the estimated initial public offering price range set forth on the front cover page of this prospectus). In addition, you may experience further dilution to the extent that our ordinary shares are issued upon the exercise of share options. Substantially all of the ordinary shares issuable upon the exercise of currently outstanding share options will be issued at a purchase price on a per ADS or per share basis that is less than the initial public offering price per ADS in this offering. See “Dilution” for a more complete description of how the value of your investment in the ADSs will be diluted upon the completion of this offering.

The deposit agreement provides that the United States District Court for the Southern District of New York (or, if the United States District Court for the Southern District of New York lacks subject matter jurisdiction over a particular dispute, the state courts in New York County, New York) shall have exclusive jurisdiction over any suit, action or proceeding arising out of or relating in any way to the ADSs or the deposit agreement, which could limit the ability of owners and holders of the ADSs or other securities to obtain a favorable judicial forum for disputes with us, our directors and officers, the depositary, and potentially others.

The deposit agreement provides that the United States District Court for the Southern District of New York (or, if the United States District Court for the Southern District of New York lacks subject matter jurisdiction over a particular dispute, the state courts in New York County, New York) shall have exclusive jurisdiction over any suit, action or proceeding against or involving us or the depositary, arising out of or relating in any way to the deposit agreement or the transactions contemplated thereby or by virtue of owning the ADSs. The enforceability of similar federal court choice of forum provisions has been challenged in legal proceedings in the United States, and it is possible that a court could find this type of provision to be inapplicable or unenforceable. If a court were to find the federal choice of forum provision contained in the deposit agreement to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other

 

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jurisdictions. If upheld, the forum selection provision in the deposit agreement may limit a security-holder’s ability to bring a claim against us, our directors and officers, the depositary, and potentially others in his or her preferred judicial forum, and this limitation may result in increased costs for investors to bring lawsuits and discourage such lawsuits. Owners and holders of the ADSs will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder pursuant to the exclusive forum provision in the deposit agreement. In addition, the forum selection provision of the deposit agreement does not affect the right of an ADS holder or the depositary to require any claim against us, including a federal securities law claim, to be submitted to arbitration or to commence an action in any court in aid of that arbitration provision, or to enter judgment upon or enforce any arbitration award.

The voting rights of holders of the ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct how the ordinary shares represented by your ADSs are voted.

Holders of the ADSs do not have the same rights as our registered shareholders. As a holder of ADSs, you will not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights that are carried by the underlying Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary. If we instruct the depositary to ask for your instructions, then upon receipt of your voting instructions, the depositary will try, as far as practicable, to vote the underlying Class A ordinary shares represented by your ADSs in accordance with your instructions. If we do not instruct the depositary to ask for your instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so. You will not be able to directly exercise your right to vote with respect to the underlying Class A ordinary shares represented by your ADSs unless you surrender and cancel your ADSs, withdraw the shares, and become the registered holder of such shares prior to the record date for the general meeting. Under our currently effective memorandum and articles of association, the minimum notice period required to be given by our company to our registered shareholders for convening a general meeting is seven (7) days.

When a general meeting is convened, you may not receive sufficient advance notice of the meeting to withdraw the Class A ordinary shares underlying your ADSs and become the registered holder of such shares to allow you to vote directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under our currently effective memorandum and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing the Class A ordinary shares underlying your ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We have agreed to give the depositary at least 40 days’ prior notice of shareholder meetings. Nevertheless, we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the underlying Class A ordinary shares represented by your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to direct how the Class A ordinary shares underlying your ADSs are voted and you may have no legal remedy if the Class A ordinary shares underlying your ADSs are not voted as you requested. Except in limited circumstances, the depositary for the ADSs will give us a discretionary proxy to vote the Class A ordinary shares underlying your ADSs if you do not vote at shareholders’ meetings, which could adversely affect your interests.

Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirement is

 

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available. Under the deposit agreement, the depositary will not make rights available to you unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from the registration requirement 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, you may be unable to participate in our rights offerings in the future and may experience dilution in your holdings.

You may not receive dividends or other distributions if the depositary decides it is impractical to make them available to you.

The depositary will pay cash distributions on the ADSs only to the extent that we decide to distribute dividends on our Class A ordinary shares or other deposited securities. To the extent that there is a distribution, the depositary has agreed to pay you 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 and any taxes or other governmental charges. You will receive these distributions in proportion to the number of Class A ordinary shares your ADSs represent. However, the depositary may, at its discretion, decide that it is unlawful 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, or that the value of certain distributions may be less than the cost of distribution. In these cases, the depositary may decide not to distribute such property to you.

We and the depositary are entitled to amend the deposit agreement and to change the rights of ADS holders under the terms of such agreement, and we may terminate the deposit agreement, without the prior consent of the ADS holders.

We and the depositary are entitled to amend the deposit agreement and to change the rights of the ADS holders under the terms of such agreement, without the prior consent of the ADS holders. We and the depositary may agree to amend the deposit agreement in any way we decide is necessary or advantageous to us. Amendments may reflect, among other things, operational changes in the ADS program, legal developments affecting ADSs or changes in the terms of our business relationship with the depositary. In the event that the terms of an amendment prejudice a substantial existing right of ADS holders, ADS holders will only receive 30 days’ advance notice of the amendment, and no prior consent of the ADS holders is required under the deposit agreement. Furthermore, we may decide to terminate the ADS facility at any time for any reason. For example, terminations may occur when we decide to list our shares on a non-U.S. securities exchange and determine not to continue to sponsor an ADS facility or when we become the subject of a takeover or a going-private transaction. If the ADS facility will terminate, ADS holders will receive at least 90 days’ prior notice, but no prior consent is required from them. Under the circumstances that we decide to make an amendment to the deposit agreement that may prejudice a substantial existing right of is ADS holders or terminate the deposit agreement, the ADS holders may choose to sell their ADSs or surrender their ADSs and become direct holders of the underlying Class A ordinary shares, but will have no right to any compensation whatsoever.

ADSs 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, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim that they may have against us or the depositary arising out of or relating to our ordinary shares, the ADSs, or the deposit agreement, including any claim under the U.S. federal securities laws.

If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. 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

 

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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, by a federal or state court in the City of New York, which has non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether 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 entering into the deposit agreement.

If you or any other owners and holders of ADSs bring 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 owner or holder 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 or the depositary. If a lawsuit is brought against us 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 permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any owner or holder of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems it expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate actions such as a rights offering, in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of the ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is 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.

Certain judgments obtained against us by our shareholders may not be enforceable.

We are a company incorporated under the laws of the Cayman Islands. We conduct our operations outside the United States and substantially all of our assets are located outside the United States. In addition, substantially all of our directors and executive officers and the experts named in this prospectus reside outside the United States, and most of their assets are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against them in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands, Singapore, Hong Kong or other relevant jurisdiction may render you unable to enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands, Singapore, and Hong Kong, see “Enforceability of Civil Liabilities.”

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 the Cayman Islands law.

We are a company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Act of the Cayman Islands (as revised from time to time), and the common law of the Cayman Islands. The rights of shareholders to take action against our

 

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directors, actions by our minority shareholders and the fiduciary duties of our directors to us under the 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 the Cayman Islands law may not be as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, the 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 companies like us have no general rights under the Cayman Islands law to inspect corporate records, other than the memorandum and articles of association and any special resolutions passed by such companies, and the registers of mortgages and charges of such companies. Our directors have discretion under our currently effective memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. Currently, we do not plan to rely on home country practice with respect to our corporate governance after we complete this offering. However, if we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of our board of directors, or our Controlling Shareholder than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act of the Cayman Islands and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital—Differences in Cayman Corporate Law and U.S. Corporate Law.”

Our currently effective memorandum and articles of association contain anti-takeover provisions that could discourage a third party from acquiring us, which could limit our shareholders’ opportunity to sell their shares, including ordinary shares represented by the ADSs, at a premium.

Our currently effective memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. For example, our board of directors has the authority, without further action by our shareholders, to create and issue new classes or series of shares (including preferred shares) and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares, in the form of ADSs or otherwise. Preferred shares could therefore be created and issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to create and issue new class or series of preferred shares, the price of the ADSs may fall and the voting and other rights of the then existing holders of our ordinary shares and the ADSs may be materially and adversely affected.

 

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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 United States that are applicable to U.S. domestic issuers, including:

 

   

the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;

 

   

the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;

 

   

the sections of the Exchange Act requiring insiders 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

 

   

the selective disclosure rules by issuers of material nonpublic information under Regulation FD.

We will be 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 New York Stock Exchange. 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. 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.

As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that may differ significantly from the NYSE listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the NYSE.

As a Cayman Islands company to be listed on the New York Stock Exchange, we are subject to the NYSE listing standards. The NYSE 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, may differ significantly from the NYSE listing standards. Currently, we do not plan to rely on home country practices with respect to our corporate governance after we complete this offering. However, if we choose to follow home country practices in the future, our shareholders may be afforded less protection than they would otherwise enjoy under the NYSE listing standards applicable to U.S. domestic issuers.

We have not determined a specific use for a portion of the net proceeds from this offering, and we may use these proceeds in ways with which you may not agree.

As of January 31, 2021, we had HK$450.9 million (US$58.2 million) in cash and cash equivalents. We expect our cash and cash equivalents immediately after the completion of this offering to be HK$1,287.8 million (US$166.1 million), based upon an assumed initial public offering price of US$7.50 per ADS, which is the midpoint of the estimated initial public offering price range set forth on the front cover page of this prospectus. We have not determined a specific use for a portion of the net proceeds of this offering, and our management will have considerable discretion in deciding how to apply these proceeds. You will not have the opportunity to assess whether the proceeds are being used appropriately before you make your investment decision. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. We cannot assure you that the net proceeds will be used in a manner that will improve our results of operations or increase the ADS price, nor that these net proceeds will be placed only in investments that generate income or appreciate in value.

 

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There can be no assurance that we will not be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could subject United States investors in the ADSs or ordinary shares to significant adverse United States income tax consequences.

We will be classified as a passive foreign investment company, or PFIC, for any taxable year if either (a) 75% or more of our gross income for such year consists of certain types of “passive” income or (b) 50% or more of the value of our assets (determined on the basis of a quarterly average) during such year produce or are held for the production of passive income (the “asset test”). Based upon our current and expected income and assets, including goodwill (taking into account the expected proceeds from this offering) and projections as to the market price of our ADSs following the completion of this offering, we do not presently expect to be classified as a PFIC for the current taxable year or the foreseeable future.

While we do not expect to be treated as a PFIC, because the value of our assets for purposes of the asset test may be determined by reference to the market price of our ADSs, fluctuations in the market price of our ADSs may cause us to become a PFIC for the current or subsequent taxable years. The determination of whether we will be or become a PFIC will also depend, in part, on the composition and classification of our income, including the relative amounts of income generated by and the value of assets of our strategic investment business as compared to our other businesses. Because there are uncertainties in the application of the relevant rules, it is possible that the Internal Revenue Service, or the IRS, may challenge our classification of certain income and assets as non-passive which may result in our being or becoming a PFIC in the current or subsequent years. In addition, the composition of our income and assets will also be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. If we determine not to deploy significant amounts of cash for active purposes, our risk of being a PFIC may substantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year.

If we are a PFIC in any taxable year, a U.S. Holder (as defined in “Taxation—United States Federal Income Tax Considerations”) may incur significantly increased United States income tax on gain recognized on the sale or other disposition of our ADSs or ordinary shares and on the receipt of distributions on our ADSs or ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the United States federal income tax rules and such holder may be subject to burdensome reporting requirements. Further, if we are a PFIC for any year during which a U.S. Holder holds our ADSs or our ordinary shares, we will generally continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our ADSs or our ordinary shares. For more information see “Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Rules.”

We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an emerging growth company.

Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002 and the rules subsequently implemented by the SEC and the New York Stock Exchange detailed requirements concerning corporate governance practices of public companies. As a company with less than US$1.07 billion in net revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements 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 2012 relating to internal controls over financial reporting.

We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. After we are no longer an “emerging growth

 

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company,” we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. Our management will be required to devote substantial time and attention to our public company reporting obligations and other compliance matters. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. 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.

The depositary for the ADSs will give us a discretionary proxy to vote our Class A ordinary shares underlying your ADSs if you do not vote at shareholders’ meetings, except in limited circumstances, which could adversely affect your interests.

Under the deposit agreement for the ADSs, if you do not vote, the depositary will give us a discretionary proxy to vote our Class A ordinary shares underlying your ADSs at shareholders’ meetings if:

 

   

we have instructed the depositary that we wish a discretionary proxy to be given;

 

   

we reasonably do not know of any substantial opposition to the matter to be voted on at the meeting; and

 

   

the matter to be voted on at the meeting is not materially adverse to the interests of shareholders.

The effect of this discretionary proxy is that if you do not vote at shareholders’ meetings, you cannot prevent our Class A ordinary shares underlying your 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 Class A ordinary shares are not subject to this discretionary proxy.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

AND INDUSTRY DATA

This prospectus contains forward-looking statements that involve risks and uncertainties. All statements other than statements of current or historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to,” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

 

   

our goals and strategies;

 

   

our future business development, financial condition and results of operations;

 

   

the trends in, expected growth and market size of the digital financial services and digital media marketing industries in Singapore and Hong Kong;

 

   

expected changes in our revenue, costs or expenditures;

 

   

our expectations regarding demand for and market acceptance of our products and services;

 

   

competition in our industry;

 

   

our proposed use of proceeds;

 

   

government policies and regulations relating to our industry; and

 

   

general economic and business conditions in the markets we have businesses.

You should read this prospectus and the documents that we refer to in this prospectus with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this prospectus include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Market and Industry Information

This prospectus contains certain data and information that we obtained from industry publications and reports generated by third-party providers of market intelligence. We have not independently verified the accuracy or completeness of the data and information contained in these publications and reports. Statistical data in these publications also include projections based on a number of assumptions. The financial services industry may not grow at the rate projected by market data, or at all. Failure of these markets to grow at the projected rate may have a material and adverse effect on our business and the market price of the ADSs. If any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately US$107.9 million, or approximately US$124.7 million if the underwriters exercise their option to purchase additional ADSs in full, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. These estimates are based upon an assumed initial public offering price of US$7.50 per ADS, which is the midpoint of the estimated initial public offering price range set forth on the front cover page of this prospectus. A US$1.00 change in the assumed initial public offering price of US$7.50 per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease the net proceeds to us from this offering by US$14.9 million, assuming the number of ADSs offered by us as set forth on the cover page of this prospectus remains the same, and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.

The primary purposes of this offering is to enhance our brand recognition, create a public market for our shares for the benefit of all shareholders and as a currency for future acquisitions, retain talented employees by providing them with potential equity incentives, and obtain additional capital to support our growth initiatives. We intend to use the net proceeds that we receive from this offering as follows:

 

   

approximately 40% to fulfill the capital requirements for future license applications, acquisitions, IT infrastructure, and human resources;

 

   

approximately 40% to support our business expansion and growth although we do not have any current plans for acquisitions with the use of proceeds from this offering at this time; and

 

   

the remainder for general corporate purposes.

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the net proceeds of this offering differently than as described in the respective prospectuses. See “Risk Factors—Risks Relating to Our ADSs and This Offering—We have not determined a specific use for a portion of the net proceeds from this offering, and we may use these proceeds in ways with which you may not agree.”

Pending any use as described above, we plan to invest the net proceeds that we receive from this offering for cash management purposes in short-term, interest-bearing, debt instruments or demand deposits.

 

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DIVIDEND POLICY

We have not declared or paid dividends in the past given the stage of development that our businesses were in. We intend to distribute dividends in the future, but we do not have a fixed dividend policy. Although we intend to distribute dividends in the future, the amount, timing, and whether or not we actually distribute dividends at all is at the discretion of our board of directors.

We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries for our cash requirements, including any payment of dividends to our shareholders. Our board of directors has complete discretion on whether to distribute dividends, subject to applicable laws. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Under the Cayman Islands law, a Cayman Islands company may pay a dividend either out of profit or share premium account, provided that in no circumstances may a dividend be paid if the dividend payment would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends, the form, frequency, and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions, and other factors that the board of directors may deem relevant.

If we pay any dividends on our ordinary shares, we will pay those dividends that are payable in respect of the ordinary shares underlying the ADSs to the depositary, as the registered holder of such ordinary shares, and the depositary then will pay such amounts to our ADS holders in proportion to the ordinary shares underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Description of American Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars, except as otherwise disclosed in this prospectus.

 

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CAPITALIZATION

The following table sets forth our capitalization as of January 31, 2021:

 

   

on an actual basis;

 

   

on a pro forma basis to reflect the issuance of 17,000,000 Class A ordinary shares for considerations of US$170,000,000 (equivalent to approximately HK$1,318 million) in March 2021; and

 

   

on a pro forma as-adjusted basis to reflect (i) the issuance of 17,000,000 Class A ordinary shares for considerations of US$170,000,000 (equivalent to approximately HK$1,318 million) in March 2021 and (ii) the issuance and sale of 6,400,000 Class A ordinary shares in the form of ADSs by us in this offering at an assumed initial public offering price of US$7.50 per ADS, the midpoint of the estimated range of the initial public offering price shown on the front cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, assuming the underwriters do not exercise their option to purchase additional ADSs.

You should read the following table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

    As of January 31, 2021  
    Actual     Pro Forma     Pro Forma As Adjusted(1)  
    HK$     US$     HK$     US$     HK$     US$  
    (in thousands)  

Equity

           

Share capital

    40       5       52       7       57       7  

Reserves

    1,481,493       191,084       2,799,508       361,082       3,636,349       469,019  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Capitalization(2)

    1,481,533       191,089       2,799,560       361,089       3,636,406       469,026  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Notes:

(1)

The pro forma as adjusted information discussed above is illustrative only. Our total capitalization following the completion of this offering is subject to adjustment based on the actual initial public offering price and other terms of this offering determined at pricing.

(2)

A US$1.00 change in the assumed initial public offering price of US$7.50 per ADS in this offering, the mid-point of the estimated range of the initial public offering price shown on the cover page of this prospectus, would, in the case of an increase, increase and, in the case of a decrease, decrease total capitalization by US$14.9 million, assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

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DILUTION

If you invest in the ADSs, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and our net tangible book value per ADS after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

Our net tangible book value as of January 31, 2021 was approximately US$181,937,419, or US$3.59 per ordinary share and US$1.44 per ADS as of the same date. Net tangible book value represents the amount of our total tangible assets, less the amount of our total consolidated liabilities. Pro forma net tangible book value is calculated after giving effect to the issuance of 17,000,000 Class A ordinary shares on March 8, 2021. Dilution is determined by subtracting net tangible book value per ordinary share, after giving effect to the additional proceeds that we will receive from this offering, from the assumed initial public offering price of US$7.50 per ordinary share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus adjusted to reflect the ADS-to-ordinary share ratio, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Because the Class A ordinary shares and Class B ordinary shares have the same dividend and other rights, except for voting and conversion rights, the dilution is presented based on all issued and outstanding ordinary shares, including Class A ordinary shares and Class B ordinary shares.

Without taking into account any other changes in such net tangible book value after January 31, 2021, other than to give effect to our issuance and sale of 16,000,000 ADSs in this offering at an assumed initial public offering price of US$7.50 per ADS, the midpoint of the estimated public offering price range, after deduction of underwriting discounts and commissions and estimated offering expenses payable by us (assuming the underwriters do not exercise their option to purchase additional ADSs), our pro forma as adjusted net tangible book value as of January 31, 2021 would have been US$459,874,419, or US$6.21 per outstanding ordinary share, including ordinary shares underlying our outstanding ADSs, and US$2.49 per ADS. This represents an immediate increase in net tangible book value of US$2.62 per ordinary share, or US$1.05 per ADS, to existing shareholders and an immediate dilution in net tangible book value of US$12.54 per ordinary share, or US$5.01 per ADS, to investors purchasing ADSs in this offering. The following table illustrates such dilution:

 

     Per Ordinary Share      Per ADS  

Assumed initial public offering price

   US$ 18.75      US$ 7.50  

Net tangible book value as of January 31, 2021

   US$ 3.59      US$ 1.44  

Pro forma net tangible book value after giving effect to subsequent issuance of ordinary shares in March 2021

   US$ 5.20      US$ 2.08  

Pro forma as adjusted net tangible book value after giving effect to this offering and subsequent issuance of ordinary shares in March 2021

   US$ 6.21      US$ 2.49  

Amount of dilution in net tangible book value to new investors in the offering

   US$ 12.54      US$ 5.01  

A US$1.00 change in the assumed initial public offering price of US$7.50 per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease our pro forma as adjusted net tangible book value after giving effect to this offering by US$14.9 million, the pro forma as adjusted net tangible book value per ordinary share and per ADS after giving effect to this offering by US$0.20 per ordinary share and US$0.08 per ADS and the dilution in pro forma as adjusted net tangible book value per ordinary share and per ADS to new investors in this offering by US$2.30 per ordinary share and US$0.92 per ADS, assuming no change to the number of ADSs offered by us as set forth on the cover page of the prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

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The following table summarizes, on a pro forma as adjusted basis as of January 31, 2021, the differences between existing shareholders and the new investors with respect to the number of ordinary shares (in the form of ADS or ordinary shares) purchased from us, the total consideration paid, and the average price per ordinary share and per ADS paid before deducting underwriting discounts and commissions and estimated offering expenses. The total number of ordinary shares does not include Class A ordinary shares underlying the ADSs issuable upon the exercise of the option granted to the underwriters to purchase additional ADSs.

 

     Ordinary Shares Purchased     Total Consideration     Average Price
Per Ordinary
Share
     Average Price
Per ADS
 
     Number      Percent     Amount      Percent  

Existing shareholders

     67,618,142        91.4   US$ 327,044,537        73.2   US$ 4.84      US$ 1.93  

New investors

     6,400,000        8.6   US$ 120,000,000        26.8   US$ 18.75      US$ 7.50  
  

 

 

    

 

 

   

 

 

    

 

 

      

Total

     74,018,142        100.0   US$ 447,044,537        100.0     
  

 

 

    

 

 

   

 

 

    

 

 

      

The pro forma as adjusted information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of the ADSs and other terms of this offering determined at pricing.

 

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ENFORCEABILITY OF CIVIL LIABILITIES

Cayman Islands

We are incorporated under the laws of the Cayman Islands as an exempted company with limited liability. We are incorporated in the Cayman Islands because of certain benefits associated with being a Cayman Islands exempted company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions, and the availability of professional and support services. However, the Cayman Islands has a less developed body of securities laws than the United States and provides less protection for investors. In addition, Cayman Islands companies do not have standing to sue before the federal courts of the United States.

Substantially all of our assets are located outside the United States. In addition, most of our directors and officers are nationals or residents of jurisdictions other than the United States and all or a substantial portion of their assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or these persons, or to enforce judgments obtained in U.S. courts against us or them, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. It may also be difficult for you to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors.

We have appointed Puglisi & Associates as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

Travers Thorp Alberga, our counsel as to the laws of the Cayman Islands has advised us that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers that are predicated upon the civil liability provisions of the federal securities laws of the United States or the securities laws of any state in the United States, or (ii) entertain original actions brought in the Cayman Islands against us or our directors or officers that are predicated upon the federal securities laws of the United States or the securities laws of any state in the United States.

Travers Thorp Alberga has informed us that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States (and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments), a judgment in personam obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment (i) is given by a competent foreign court with jurisdiction to give the judgment, (ii) imposes a specific positive obligation on the judgment debtor (such as an obligation to pay a liquidated sum or perform a specified obligation), (iii) is final and conclusive, (iv) is not in respect of taxes, a fine, or a penalty; (v) has not been obtained by fraud; and (vi) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. However, the Cayman Islands courts are unlikely to enforce a judgment obtained from the U.S. courts under civil liability provisions of the U.S. federal securities law if such judgment is determined by the courts of the Cayman Islands to give rise to obligations to make payments that are penal or punitive in nature. Because such a determination has not yet been made by a court of the Cayman Islands, it is uncertain whether such civil liability judgments from U.S. courts would be enforceable in the Cayman Islands. A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

Singapore

Clifford Chance Pte. Ltd., our counsel with respect to Singapore law, has advised us that judgments of the United States courts, or US Judgments, are not directly recognizable or enforceable in Singapore. There are

 

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currently no treaties or other arrangements providing for reciprocal enforcement of foreign judgments between Singapore and the United States. Therefore, to enforce a US Judgment in Singapore, the judgment creditor would have to commence fresh proceedings at common law. If it satisfies the Singapore law requirements, the US Judgment creates a fresh obligation to pay the judgment debt, different from that being adjudicated before the US courts. As a matter of practice, the judgment creditor would commence a common law action for debt and, typically, apply for summary judgment on the basis of the US Judgment. The Singapore court’s in personam jurisdiction over the judgment debtor must be established in accordance with Singapore’s rules for establishing jurisdiction (including personal service, submission to jurisdiction and, given the right circumstances, service out of jurisdiction). To be enforceable at common law, a US Judgment must be (a) from a court of law of competent and international jurisdiction over the judgment debtor (based on Singapore’s conflict of laws principles) (b) final and conclusive on the merits and (c) for a fixed or ascertainable sum of money. In addition, the US Judgment must not have been (i) procured by fraud (ii) obtained in breach of natural justice (iii) inconsistent with a prior local judgment to give effect to the US Judgment. Further, the enforcement of the US Judgment must (I) not be contrary to Singapore’s public policy and (II) not be tantamount to the direct or indirect enforcement of foreign penal, revenue or other public laws.

Hong Kong

Justin Chow & Co. Solicitors LLP, our counsel with respect to Hong Kong law, has advised us that judgment of United States courts will not be directly enforced in Hong Kong. There are currently no treaties or other arrangements providing for reciprocal enforcement of foreign judgments between Hong Kong and the United States. However, the common law permits an action to be brought upon a foreign judgment. That is to say, a foreign judgment itself may form the basis of a cause of action since the judgment may be regarded as creating a debt between the parties to it. In a common law action for enforcement of a foreign judgment in Hong Kong, the enforcement is subject to various conditions, including but not limited to, that the foreign judgment is a final judgment conclusive upon the merits of the claim, the judgment is for a liquidated amount in a civil matter and not in respect of taxes, fines, penalties, or similar charges, the proceedings in which the judgment was obtained were not contrary to natural justice, and the enforcement of the judgment is not contrary to public policy of Hong Kong. Such a judgment must be for a fixed sum and must also come from a “competent” court as determined by the private international law rules applied by the Hong Kong courts. The defenses that are available to a defendant in a common law action brought on the basis of a foreign judgment include lack of jurisdiction, breach of natural justice, fraud, and contrary to public policy. However, a separate legal action for debt must be commenced in Hong Kong in order to recover such debt from the judgment debtor.

 

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CORPORATE HISTORY AND STRUCTURE

Corporate History

In January 2003, AMTD Group Company Limited (formerly known as Allday Enterprises Limited), our Controlling Shareholder, was founded by CK Hutchison Holdings Limited (SEHK: 0001) and Commonwealth Bank of Australia under the laws of the British Virgin Islands to provide financial services. Our Controlling Shareholder commenced our current insurance solutions business in October 2004. Our Controlling Shareholder commenced our current digital investments business in July 2016 and SpiderNet ecosystem solutions business in December 2017.

On September 12, 2019, AMTD Digital Inc. was incorporated under the laws of the Cayman Islands initially as a wholly-owned subsidiary of our Controlling Shareholder and, following the completion of a restructuring in December 2019, became a holding company of our digital financial services, SpiderNet ecosystem solutions, digital media, content, and marketing, and digitals investments businesses. For further details, see “—Restructuring.” We commenced our digital media, content, and marketing business in May 2020.

After this offering, we will become a public company while we will continue to receive support from our Controlling Shareholder for a specified period of time. We will enter into a series of agreements with our Controlling Shareholder, including a master transaction agreement, a transitional services agreement, and a non-competition agreement, to govern the arrangements between us with clearly defined terms and conditions. We do not foresee any direct conflicts of interest with our Controlling Shareholder given our unique nature of business which is not similar to and does not compete with other businesses conducted by our Controlling Shareholder. For other potential conflicts of interest, see “Risk Factors—Risks Relating to Our Business and Industry—We may have conflicts of interest with our Controlling Shareholder or any of its controlling shareholders and, because of our Controlling Shareholder’s controlling ownership interest in our company, we may not be able to resolve such conflicts on terms favorable to us.”

Under our dual-class stock structure, our shares are divided into Class A and Class B ordinary shares. Except for voting rights (each Class A ordinary share shall entitle the holder thereof to one vote on all matters subject to vote at general meetings while each Class B ordinary share shall entitle the holder thereof to twenty votes on all matters subject to vote at general meetings) and conversion rights (each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof but Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances), Class A and Class B ordinary shares rank pari passu with one another and have the same rights, preferences, privileges, and restrictions. Although Class B ordinary shares have super voting power, any rights attached to Class A ordinary shares can only be materially and adversely varied with the consent in writing of the holders of all Class A ordinary shares. Therefore, notwithstanding the fact that our Controlling Shareholder and certain other affiliates beneficially own all of our Class B ordinary shares and have the ability to control the outcome of matters put to a shareholder vote on general meetings, they do not have the right to conclude on proposals that will materially and adversely affect the rights of Class A ordinary shares in any way without affecting the rights of Class B ordinary shares in the same way unless with the approval of the holders of all Class A ordinary shares.

Restructuring

In 2019, we carried out a restructuring in relation to our digital financial services, SpiderNet ecosystem solutions, and digitals investments businesses from our Controlling Shareholder.

With respect to our digital financial services business, our Controlling Shareholder transferred AMTD Risk Solutions Limited, or AMTD RS, and AMTD RSG to AMTD Digital Financial Holdings Limited on December 31, 2019. Prior to the transfers, both AMTD RS and AMTD RSG were subsidiaries of our Controlling Shareholder.

 

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With respect to our SpiderNet ecosystem solutions business, our Controlling Shareholder transferred AMTD Digital Media Limited (formerly known as AMTD Strategic Capital Limited), or AMTD DM, to AMTD Digital Media Holdings Limited on December 31, 2019. Prior to the transfer, AMTD DM was a subsidiary of our Controlling Shareholder.

With respect to our digital investments business, our Controlling Shareholder transferred AMTD Direct Investment I Limited, or AMTD DI I, AMTD Direct Investment III Limited, or AMTD DI III, AMTD Biomedical Investment Limited, or AMTD BI, AMTD Investment Solutions Limited, or AMTD IS, and AMTD Principal Investment Solutions Group Limited, AMTD PISG, to AMTD Digital Investments Holdings Limited on December 31, 2019. Prior to the transfers, AMTD DI I, AMTD DI III, AMTD BI, AMTD IS and AMTD PISG were subsidiaries of our Controlling Shareholder.

Our Choice of Singapore as the Location for Our Strategic Hub

We believe that Singapore’s pro-business, smart-city-centric, and cost-competitive environment, excellent infrastructure, and highly skilled and cosmopolitan labor force make it the ideal home for our strategic hub to expand into the ASEAN region.

Together with our Controlling Shareholder and its affiliate companies, we have made multiple strategic layouts and initiatives in Singapore over the past few years.

 

   

AMTD Digital is currently leading a consortium to apply for a digital wholesale banking license in Singapore. The other consortium members include Xiaomi, SP Group, and Funding Societies;

 

   

AMTD International has entered into a long-term strategic partnership with SGX-ST to promote the development of Singapore’s capital markets and strengthen connectivity between Singapore, ASEAN, the Greater Bay Area, the rest of China, and the Middle East;

 

   

AMTD Group and AMTD Charity Foundation established the AMTD ASEAN-Solidarity Fund together with AFIN in April 2020, with an initially available capital of S$50 million to support and anchor FinTech startups during the challenging times of the pandemic;

 

   

AMTD Group and AMTD Charity Foundation established a S$6 million MAS-SFA-AMTD FinTech Solidarity Grant scheme together with the MAS and Singapore FinTech Association in May 2020 to support Singapore-based FinTech companies amid the challenging business climate caused by the COVID-19 pandemic;

 

   

AMTD Group and AMTD Charity Foundation is the first corporate founding member of AFIN, a non-profit entity formed by the MAS, International Finance Corporation, a member of the World Bank Group, and the ASEAN Bankers Association;

 

   

AMTD Group and Singapore FinTech Association jointly established the AMTD-SFA Global FinTech Fellowship Program;

 

   

AMTD Charity Foundation, Singapore Management University, the Institute of Systems Science at the National University of Singapore, and Xiaomi Finance jointly established a AMTD-Xiaomi-SMU-ISS Digital Finance Leadership Program, or AXSI Program;

 

   

We entered into a strategic collaboration agreement with Global FinTech Institute, or GFI, in September 2020 to provide Chartered FinTech Professional (CFtP) candidates and CFtP qualification holders with opportunities for mentorship and internship in FinTech firms across the world. AMTD Digital grants “AMTD-GFI Scholarship” to selected students to complete the CFtP qualification with internship in the AMTD SpiderNet ecosystem;

 

   

AMTD Group is the founding member and has been a strategic partner of the Singapore FinTech Festival for the past four consecutive years;

 

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AMTD Digital has acquired the controlling stake in PolicyPal Pte. Ltd., Singapore’s InsurTech pioneer and the first graduate of MAS’s FinTech Sandbox;

 

   

We expect to acquire a controlling stake in CapBridge Financial Pte. Ltd., the holding company of a leading online private markets integrated capital raising and secondary liquidity platform based in Singapore for global growth companies and funds. Completion of the transaction is subject to final negotiation of terms of the transaction, as well as MAS approval;

 

   

AMTD Assets Alpha Group, or AMTD Assets, acquired Oakwood Premier AMTD Singapore, a centrally located hotel and serviced apartment;

 

   

We entered into a long-term strategic partnership with Singapore FinTech Association to support and anchor Singapore’s FinTech community, maintaining Singapore’s leadership as one of the most energetic, sustainable FinTech ecosystems promoting innovation and entrepreneurship, and contributing to Singapore’s vision as a smart nation; and

 

   

AMTD Digital Solutions Pte. Ltd., together with PolicyPal Pte. Ltd., incorporated Applaud Digital Solutions Pte. Ltd. to apply for a direct insurer (composite) license in Singapore.

 

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Corporate Structure

The following diagram illustrates AMTD Digital Inc. and its subsidiaries in our corporate structure as of the date of this prospectus.

 

LOGO

 

Note:

(1) 

Subject to certain regulatory approval, capital injection will be made by all consortium partners according to the execution of shareholder’s agreement, AMTD Digital Holdings Pte. Ltd.’s shareholding will become 35.2%.

 

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Our Subsidiaries

AMTD Digital Solutions Power Pte. Ltd.

AMTD Digital Solutions Power Pte. Ltd. was incorporated under the laws of Singapore in June 2020 as a wholly-owned subsidiary of AMTD Digital Inc. with business exposure and operations in Singapore and Hong Kong.

Digital Financial Services

AMTD Digital Financial Holdings Limited was incorporated under the laws of the British Virgin Islands in October 2019 under the name of AMTD DOP Limited, as a holding company for our digital financial services business. We changed its name to AMTD Digital Financial Holdings Limited in December 2019.

We conduct our insurance solutions business through AMTD RS and AMTD RSG, which were transferred to AMTD Digital Financial Holdings Limited following the completion of our restructuring. AMTD RSG was incorporated under the laws of Hong Kong in August 2004 under the name of AMTD Risk Management Limited to carry out our insurance solutions business. We changed its name to AMTD Risk Solutions Group Limited in October 2016. AMTD RS was incorporated under the laws of the British Virgin Islands in July 2016 to hold AMTD RSG. AMTD RSG is a licensed insurance broker company regulated by the Hong Kong Insurance Authority.

Our subsidiary, AMTD Digital Holdings Pte. Ltd., entered into a binding term sheet in December 2019 with Xiaomi, SP Group, and Funding Societies to establish a consortium in which we expect AMTD Digital Holdings Pte. Ltd. to be the largest shareholder. The consortium is applying for a digital banking license in Singapore.

We entered into a share purchase agreement in June 2020 to acquire 51% of the equity interest in PolicyPal Pte. Ltd., the holding company of PolicyPal’s business, for a consideration of US$3 million in cash and 702,765 of our Class A ordinary shares. We completed the acquisition through PolicyPal Group Limited in August 2020.

Also in June 2020, we entered into a binding term sheet pursuant to which we expect to acquire 55% of CapBridge Financial Pte. Ltd.’s equity interest. We expect to complete the acquisition through CapBridge Group Limited in the first half of 2021. The completion of our acquisition of CapBridge is subject to a number of conditions, including final negotiation of terms of the transaction, MAS approval, and satisfaction of our closing obligations.

AMTD Digital Solutions Pte. Ltd. was incorporated under the laws of Singapore in April 2020 as our operating entity. In July 2020, AMTD Digital Solutions Pte. Ltd., together with PolicyPal Pte. Ltd., incorporated Applaud Digital Solutions Pte. Ltd.

AMTD Digital Holdings Pte. Ltd., a subsidiary of AMTD (Singapore) Group Holdings Ltd., entered into a binding term sheet in December 2019 with Xiaomi, SP Group, and Funding Societies to establish Singa Digital Pte. Ltd., the entity expected to operate Singa Bank.

SpiderNet Ecosystem Solutions

AMTD Digital Connectors Holdings Limited was incorporated under the laws of the British Virgin Islands in October 2019 under the name of AMTD DC Limited for our SpiderNet ecosystem solutions business. We changed its name to AMTD Digital Connectors Holdings Limited in December 2019.

Digital Media, Content, and Marketing

AMTD Digital Media Holdings Limited was incorporated under the laws of the British Virgin Islands in October 2019 under the name of AMTD MA Limited, as a holding company for our digital media, content, and marketing business. We changed its name to AMTD Digital Media Holdings Limited in December 2019.

 

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We conduct our operations of this business through AMTD Digital Media Holdings Limited and AMTD DM, which was transferred to AMTD Digital Inc. as a subsidiary of AMTD Digital Media Holdings Limited following the completion of our restructuring. AMTD DM was incorporated under the laws of Hong Kong in August 2004 under the name of AMTD Direct Limited, which was subsequently changed to AMTD Strategic Capital Limited in September 2007 and again to AMTD Digital Media Limited in March 2020. AMTD Digital Media Solutions Pte. Ltd. was incorporated under the laws of Singapore in August 2020 to provide digital media, content, and marketing services in Singapore. In January 2021, AMTD Digital Solutions Power Pte. Ltd. transferred AMTD Digital Media Solutions Pte. Ltd. to AMTD Digital Media Holdings Limited.

Digital Investments

AMTD IS was incorporated under the laws of the British Virgin Islands in July 2016 to hold certain investments. Also in July 2016, AMTD PISG was incorporated under the laws of the British Virgin Islands as a subsidiary of AMTD IS to hold certain investments.

AMTD BI, AMTD DI I, and AMTD Direct Investment III Limited were incorporated under the laws of the British Virgin Islands in July 2017, August 2018, and October 2018, respectively, each to hold certain investments. AMTD BI was incorporated under the name of AMTD Consulting Limited, which was subsequently changed to AMTD Biomedical Investment Limited in May 2018.

AMTD Singapore Solidarity Fund Pte. Ltd. and its subsidiaries, collectively, the Fund, were incorporated under the laws of Singapore in April 2020. The Fund was set up for the purpose of providing financial support to FinTech companies through a grant scheme administered by the Singapore FinTech Association and a long-term support scheme in the form of capital investments. The Fund was transferred from our Controlling Shareholder and AMTD Foundation Limited, or AMTD Charity Foundation, a charitable organization founded by our founder, Calvin Choi, to AMTD Digital Solutions Power Pte. Ltd. in June 2020 and became wholly-owned subsidiaries of AMTD Digital Solutions Power Pte. Ltd. In January 2021, AMTD Digital Solutions Power Limited transferred AMTD Singapore Solidarity Fund Pte. Ltd. and its subsidiaries to AMTD Digital Investments Solutions Holdings Limited.

AMTD Digital Investment Holdings Limited was incorporated under the laws of the British Virgin Islands in October 2019 to hold AMTD IS, AMTD PISG, AMTD BI, and AMTD DI I.

Name Change History and Licenses

The following table sets forth the name change history and licenses held by our company and subsidiaries (the acquisition of CapBridge is subject to final negotiation of terms of the transactions, as well as MAS approval).

 

Entity Name

  

Name Change History

  

Licenses

AMTD Digital Inc. (incorporated in the Cayman Islands)    AMTD Digital Inc. (incorporated on September 12, 2019)    —  
AMTD Digital Solutions Power Pte. Ltd. (incorporated in Singapore)    AMTD Digital Solutions Power Pte. Ltd. (incorporated on June 5, 2020)    —  
AMTD Digital Connectors Holdings Limited (incorporated in the British Virgin Islands)   

•   AMTD DC Limited (incorporated on October 22, 2019)

   —  
  

•   AMTD Digital Connectors Holdings Limited (renamed on December 18, 2019)

  

 

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Entity Name

  

Name Change History

  

Licenses

AMTD Digital Financial Holdings Limited (incorporated in the British Virgin Islands)   

•   AMTD DOP Limited (incorporated on October 22, 2019)

   —  
  

•   AMTD Digital Financial Holdings Limited (renamed on December 18, 2019)

  
AMTD Digital Investments Holdings Limited (incorporated in the British Virgin Islands)   

•   AMTD DVI Limited (incorporated on October 22, 2019)

   —  
  

•   AMTD Digital Investments Holdings Limited (renamed on December 18, 2019)

  
AMTD Digital Media Holdings Limited (incorporated in the British Virgin Islands)   

•   AMTD MA Limited (incorporated on October 22, 2019)

   —  
  

•   AMTD Digital Media Holdings Limited (renamed on December 18, 2019)

  
AMTD Digital Solutions Pte. Ltd. (incorporated in Singapore)    AMTD Digital Solutions Pte. Ltd. (incorporated on April 2, 2020)    —  

AMTD Digital Media Limited

(incorporated in Hong Kong)

  

•   AMTD Direct Limited (incorporated on August 13, 2004)

   —  
  

•   AMTD Strategic Capital Limited (renamed on September 5, 2007)

  
  

•   AMTD Digital Media Limited (renamed on March 25, 2020)

  
AMTD Risk Solutions Limited (incorporated in the British Virgin Islands)    AMTD Risk Solutions Limited (incorporated on July 26, 2016)    —  
AMTD Risk Solutions Group Limited (incorporated in Hong Kong)   

•   AMTD Risk Management Limited (incorporated on August 13, 2004)

  

•   Membership of The Hong Kong Confederation of Insurance Brokers (obtained on October 19, 2004)

  

•   AMTD Risk Solutions Group Limited (renamed on October 25, 2016)

  

•   Mandatory Provident Fund Principal Intermediary (registered on September 23, 2016)

     

•   Insurance Broker Company with Hong Kong Insurance Authority (obtained on September 23, 2019)

 

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Entity Name

  

Name Change History

  

Licenses

AMTD Direct Investment I Limited (incorporated in the British Virgin Islands)    AMTD Direct Investment I Limited (incorporated on August 29, 2018)    —  
AMTD Direct Investment III Limited (incorporated in the British Virgin Islands)    AMTD Direct Investment III Limited (incorporated on August 29, 2018)    —  
AMTD Investment Solutions Limited (incorporated in the British Virgin Islands)    AMTD Investment Solutions Limited (incorporated on July 21, 2016)    —  
AMTD Principal Investment Solutions Group Limited (incorporated in the British Virgin Islands)    AMTD Principal Investment Solutions Group Limited (incorporated on July 27, 2016)    —  
AMTD Biomedical Investment Limited (incorporated in the British Virgin Islands)   

•   AMTD Consulting Limited (incorporated on July 28, 2017)

   —  
  

•   AMTD Biomedical Investment Limited (renamed on May 7, 2018)

  
PolicyPal Group Limited (incorporated in the British Virgin Islands)    PolicyPal Group Limited (incorporated on August 10, 2020)    —  
PolicyPal Pte. Ltd. (incorporated in Singapore)    PolicyPal Pte. Ltd. (incorporated on April 22, 2016)    —  
BaoXianBaoBao Pte. Ltd. (incorporated in Singapore)   

•   BaoXianBaoBao Pte. Ltd. (incorporated on August 25, 2017)

  

•   Exempt Financial Adviser under Financial Advisers Act

  

•   PolicyPal Singapore Pte. Ltd. (renamed on September 17, 2017)

  

•   Registered Insurance Broker under Insurance Act

  

•   BaoXianBaoBao Pte. Ltd. (renamed on March 4, 2021)

  
PolicyPal Tech Pte. Ltd. (incorporated in Singapore)    PolicyPal Tech Pte. Ltd. (incorporated on May 10, 2018)    —  
AMTD Singapore Solidarity Fund Pte. Ltd. (incorporated in Singapore)   

•   AMTD Singapore Fintech Relief Fund Pte. Ltd. (incorporated on April 1, 2020)

 

•   AMTD Singapore Solidarity Fund Pte. Ltd. (renamed on July 9, 2020)

   —  
AMTD Solidarity Fund 1 Pte. Ltd. (incorporated in Singapore)   

•   AMTD Relief Fund 1 Pte. Ltd. (incorporated on April 1, 2020)

   —  

 

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Entity Name

  

Name Change History

  

Licenses

  

 

•   AMTD Solidarity Fund 1 Pte. Ltd. (renamed on July 8, 2020)

  
AMTD Solidarity Fund 2 Pte. Ltd. (incorporated in Singapore)   

•   AMTD Relief Fund 2 Pte. Ltd. (incorporated on April 1, 2020)

 

•   AMTD Solidarity Fund 2 Pte. Ltd. (renamed on July 8, 2020)

   —  
AMTD Solidarity Fund 3 Pte. Ltd. (incorporated in Singapore)   

•   AMTD Relief Fund 3 Pte. Ltd. (incorporated on April 1, 2020)

 

•   AMTD Solidarity Fund 3 Pte. Ltd. (renamed on July 8, 2020)

   —  
AMTD Solidarity Fund 4 Pte. Ltd. (incorporated in Singapore)   

•   AMTD Relief Fund 4 Pte. Ltd. (incorporated on April 1, 2020)

 

•   AMTD Solidarity Fund 4 Pte. Ltd. (renamed on July 8, 2020)

   —  
AMTD Solidarity Fund 5 Pte. Ltd. (incorporated in Singapore)   

•   AMTD Relief Fund 5 Pte. Ltd. (incorporated on April 1, 2020)

 

•   AMTD Solidarity Fund 5 Pte. Ltd. (renamed on July 8, 2020)

   —  
AMTD (Singapore) Group Holdings Ltd (incorporated in the British Virgin Islands)   

•   AMTD Platform Solutions Group Limited (incorporated on June 20, 2017)

 

•   AMTD (Singapore) Group Holdings Ltd (renamed on April 7, 2020)

   —  
AMTD Digital Holdings Pte. Ltd. (incorporated in Singapore)   

AMTD Digital Holdings Pte. Ltd. (incorporated on December 31, 2019)

   —  
Singa Digital Pte. Ltd. (incorporated in Singapore)    Singa Digital Pte. Ltd. (incorporated on January 3, 2020)    —  
AMTD Digital Media Solutions Pte. Ltd. (incorporated in Singapore)    AMTD Digital Media Solutions Pte. Ltd. (incorporated on August 10, 2020)    —  
Applaud Digital Solutions Pte. Ltd. (incorporated in Singapore)    Applaud Digital Solutions Pte. Ltd. (incorporated on July 13, 2020)    —  

 

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Our Relationship with the Controlling Shareholder and Other Group Companies

AMTD Digital is the core of the AMTD SpiderNet, and hence, we have created a shareholding structure where the interest of all AMTD Group companies’ interests are aligned with those of AMTD Digital, ensuring seamless cooperation between the group companies and that maximum synergies will be achieved. As of the date of this prospectus, AMTD Digital Inc. is 72.2%-owned by our Controlling Shareholder and its subsidiaries in aggregate, with our Controlling Shareholder owning 29.4%, AMTD International owning 10.4%, AMTD Education Group, or AMTD Education, owning 16.2%, and AMTD Assets owning 16.2% of our equity interests.

Treasury functions are conducted centrally under our Controlling Shareholder and intra-group treasury fund transfers are carried out among the entities within AMTD Group. The treasury function manages available funds at our Controlling Shareholder level and allocates the funds to various entities within AMTD Group for their operations.

Historically, our Controlling Shareholder has provided us with business premises, financial, accounting, administrative, legal, and human resources services, as well as the services of a number of its executive officers and other employees, the costs of which were allocated to us based on actual usage or proportion of revenue and infrastructure usage attributable to our business, among other things. We have begun to invest in our own financial, accounting, and legal functions separate from those of our Controlling Shareholder, and we will further establish other support systems of our own or contract with third parties to provide them to us after we become a stand-alone public company. We entered into a series of agreements with our Controlling Shareholder with respect to our ongoing relationship in May 2021. These agreements include a master transaction agreement, a transitional services agreement, and a non-competition agreement. The following are summaries of these agreements.

Master Transaction Agreement

Pursuant to the master transaction agreement, we are responsible for all financial liabilities associated with the current and historical digital financial services, SpiderNet ecosystem solutions, digital media, content, and marketing, and digital investments businesses and operations that have been conducted by or transferred to us, and our Controlling Shareholder is responsible for financial liabilities associated with all of our Controlling Shareholder’s other current and historical businesses and operations, in each case regardless of the time those liabilities arise. The master transaction agreement also contains indemnification provisions under which we and our Controlling Shareholder indemnify each other with respect to breaches of the master transaction agreement or any related inter-company agreement.

In addition, we agree to indemnify our Controlling Shareholder, its subsidiaries and each of their directors, officers and employees against liabilities arising from misstatements or omissions in this prospectus or the registration statement of which it is a part, except for misstatements or omissions relating to information that our Controlling Shareholder provided to us specifically for inclusion in this prospectus or the registration statement of which it forms a part. Our Controlling Shareholder will indemnify us including each of our subsidiaries, director, officers and employees against liabilities arising from misstatements or omissions with respect to information that our Controlling Shareholder provided to us specifically for inclusion in this prospectus, the registration statement of which this prospectus forms a part, or our annual reports or other SEC filings following the completion of this offering.

The master transaction agreement also contains a general release, under which the parties will release each other, including each party’s subsidiaries, directors, officers and employees from any liabilities arising from events occurring on or before the initial filing date of the registration statement of which this prospectus forms a part, including in connection with the activities to implement this offering. The general release does not apply to liabilities allocated between the parties under the master transaction agreement, the transitional services agreement, and the non-competition agreement.

 

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The master transaction agreement sets forth the investment opportunity referral procedures, pursuant to which our Controlling Shareholder agrees to first present investment opportunities related to digital financial services or digital financial licenses, or investment opportunities in new technology or new media companies to us for consideration within a specified period and to refrain from pursuing these investment opportunities. Our Controlling Shareholder agrees to pursue these investment opportunities for itself only after we decline to pursue these investment opportunities or upon expiration of the specified period should we fail to respond, with the exception of subsequent investments by our Controlling Shareholder in its existing investee companies. When determining whether or not to pursue an investment opportunity, members of our investment committee that have overlapping duties as directors or officers in our Controlling Shareholder will abstain from participating in the investment decision-making and approval process.

Furthermore, under the master transaction agreement, we agree to use our reasonable best efforts to select the same independent certified public accounting firm, or auditor, used by our Controlling Shareholder and provide to our Controlling Shareholder as much prior notice as reasonably practical of any change in our auditor until the first fiscal year end occurring after our Controlling Shareholder together with its subsidiaries no longer owns in aggregate at least 20% of the voting power of our then outstanding securities.

Pursuant to the master transaction agreement, we are licensed by our Controlling Shareholder to use any and all of its intellectual properties for free.

The master transaction agreement will automatically terminate the first date upon which our Controlling Shareholder together with its subsidiaries ceases to own in aggregate at least 20% of the voting power of our then outstanding securities. This agreement can be terminated early or extended by mutual written consent of the parties. The termination of this agreement will not affect the validity and effectiveness of the transitional services agreement and the non-competition agreement.

Transitional Services Agreement

Under the transitional services agreement, our Controlling Shareholder agrees that, during the service period, as described below, our Controlling Shareholder will provide us with various corporate support services, including but not limited to:

 

   

administrative support;

 

   

marketing and branding support;

 

   

technology support; and

 

   

provision of office space and facilities.

Our Controlling Shareholder may also provide us with additional services that we and our Controlling Shareholder may identify from time to time in the future.

The price to be paid for the services provided under the transitional service agreement is determined according to the terms of the agreement. The transitional service agreement provides that the performance of a service according to the agreement will not subject the provider of such service to any liability whatsoever except as directly caused by the gross negligence or willful misconduct of the service provider. Liability for gross negligence or willful misconduct is limited to the lower of the price paid for the particular service or the cost of the service’s recipient performing the service itself or hiring a third party to perform the service. Under the transitional services agreement, the service provider of each service is indemnified by the recipient against all third-party claims relating to provision of services or the recipient’s material breach of a third-party agreement, except where the claim is directly caused by the service provider’s gross negligence or willful misconduct.

The service period under the transitional services agreement commences on the date this registration statement is filed publicly with the SEC and will end on the expiration of 18 months thereafter. We may

 

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terminate the transitional services agreement with respect to either all or part of the services by giving 30-day prior written notice to our Controlling Shareholder and paying a termination fee equal to the direct costs incurred by our Controlling Shareholder in connection with its provision of services at the time of the early termination. Our Controlling Shareholder may terminate this agreement with respect to either all or part of the services by giving us a 30-day prior written notice if our Controlling Shareholder together with its subsidiaries ceases to own in aggregate at least 20% of the voting power of our then outstanding securities or ceases to be the largest beneficial owner of our then outstanding voting securities, without considering holdings of institutional investors that have acquired our securities in the ordinary course of their business and not with the purpose or the effect of changing or influencing control of our company.

Non-competition Agreement

Our non-competition agreement with our Controlling Shareholder provides for a non-competition period beginning upon the completion of this offering and ending on the later of (1) two years after the first date when our Controlling Shareholder together with its subsidiaries ceases to own in aggregate at least 20% of the voting power of our then outstanding securities and (2) the fifth anniversary of the completion of this offering. This agreement can be terminated early by mutual written consent of the parties.

Our Controlling Shareholder has agreed not to compete with us during the non-competition period in our digital financial services, SpiderNet ecosystem solutions, digital media, content, and marketing, except for owning non-controlling equity interest in any company competing with us. We have agreed not to compete with our Controlling Shareholder during the non-competition period in the businesses currently conducted by our Controlling Shareholder, except for owning non-controlling equity interest in any company competing with our Controlling Shareholder.

The non-competition agreement also provides for a mutual non-solicitation obligation that neither we nor our Controlling Shareholder may, during the non-competition period, hire, or solicit for hire, any active employees of, or individuals providing consulting services to the other party, or any former employees of, or individuals providing consulting services to the other party within six months of the termination of their employment or consulting services, without the other party’s consent, except for solicitation activities through generalized non-targeted advertisement not directed to such employees or individuals that do not result in a hiring within the non-competition period.

Contractual Arrangements with respect to Airstar Bank

In October 2020, we entered into an agreement with our Controlling Shareholder, pursuant to which we agree to provide SpiderNet ecosystem solutions services to support the management of its 10% investee company, Airstar Bank, for a fixed annual service fee of HK$12.8 million. In addition to the fixed annual service fee, we are entitled to receive 15% of all distributions, in any form, received by our Controlling Shareholder from Airstar Bank, including but not limited to cash or share dividends, regardless of whether on a regular or one-off basis. We are also entitled to receive 15% of any profit generated by our Controlling Shareholder from the disposal of any shares of Airstar Bank. However, we are not liable for any loss arising from the disposal of any shares of Airstar Bank by our Controlling Shareholder. This agreement with our Controlling Shareholder will remain effective until terminated by mutual agreement.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled “Selected Consolidated Financial Data” and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. See “Special Note Regarding Forward-Looking Statements.” Our consolidated financial statements have been prepared in accordance with IFRS.

Overview

As the fusion reactor at the core of the AMTD SpiderNet ecosystem, we are one of the most comprehensive digital solutions platforms in Asia with businesses spanning multiple verticals, including digital financial services, SpiderNet ecosystem solutions, digital media, content, and marketing, and digital investments.

Our one-stop digital solutions platform operates four main business lines:

 

   

Digital Financial Services. Primarily through our controlled entities, investees, and business partners, we provide one-stop, cross-market and intelligent digital financial services for retail and corporate clients in Asia. We possess some of the most scarce digital financial licenses in Asia and provide a variety of digital financial services through the following:

 

   

AMTD Risk Solutions—the largest Hong Kong-based corporate insurance solution provider in terms of revenue of corporate insurance business in Hong Kong, according to the CIC Report. AMTD RSG, our wholly-owned subsidiary, was a member of the Hong Kong Confederation of Insurance Brokers since October 2004 and was granted an insurance brokerage license issued by the Hong Kong Insurance Authority in September 2019, pursuant to the newly established statutory regime for regulation of insurance intermediaries which took over regulation of insurance agents and brokers from the self-regulatory bodies including Hong Kong Confederation of Insurance Brokers. See “Regulation—Hong Kong—Insurance Brokerage Regulatory Regime” for details on the new regulatory regime.

 

   

PolicyPal—a one-stop digital insurance technology platform for consumers and SME clients in Singapore in August 2020. We have acquired a controlling interest in PolicyPal Pte. Ltd. via our fusion-in program. BaoXianBaoBao Pte. Ltd., the wholly-owned subsidiary of PolicyPal Pte. Ltd., is a registered insurance broker with respect to direct insurance and an exempt financial advisor in relation to advising on and arranging of investment products that are life policies in Singapore, other than for reinsurance. BaoXianBaoBao Pte. Ltd. is the first company to graduate from the MAS’s FinTech regulatory sandbox.

In addition, we have entered into agreements to acquire or apply for some of the most scarce digital financial licenses in Asia and provide a variety of digital financial services through the following:

 

   

Singa Bank (in application)—a digital wholesale banking platform to be established to provide comprehensive services to SME and corporate clients in Singapore. Our subsidiary, AMTD Digital Holdings Pte. Ltd., entered into a binding term sheet in December 2019 with Xiaomi, SP Group, and Funding Societies to establish a consortium in which we expect AMTD Digital Holdings Pte. Ltd. to be the largest shareholder. The consortium intends to pursue digital banking opportunities in Singapore through Singa Bank, the launch of which is subject to obtaining a digital wholesale banking license from the MAS and other regulatory requirements.

 

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Applaud (in application)—in July 2020, one of our subsidiaries, AMTD Digital Solutions Pte. Ltd., together with PolicyPal Pte. Ltd., incorporated Applaud, which is applying for a direct insurer (composite) license from the MAS.

 

   

CapBridge—a leading online private markets integrated capital raising and secondary liquidity platform for global growth companies and funds based in Singapore. We entered into a binding term sheet in June 2020 to acquire a controlling interest in CapBridge Financial Pte. Ltd. The transaction is subject to final negotiation of terms of the transaction, as well as MAS approval. Through CapBridge Financial Pte. Ltd.’s subsidiary, 1exchange, Singapore’s first MAS-regulated private markets securities exchange, CapBridge provides a holistic approach that enhances capital flow for growth companies and improve liquidity options for private investors. 1exchange is a recognized market operator in Singapore. CapBridge Pte. Ltd., another subsidiary of CapBridge Financial Pte. Ltd., holds a capital markets services license in respect of dealing in capital markets products that are securities and collective investment schemes, and is an exempt financial advisor in respect of advising on investment products and issuing or promulgating analyses/reports on investment products that are securities and collective investment schemes.

To further enrich our comprehensive suite of financial services, we intend to continue acquiring complementary capabilities and/or licenses, through acquiring and/or incubating FinTech companies.

 

   

SpiderNet Ecosystem Solutions. We serve as a super connector and digital accelerator for Asia-based entrepreneurs and corporates by connecting them to resources and technologies, and providing them with access to our unique AMTD SpiderNet ecosystem. Centered on our ecosystem-powered strategy, we empower entrepreneurs and corporates with capital, technologies, mentorship, connectivity, and other resources essential to accelerating and enhancing their business digital transformation and corporate development journeys.

Through a membership fee scheme, we provide our corporate clients with exclusive access to the AMTD SpiderNet ecosystem and its prestigious corporate members, prominent business executives and partners, creating strategic and synergistic opportunities. In addition, our digital solutions initiatives and programs in partnership with industry leaders and academic institutions serve to support industry professionals and foster next generation entrepreneurs in the region by equipping them with the latest trends and knowledge in the digital space. Our services help our ecosystem members to enhance connectivity, identify business synergies, and create valuable business propositions. We further deepen our relationship with corporate clients by facilitating synergies between their portfolio companies and other partners in the AMTD SpiderNet ecosystem.

We have entered into an agreement with our Controlling Shareholder to provide Airstar Bank with the support from our SpiderNet ecosystem solutions services, including resources, capital support, and expertise in the financial services industry to support its business development and support them to gradually build up their own ecosystem for an annual service fee. Airstar Bank, a virtual bank jointly-established by our Controlling Shareholder and Xiaomi, is a comprehensive digital banking platform providing services to retail and corporate clients in Hong Kong. Airstar Bank holds one of the only eight virtual banking licenses issued by the Hong Kong Monetary Authority and commenced operations in June 2020. Our Controlling Shareholder holds 10% of equity interest in Airstar Bank as a controller under the Banking Ordinance of Hong Kong and we do not have any equity interest in Airstar Bank.

 

   

Digital Media, Content, and Marketing. We commenced our digital media, content, and marketing business in May 2020. We create and promote digital solutions content by investing and developing multimedia channels to provide users and audiences access to content medium through a comprehensive library of traditional and digital movies, podcasts, webinars and live videos offered by content providers and online media platforms since May 2020. Through our offering of digital media and content, we are able to spearhead industry trends and create effective marketing for our clients and ecosystem partners through innovative content creation, digital marketing platforms and cutting-edge

 

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technology. For example, we are a seed round investor of Forkast.News, a digital media platform founded by former Bloomberg News anchor Angie Lau in April 2021. The platform provides readers stories and analysis on blockchain, cryptocurrency, and emerging technology in the Asia-Pacific region. We will also strategically acquire DigFin, a journalism brand and a content agency established by Jamie DiBiasio, an award-winning financial journalist and author, whose stories analyze business models in digital finance, FinTech, and digital assets. Together with our Controlling Shareholder, we have been the founding grand sponsor of Singapore FinTech Festival, the largest FinTech event in the world with over 60,000 attendees each year for four consecutive years since 2017, and the sole strategic partner of Hong Kong FinTech Week, Hong Kong’s annual FinTech event, for three years in a row since 2018. We have organized, hosted and participated in hundreds of sessions, including keynote speeches, panels, and fireside chats, to share our insights and exchange knowledge. Many of our clients, and ecosystem members and partners were able to access these global events through collaboration with us and thus presented valuable marketing opportunities for them. Recently, we have invested in movie productions via digital formats. “Shock Wave 2” (拆弹专家2), a movie invested by us and co-produced by Universe Entertainment and Alibaba Picture in 2020, has grossed over RMB1.3 billion of box office as of February 10, 2021. We also invested in “The White Storm 3” (扫毒3) and “Redemption” (咎赎). We intend to continue to invest and participate in more popular movie productions in order to maximize our reach to broader audiences for content sharing and marketing.

 

   

Digital Investments. We invest directly in various innovative technology companies to leverage, enhance and enrich the AMTD SpiderNet ecosystem by including them into our ecosystem. Currently, our investment portfolio includes minority interest holdings in the following:

 

   

Appier—a leading artificial intelligence technology company, which provides AI-based solutions for precision marketing.

 

   

DayDayCook—a leading content-driven lifestyle brand for young food lovers in Asia with over 60 million cumulative users across its online platforms.

 

   

WeDoctor—one of China’s largest technology-enabled healthcare solutions platforms providing seamless online and offline healthcare services with a mix of general practitioners and specialists.

 

   

AMTD ASEAN Solidarity Fund and Solidarity Grant—We also established the AMTD ASEAN Solidarity Fund in partnership with AFIN in April 2020 with an initial capital of S$50 million to invest in innovative companies spanning across AI (Active.ai), card payment solutions (CardUp), cross-border payment platform (TranSwap), and SME financing solutions (Funding Societies). AFIN is a non-profit entity formed by the MAS, International Finance Corporation, a member of the World Bank Group, and the ASEAN Bankers Association, with the objectives of supporting financial innovation and inclusion around the world. In addition to providing funding, the solidarity fund will offer the FinTech companies full access to the AMTD SpiderNet ecosystem, which opens opportunities for them to collaborate with each other across ASEAN countries, Hong Kong, and China. Through the solidarity fund, we hold equity or debt interests in five FinTech companies, representatives of which include Active.ai, a cloud-based conversational AI platform; CardUp, a credit card enablement platform; Funding Societies, a SME digital financing platform, and TranSwap, a cross-border payment platform. We expect to make further investments through the solidarity fund.

 

   

MAS-SFA-AMTD FinTech Solidarity Grant—MAS-SFA-AMTD FinTech Solidarity Grant was jointly established in May 2020 by the MAS, SFA, and AMTD Charity Foundation with an amount of S$6 million to support FinTech companies in generating new businesses and pursuing growth strategies. As of the date of this prospectus, approximately 190 FinTech companies have benefited from our MAS-SFA-AMTD FinTech Solidarity Grant, which have formed a solid enhancement to our AMTD SpiderNet ecosystem.

We generate revenue primarily from fees and commissions from our digital financial services business and SpiderNet ecosystem solutions business during the years ended April 30, 2019 and 2020, and the nine months

 

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ended January 31, 2021. We have achieved tremendous growth since the launch of our SpiderNet ecosystem solutions business in December 2017 as a result of the continued expansion and monetization of AMTD SpiderNet ecosystem. Our revenue increased significantly from HK$14.6 million for the fiscal year ended April 30, 2019 to HK$167.5 million (US$21.6 million) for the fiscal year ended April 30, 2020, and from HK$133.3 million for the nine months ended January 31, 2020 to HK$145.5 million (US$18.8 million) for the nine months ended January 31, 2021. Our net profit increased significantly from HK$21.5 million for the fiscal year ended April 30, 2019 to HK$158.3 million (US$20.4 million) for the fiscal year ended April 30, 2020, and from HK$91.7 million for the nine months ended January 31, 2020 to HK$109.9 million (US$14.2 million) for the nine months ended January 31, 2021. We continue to deepen and monetize our relationship with clients by cross-selling solutions that fill their unique needs.

Key Factors Affecting Our Results of Operations

Our business and results of operations are affected by a number of general factors that impact the digital financial services and SpiderNet ecosystem solutions industries in Asia, including, among others, our ability to provide digital financial services across different markets in Asia, our ability to adopt and monetize the increasing reliance and application on digital financial services arising from the post-COVID-19 paradigm shift, our ability to empower and extract value from the entrepreneurs joining our fusion-in program, overall economic environment in Asia, conditions and trends of financial and capital markets, the competitive environment, and government policies and initiatives affecting the digital financial services and SpiderNet ecosystem solutions industries. Unfavorable changes in any of these general factors could adversely affect demand for our services and materially and adversely affect our results of operations.

Rate of adoption of digital financial services in Asia

We operate digital financial services business in Singapore, Hong Kong, and in the future, other markets in Asia. With the addition of PolicyPal and the proposed acquisition of CapBridge (currently subject to negotiation of terms of the transaction, as well as MAS approval), the planned launch of Singa Bank and Applaud (currently subject to MAS approval), and the further digitalization of our insurance business, we expect rapid increase in our revenue from digital financial services business in the future.

Consumers in Singapore, Hong Kong, and other markets in Asia are rapidly embracing digital banking, insurance, and other digital finance services. We anticipate that this shift will be further accelerated by the recent COVID-19 pandemic, which forced a large part of the Asian population to adopt digital means for work, education, and commerce and to conduct their financial transactions electronically as they were subjected to various social distancing measures and travel restrictions. Furthermore, globalization and digitalization has enabled greater movements of people, goods, and services across borders. There has been increasing trade among the economies of Hong Kong, the Greater Bay Area, and the ASEAN region, which will benefit financial institutions like us that can provide seamless, comprehensive digital financial solutions across borders.

The revenue that we generate from our digital financial services business will depend in a large part to the rate at which the Asian population embraces digital financial services. We anticipate rapid growth in our future digital financial services, contributing to the growing scale of our revenue. However, should the Asian markets not embrace digital financial services as rapidly as we anticipate, our future results of operation could be affected.

Our ability to expand into new markets and offer new products and services

Digital financial services business is a highly regulated industry, and digital financial licenses are generally regulated separately across different product types and different regions. In order to provide one-stop cross-regional digital financial services that meet the evolving needs of clients, it is important for us to obtain licenses from multiple regulatory regimes. We expanded our digital financial services operations in 2020 with the acquisition of PolicyPal, the planned acquisition of CapBridge (currently subject to negotiation of terms of the

 

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transaction, as well as MAS approval), and the planned establishment of Singa Bank and Applaud (currently subject to MAS approval). In the future, we may consider to apply for banking licenses in other ASEAN countries such as Malaysia, Vietnam, and Indonesia, as regulations allow, and may also consider to obtain financial licenses in other areas, such as digital insurance, digital assets exchange, and digital payment. If we are unable to expand into new markets, our future results of operations could be affected.

At the same time, it is imperative for us to continue to offer new products and services in order to attract new customers and retain our existing customers. For example, for our digital financial services business, we plan to continue to offer new products and solutions, as well as digital interfaces for our clients. If we are unable to offer new products and services to attract and retain our clients, our future results of operation could be affected.

Our future capabilities to provide insightful information to support our clients’ strategic decisions

For our SpiderNet ecosystem solutions business, our future service quality and growth depend on our capabilities to provide insightful information to help our clients to actively identify opportunities within our AMTD SpiderNet ecosystem, efficiently deliver their strategic messages, facilitate their corporate communications, and gain intelligence on their industry and general capital markets trend. Our ecosystem and industry expertise allow us to effectively address our clients’ needs. Moreover, as our clientele continue to grow and as we deepen our insights into a greater number of industries, we will have access to more data and our ability to extract valuable information from unstructured data will be enhanced, resulting in a virtuous cycle. We have experienced strong growth in our SpiderNet ecosystem solutions business. Our SpiderNet ecosystem solutions income increased from HK$5.9 million for the fiscal year ended April 30, 2019 to HK$157.7 million (US$20.3 million) for the fiscal year ended April 30, 2020, and from HK$126.0 million for the nine months ended January 31, 2020 to HK$134.9 million (US$17.4 million) for the nine months ended January 31, 2021.

Our ability to maximize synergies and unlock value through our fusion-in program

We are the core of the AMTD SpiderNet ecosystem, and our success is predicated on our ability to connect the various partners in the AMTD SpiderNet ecosystem, promote business cooperation among partners, empower them with digital financial services, and in turn, unlocking substantial value as each of the businesses within the system grows.

Our unique fusion-in program is our core strategy. By swapping equity interests with leading digital financial businesses, we align their business interests with ours. We further benefit from gaining access to new talents, capabilities, and technologies, while our business partners gain the ability to unlock their potential and accelerate their growth by joining the AMTD SpiderNet ecosystem. PolicyPal illustrates our integration of leading digital financial businesses through such a program, and we plan to integrate CapBridge after we complete the acquisition. We believe that these additions will create significant value for us, and we will continue to identify such promising partners for future integration.

Our ability to attract, retain, and motivate talents

It is essential for us to attract, retain, and motivate talent because our businesses are human capital intensive. We believe that it is necessary and customary to invest in talents, arguably our most important assets, with attractive compensation packages, as we compete to attract, retain, and motivate qualified employees. Key members of our management are also shareholders of our company, ensuring that interests and incentives are aligned with our performance. Our staff costs for the fiscal years ended April 30, 2019 and 2020, and the nine months ended January 31, 2021 were HK$9.2 million, HK$15.2 million (US$2.0 million), and HK$32.5 million (US$4.2 million), respectively, representing 63.0%, 9.1%, and 22.4% of our total revenue for the corresponding periods. Our staff costs have historically been comprised of cash-based and share-based compensation and benefits, although we may establish employee equity incentive plans to further incentivize our people, for which

 

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we may incur share-based compensation expenses. Nevertheless, highly incentivized professionals and other talents could potentially enable us to achieve great business prospects and results of operations.

Key Components of Results of Operations

Revenue

Our revenue consists of (i) digital financial services business income, and (ii) SpiderNet ecosystem solutions business income.

We derive fee income primarily from two business lines: (i) digital financial services, which currently consists entirely of insurance brokerage income, where we charge fees and commissions from insurance purchasers, which are paid either directly to us or through insurance provider partners and (ii) SpiderNet ecosystem solutions, where we recognize our fee income over the period of contracts. SpiderNet ecosystem solutions business income currently represents the primary source of our fees and commissions income.

Changes in fair value on financial assets measured at FVTPL

We record changes in fair value on financial assets measured at FVTPL with respect to our digital investments and movie investments. For a discussion of fair value measurement of our financial assets, see “—Significant Accounting Policies—Fair Value Measurement” and “—Significant Accounting Policies—Financial Instruments.” For a discussion of our investment portfolio, see “Business—Digital Investments—Investment Portfolio.”

Employee benefits expenses

Our employee benefits expenses mainly consist of staff salaries, bonus and director fee.

Premises and office expenses

Our premises and office expenses mainly consist of premises cost and office utilities and other miscellaneous office expenses.

Legal and professional fee

Our legal and professional fee mainly consist of audit services, professional liability insurance, and professional and legal expenses in connection with our restructuring.

Depreciation and amortization

Our depreciation and amortization mainly consists of amortization of intangible assets.

Advertising and promotion expenses

Our advertising and promotion expenses mainly consist of expenses to incurred to promote and enhance our branding.

Other expenses

Our other expenses mainly consist of traveling and business development expenses, donation, and other miscellaneous expenses.

 

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Other income

Other income consists of bank interest income, and other non-recurring miscellaneous income.

Other gains and losses

Other gains and losses consist of (i) net exchange gain, (ii) recovery of accounts receivable written off, and (iii) change in fair value on derivative financial liabilities.

Taxation

The following summarizes our applicable tax rates in the Cayman Islands, Singapore, and Hong Kong.

Cayman Islands

The Cayman Islands currently levies no taxes on individuals or corporations outside of the Cayman Islands based upon profits, income, gains, or appreciation. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties, which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on dividend payments. There are no reciprocal tax treaties between the Cayman Islands and Singapore.

Singapore

Our Singapore subsidiaries are subject to the Singapore corporate tax of 17%.

Hong Kong

Our Hong Kong subsidiaries are subject to a 8.25% Hong Kong profit tax on the first HK$2,000,000 of their taxable income generated from operations in Hong Kong. Any taxable income generated from operations in Hong Kong above HK$2,000,000 will be subject to a 16.5% Hong Kong profit tax. Under the Hong Kong tax law, our Hong Kong subsidiaries are exempted from the Hong Kong income tax on our foreign-derived income. In addition, payments of dividends from our Hong Kong subsidiaries to us are not subject to any Hong Kong withholding tax.

 

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Results of Operations

The following table sets forth a summary of our consolidated results of operations for the periods presented. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. The results of operations in any period are not necessarily indicative of our future trends.

 

     For the Fiscal Year Ended April 30,     For the Nine Months Ended
January 31,
 
     2019     2020     2020     2021  
     (in thousands)  
     HK$     HK$     US$     HK$     HK$     US$  

Revenue

     14,554       167,547       21,610       133,307       145,530       18,771  

Employee benefits expense

     (9,169     (15,168     (1,956     (10,242     (32,543     (4,197

Advertising and promotion expense

     —       —       —       (22     (2,422     (312

Premises and office expenses

     (1,541     (4,737     (611     (3,567     (4,308     (556

Legal and professional expenses

     (2,650     (1,952     (252     (843     (1,384     (179

Depreciation and amortization

     —         —         —         —         (3,259     (420

Other expenses

     (672     (1,649     (213     (1,354     (3,179     (410

Changes in fair value on financial assets measured at FVTPL

     19,319       43,592       5,623       (1,933     28,870       3,724  

Other income

     252       —         —         —         1,171       151  

Other gains and losses, net

     2,058       (5,586     (720     (5,450     (690     (89
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit before tax

     22,151       182,047       23,481       109,896       127,786       16,483  

Income tax expense

     (607     (23,715     (3,059     (18,170     (17,921     (2,311
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the year/period

     21,544       158,332       20,422       91,726       109,865       14,172  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Item that may be reclassified subsequently to profit or loss:

            

Exchange differences arising on translation of foreign operation

     —         —         —         —         819       106  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income for the year/period

     —         —         —         —         819       106  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year/period

     21,544       158,332       20,422       91,726       110,684       14,278  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Note:

*

The advertising and promotion expenses for the fiscal years ended April 30, 2019 and 2020 are insignificant and included in other expenses.

 

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Segment Information

We report our results of operations in three reportable segments: digital financial services, SpiderNet ecosystem solutions, and corporate (including digital investments business and digital media, content, and marketing business), which correspond to our business lines. The following table sets forth certain financial information of our reportable segments for the periods presented.

 

     For the Fiscal Year Ended April 30,      For the Nine Months Ended
January 31,
 
     2019      2020      2020     2021  
     (in thousands)  
     HK$      HK$      US$      HK$     HK$      US$  

Digital Financial Services

                

Segment revenue

     8,671        9,869        1,273        7,259       10,617        1,369  

Segment result

     1,863        4,765        614        5,216       437        56  

SpiderNet Ecosystem Solutions

     

Segment revenue

     5,883        157,678        20,337        126,048       134,913        17,401  

Segment result

     1,945        140,134        18,075        112,802       103,844        13,394  

Corporate (including digital investments business and digital media, content, and marketing business)

                

Changes in fair value on financial assets measured at FVTPL

     19,319        43,592        5,623        (1,933     28,870        3,724  

Segment result

     19,062        43,291        5,584        (2,060     28,839        3,720  

Total segment result

     22,870        188,190        24,273        115,958       133,120        17,170  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

Note:

(1)

Segment result represents segment revenue and changes in fair value on financial assets measured at FVTPLs less direct cost attributable to the applicable segment.

Nine Months Ended January 31, 2021 Compared to Nine Months Ended January 31, 2020

Digital financial services segment

The segment revenue of the digital financial services segment increased from HK$7.3 million for the nine months ended January 31, 2020 to HK$10.6 million (US$1.4 million) for the nine months ended January 31, 2021. The segment profit decreased from HK$5.2 million for the nine months ended January 31, 2020 to HK$0.4 million (US$0.1 million) for the nine months ended January 31, 2021, primarily due to an increase in employee benefits expense and depreciation and amortization expense incurred and offset by the increase in revenue in the nine months ended January 31, 2021.

SpiderNet ecosystem solutions segment

The segment revenue of the SpiderNet ecosystem solutions segment increased from HK$126.0 million for the nine months ended January 31, 2020 to HK$134.9 million (US$17.4 million) for the nine months ended January 31, 2021 and the segment profit decreased from HK$112.8 million for the nine months ended January 31, 2020 to HK$103.8 million (US$13.4 million) for the nine months ended January 31, 2021, primarily due to our expansion of the SpiderNet ecosystem solutions business by increasing the number of customers and offset by the increase in employee benefits expense incurred in the nine months ended January 31, 2021.

Corporate

The segment profit of corporate segment, which mainly consisted of changes in fair value on financial assets measured at FVTPL from our investments in innovative companies, was HK$28.8 million (US$3.7 million) for

 

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the nine months ended January 31, 2021, compared to the segment loss of HK$2.1 million for the nine months ended January 31, 2020, primarily due to the increase in the fair value of our investments portfolio driven by the business growth of the investees as of January 31, 2021.

For reconciliation of segment revenue to consolidated revenue and reconciliation of segment results to consolidated profit before tax, see note 4 to our consolidated financial statements for the nine months ended January 31, 2020 and 2021 included elsewhere in this prospectus.

Nine Months Ended January 31, 2021 Compared to Nine Months Ended January 31, 2020

Revenue

Our revenue from contracts with customers increased from HK$133.3 million for the nine months ended January 31, 2020 to HK$145.5 million (US$18.8 million) for the nine months ended January 31, 2021, primarily due to the expansion of our SpiderNet ecosystem solutions business.

 

   

Digital financial services. Our commission income from the digital financial services segment increased from HK$7.3 million for the nine months ended January 31, 2020 to HK$10.6 million (US$1.4 million) for the nine months ended January 31, 2021, primarily due to the acquisition of PolicyPal during the nine months ended January 31, 2021.

 

   

SpiderNet ecosystem solutions. Our fee income from the SpiderNet ecosystem solutions segment increased from HK$126.0 million for the nine months ended January 31, 2020 to HK$134.9 million (US$17.4 million) for the nine months ended January 31, 2021, primarily due to our expansion of the SpiderNet ecosystem solutions business and a 80% increase in the number of customers in the nine months ended January 31, 2021.

The level of membership fee for joining the SpiderNet ecosystem solution services is a bilateral fixed fee negotiated individually and agreed-upon with each particular customer covering a defined period of time. The factors influencing the level of annual fee include the depth of cooperation and relationship, expected spectrum of services required, expected near term and long-term benefits from participating in the SpiderNet ecosystem, and the relative bargaining power of respective customers taking into consideration the reputation, stage of growth, future revenue potential from other services which can be rendered, and other factors.

The average contract sum of the membership contracts increased from HK$15.9 million for the nine months ended January 31, 2020 to HK$19.3 million (US$2.5 million) for the nine months ended January 31, 2021 mainly because the weighted average contract terms of membership increased from 18.7 months for the nine months ended January 31, 2020 to 24.7 months for the nine months ended January 31, 2021.

Changes in fair value on financial assets measured at FVTPL

Our changes in fair value on financial assets measured at FVTPL was a gain of HK$28.9 million (US$3.7 million) for the nine months ended January 31, 2021, compared to a loss of HK$1.9 million for the nine months ended January 31, 2020, primarily due to the increase in the fair value of our investments portfolio driven by the business growth and expansion of the investees as of January 31, 2021.

 

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The table below shows the details of our investment portfolio as of April 30, 2020 and January 31, 2021 and corresponding investment gains or losses for the nine months ended January 31, 2020 and 2021.

 

Summary of investments

Name of investments

   Purchase
price
     Carrying value      Corresponding
investment
gains (losses)
   

Key factors of fluctuation in gains (losses)

            As of
April 30,

2020
     As of
January 31,

2021
     For the Nine
Months
Ended
January 31,
     
            2020     2021      
            (HK$ in millions)      

Investment A
(artificial intelligence technology services)

     19.6        22.7        63.6        (0.3     40.9     During the nine months ended January 31, 2020, the change in fair value of the investment was due to exchange rate fluctuation. During the nine months ended January 31, 2021, the fair value of the investment increased mainly due to the progress of its initial public offering. The investee of Investment A was subsequently listed on the Tokyo Stock Exchange on March 30, 2021.

Investment B
(content-driven lifestyle platform)

     78.5        77.5        92.3        (0.8     14.8     During the nine months ended January 31, 2020, the change in fair value of the investment was due to exchange rate fluctuation. During the nine months ended January 31, 2021, the fair value of the investment increased mainly due to the financial performance and business development of the investee.

Investment C
(technology-enabled health-care solutions platform)

     78.5        108.5        82.1        (0.8     (26.4  

During the nine months ended January 31, 2020, the change in fair value of the investment was due to the exchange rate fluctuation. During the nine months ended January 31, 2021, the fair value decreased by reference to the recent transaction price of shares issuance of the investee.

Investment D
(card payment solutions)

     6.2               6.2                  The investment was acquired in November 2020. The fair value of the investment was close to its acquisition cost as of January 31, 2021 and reference to recent transaction price.

 

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Summary of investments

Name of investments

   Purchase
price
     Carrying value      Corresponding
investment
gains (losses)
   

Key factors of fluctuation in gains (losses)

            As of
April 30,

2020
     As of
January 31,

2021
     For the Nine
Months
Ended
January 31,
     
            2020     2021      
            (HK$ in millions)      

Investment E (cross-border payment platform)

     2.2               2.2                  The investment was acquired in December 2020. The fair value of the investment was close to its acquisition cost as of January 31, 2021.

Investment F (digital format movie production)

     16.5               18.8              2.3     The fair value of the investment increased by HK$2.3 million during the nine months ended January 31, 2021 by reference to the latest box office performance.

Investment G (digital format movie production)

     4.2               1.5              (2.7   The fair value of the investment decreased by HK$2.7 million during the nine months ended January 31, 2021 by reference to the estimated box office performance.

Investment H (digital format movie production)

     59.8               59.8                  The investment was acquired in January 2021. The fair value of the investment was close to its acquisition cost as of January 31, 2021.

Total

     265.5        208.7        326.5        (1.9     28.9    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

Employee benefits expense

Our employee benefits expense increased by 218.6% from HK$10.2 million for the nine months ended January 31, 2020 to HK$32.5 million (US$4.2 million) for the nine months ended January 31, 2021, primarily due to an increase in staff cost, and number of staff in connection with our business growth.

Premises and office expenses

Our premises and office expenses increased by 19.4% from HK$3.6 million for the nine months ended January 31, 2020 to HK$4.3 million (US$0.6 million) for the nine months ended January 31, 2021 mainly due to our business expansion in the nine months ended January 31, 2021.

Legal and professional expenses

Our legal and professional expenses increased by 75.0% from HK$0.8 million for the nine months ended January 31, 2020 to HK$1.4 million (US$0.2 million) for the nine months ended January 31, 2021 mainly due to legal and professional fee incurred in preparation for our listing.

 

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Depreciation and amortization

Our depreciation and amortization expenses increased significantly by 100% from nil for the nine months ended January 31, 2020 to HK$3.3 million (US$0.4 million) for the nine months ended January 31, 2021 mainly related to amortization of intangible asset acquired as part of the business acquisition that took place in the nine months ended January 31, 2021.

Advertising and promotion expense

Our advertising and promotion expense increased significantly from HK$22 thousand for the nine months ended January 31, 2020 to HK$2.4 million (US$0.3 million) for the nine months ended January 31, 2021 mainly due to increase in promotion activities to cope with our business expansion in the nine months ended January 31, 2021.

Other expenses

Our other expenses aggregated increased significantly by 128.6% from HK$1.4 million for the nine months ended January 31, 2020 to HK$3.2 million (US$0.4 million) for the nine months ended January 31, 2021 mainly due to our business expansion in the nine months ended January 31, 2021.

Income tax expense

We incurred income tax expense of HK$18.2 million and HK$17.9 million (US$2.3 million) for the nine months ended January 31, 2020 and 2021, respectively. The decrease in our income tax expense resulted from decrease in assessable profits in the nine months ended January 31, 2021.

Profit for the period

As a result of the foregoing, our profit increased from HK$91.7 million for the nine months ended January 31, 2020 to HK$109.9 million (US$14.2 million) for the nine months ended January 31, 2021.

Fiscal Year Ended April 30, 2020 Compared to Fiscal Year Ended April 30, 2019

Digital financial services segment

The segment revenue of the digital financial services segment increased from HK$8.7 million for the fiscal year ended April 30, 2019 to HK$9.9 million (US$1.3 million) for the fiscal year ended April 30, 2020 and the segment profit increased from HK$1.9 million for the fiscal year ended April 30, 2019 to HK$4.8 million (US$0.6 million) for the fiscal year ended April 30, 2020, primarily due to a new corporate customer who contributed an income of HK$1.5 million (US$0.2 million) in the year ended April 30, 2020.

SpiderNet ecosystem solutions segment

The segment revenue of the SpiderNet ecosystem solutions segment increased significantly from HK$5.9 million for the fiscal year ended April 30, 2019 to HK$157.7 million (US$20.3 million) for the fiscal year ended April 30, 2020 and the segment profit increased from HK$1.9 million for the fiscal year ended April 30, 2019 to HK$140.1 million (US$18.1 million) for the fiscal year ended April 30, 2020, primarily due to our expansion of the SpiderNet ecosystem solutions business and increase in number of customers in the year ended April 30, 2020.

Corporate

The segment profit of corporate segment, which mainly contributed by changes in fair value on financial assets measured at FVTPL from our investments in innovative companies of HK$43.6 million (US$5.6 million)

 

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for the fiscal year ended April 30, 2020 compared to HK$19.3 million for the fiscal year ended April 30, 2019, was HK$43.3 million (US$5.6 million) for the fiscal year ended April 30, 2020, compared to HK$19.1 million for the fiscal year ended April 30, 2019, primarily due to the increase in the fair value of our investments portfolio driven by the business growth of the investees as of April 30, 2020.

For reconciliation of segment revenue to consolidated revenue and reconciliation of segment results to consolidated profit before tax, see note 7 to our consolidated financial statements for the fiscal years ended April 30, 2019 and 2020 included elsewhere in this prospectus.

Fiscal Year Ended April 30, 2020 Compared to Fiscal Year Ended April 30, 2019

Revenue

Our revenue from contracts with customers increased significantly from HK$14.6 million for the fiscal year ended April 30, 2019 to HK$167.5 million (US$21.6 million) for the fiscal year ended April 30, 2020, primarily due to the expansion of our SpiderNet ecosystem solutions business for the fiscal year ended April 30, 2020.

 

   

Digital financial services. Our fee income from the digital financial services segment, which is mainly contributed by corporate customers in the insurance business, increased from HK$8.7 million for the fiscal year ended April 30, 2019 to HK$9.9 million (US$1.3 million) for the fiscal year ended April 30, 2020, primarily due to the addition of a new corporate customer who contributed an income of HK$1.5 million (US$0.2 million) in the year ended April 30, 2020.

 

   

SpiderNet ecosystem solutions. Our fee income from the SpiderNet ecosystem solutions segment increased significantly from HK$5.9 million for the fiscal year ended April 30, 2019 to HK$157.7 million (US$20.3 million) for the fiscal year ended April 30, 2020. The growth of the SpiderNet ecosystem solutions segment was attributable to the fact that the SpiderNet ecosystem solution service was a relatively new business during the fiscal year ended April 30, 2019 when we were undergoing the formation of the SpiderNet ecosystem with an increase in the numbers of customers by 266.7% for the fiscal year ended April 30, 2020 compared to that in the fiscal year ended April 30, 2019. As a result of the deep connections established by us and our shareholders with various business partners, financial institutions, academic institutes, bilateral organizations, institutional investors, and other reputable families in Asia and other regions, the SpiderNet ecosystem was established with a strong foundation and reputation as a valuable solution to assist entrepreneurs in growing their business and various other expansion strategies. Since its launch, the SpiderNet ecosystem solution service has been highly sought after by customers and became one of our core business lines since the fiscal year ended April 30, 2020.

The level of membership fee for joining the SpiderNet ecosystem solution services is a bilateral fixed fee individually negotiated and agreed-upon with each particular customer covering a defined period of time. The factors influencing the level of annual fee include the depth of cooperation and relationship, expected spectrum of services required, expected near term and long-term benefits from participating in the SpiderNet ecosystem, and the relative bargaining power of respective customers taking into consideration the reputation, stage of growth, future revenue potential from other services which can be rendered, and other factors.

The average contract sum of the membership contracts increased from HK$4.0 million for the fiscal year ended April 30, 2019 to HK$15.7 million (US$2.0 million) for the fiscal year ended April 30, 2020 mainly because the weighted average contract terms of membership increased from 7.6 months for the fiscal year ended April 30, 2019 to 20.1 months for the fiscal year ended April 30, 2020 and more contracts were entered into during the fiscal year ended April 30, 2020 with higher membership fee negotiated and agreed with the customers for expected deeper of cooperation and higher expected benefits from participating in the SpiderNet ecosystem.

 

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Changes in fair value on financial assets measured at FVTPL

Our changes in fair value on financial assets measured at FVTPL was HK$43.6 million (US$5.6 million) for the fiscal year ended April 30, 2020, compared to HK$19.3 million for the fiscal year ended April 30, 2019, primarily due to the increase in the fair value of our investments portfolio driven by the business growth and expansion of the investees as of April 30, 2020.

The table below shows the details of our investment portfolio and corresponding investment gains or losses for fiscal year ended April 30, 2019 and 2020.

 

Summary of investments

Name of

investments

   Purchase
price
     Carrying value      Corresponding
investment gains
(losses)
   

Key factors of fluctuation in

gains (losses)

            As of April 30,      For the Year Ended
April 30,
     
            2019      2020      2019     2020      
(HK$ in millions)

Investment A (artificial intelligence technology services)

     19.6        24.5        22.7        4.9       (1.8   During the fiscal year ended April 30, 2019, the fair value increased mainly due to the financial performance and business development of the investee. During the fiscal year ended April 30, 2020, the fair value decreased mainly due to the impact of market downturn caused by the COVID-19 on the investee’s performance.

Investment B (content-driven lifestyle platform)

     78.5        78.5        77.5        —         (1.0   The fair value of the investment decreased by HK$1.0 million during the year ended April 30, 2020 due to exchange rate fluctuation.

Investment C (technology-enabled health-care solutions platform)

     78.5        80.5        108.5        2.1       28.0     The fair value of the investment increased during the year ended April 30, 2019 and the year ended April 30, 2020 mainly due to the financial performance and business development of the investee.

Investment I (communication software)

     7.8        10.4        —          (1.0     8.3     The fair value of the investment decreased by HK$1.0 million during the year ended April 30, 2019 mainly due to the financial performance and business development of the investee. The investment was fully disposed during the year ended April 30, 2020 with realized gain of HK$8.3 million.

Investment J (online lending platform)

     296.5        317.1        —          (2.2     —       The fair value of the investment decreased by HK$2.2 million during the year ended April 30, 2019 according to the recent transaction price of the shares of the investee. The investment was fully disposed during the year ended April 30, 2020 without gain or loss.

 

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Summary of investments

Name of

investments

   Purchase
price
     Carrying value      Corresponding
investment gains
(losses)
    

Key factors of fluctuation in

gains (losses)

            As of April 30,      For the Year Ended
April 30,
      
            2019      2020      2019      2020       
(HK$ in millions)

Investment K (digital financing solutions platform)

     7.8        7.8        —          —          10.1      The investment was fully disposed during the year ended April 30, 2020 with realized gain of HK$10.1 million.

Investment L (digital financing solutions platform)

     7.8        —          —          10.3        —        The investment was fully disposed during the year ended April 30, 2019 with realized gain of HK$10.3 million.

Investment M (used cars online retailing platform)

     54.4        —          —          5.2        —        The investment was fully disposed during the year ended April 30, 2019 with realized gain of HK$5.2 million.

Total

     550.9        518.8        208.7        19.3        43.6     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Employee benefits expense

Our employee benefits expense increased by 65.2% from HK$9.2 million for the fiscal year ended April 30, 2019 to HK$15.2 million (US$2.0 million) for the fiscal year ended April 30, 2020, primarily due to an increase in staff cost, and number of staff in connection with our business growth.

Premises and office expenses

Our premises and office expenses increased by 213.3% from HK$1.5 million for the fiscal year ended April 30, 2019 to HK$4.7 million (US$0.6 million) for the fiscal year ended April 30, 2020 mainly due to our business expansion in the fiscal year ended April 30, 2020.

Legal and professional fee

Our legal and professional fee decreased by 25.9% from HK$2.7 million for the fiscal year ended April 30, 2019 to HK$2.0 million (US$0.3 million) for the fiscal year ended April 30, 2020 mainly due to legal and professional fee incurred for our restructuring in the fiscal year ended April 30, 2019.

Other expenses

Our other expenses increased by 128.6% from HK$0.7 million for the fiscal year ended April 30, 2019 to HK$1.6 million (US$0.2 million) for the fiscal year ended April 30, 2020 mainly due to our business expansion in the fiscal year ended April 30, 2020.

Income tax expense

We incurred income tax expense of HK$0.6 million and HK$23.7 million (US$3.1 million) for the fiscal years ended April 30, 2019 and 2020, respectively. The increase in our income tax expense resulted from an increase in revenue derived from our SpiderNet ecosystem solutions business.

 

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Profit for the year

As a result of the foregoing, our profit increased significantly from HK$21.5 million for the fiscal year ended April 30, 2019 to HK$158.3 million (US$20.4 million) for the fiscal year ended April 30, 2020.

Liquidity and Capital Resources

Prior to this offering, our principal sources of liquidity to finance our operating and investing activities have been net cash provided from operating activities, funding from our Controlling Shareholder, and historical equity financing activities. As of January 31, 2021, we had HK$450.9 million (US$58.2 million) in cash and cash equivalents, out of which HK$283.7 million (US$36.6 million) was held in U.S. dollars, HK$133.9 million (US$17.3 million) was held in Hong Kong dollars, HK$33.3 million (US$4.3 million) was held in Singapore dollars. Our cash and cash equivalents primarily consist of cash on hand and general bank balances excluding fiduciary bank balances representing client’s cash, which are unrestricted for withdrawal or use.

Our total indebtedness was nil as of January 31, 2021.

Our net cash generated from operating activities for the fiscal years ended April 30, 2019 and 2020, and the nine months ended January 31, 2021 was HK$24.6 million, HK$213.8 million (US$27.6 million), and HK$60.7 million (US$7.8 million), respectively. We believe that our current cash and cash equivalents and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures at least for the next 12 months from the date of this prospectus. After this offering, we may decide to enhance our liquidity position or increase our cash reserve for future operations and investments through additional financing. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in an increase in fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

Cash Flows

The following table sets forth a summary of our cash flows for the periods presented.

 

     For the Fiscal Year Ended April 30,     For the Nine Months Ended
January 31,
 
     2019     2020     2020     2021  
     (in thousands)  
     HK$     HK$     US$     HK$     HK$      US$  

Summary Consolidated Cash Flows Data

         

Net cash generated from operating activities

     24,556       213,755       27,570       178,032       60,740        7,834  

Net cash (used in)/from investing activities

     (3,071,469     (674,500     (86,997     (62,399     110,190        14,212  

Net cash from financing activities

     2,682,623       651,191       83,991       560,952       82,497        10,641  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net (decrease)/increase in cash and cash equivalents

     (364,290     190,446       24,564       676,585       253,427        32,687  

Cash and cash equivalents at the beginning of the year/period

     370,054       5,764       743       5,764       196,210        25,307  

Effect of foreign exchange rate changes

     —         —         —         —         1,280        165  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash and cash equivalents at the end of the year/period

     5,764       196,210       25,307       682,349       450,917        58,159  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Operating activities

Net cash generated from operating activities for the nine months ended January 31, 2021 was HK$60.7 million (US$7.8 million), which consists of our profit before tax of HK$127.8 million (US$16.5 million) as adjusted for non-cash items and the effects of changes in operating assets and liabilities. Adjustments for non-cash items included HK$28.9 million (US$3.7 million) of changes in fair value on financial

 

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assets measured at FVTPL in connection with our digital investments business and digital media, content, and marketing business included in the corporate segment, HK$3.3 million (US$0.4 million) of depreciation and amortization, and HK$0.6 million (US$0.1 million) of share-based payment. The principal items accounting for the changes in operating assets and liabilities were (i) HK$57.1 million (US$7.4 million) of increase in account receivables primarily attributable to the increase in SpiderNet ecosystem solutions income, (ii) HK$6.3 million (US$0.8 million) of increase in prepayments and other receivables primarily attributable to the increase in deposit paid, and (iii) HK$22.3 million (US$2.9 million) of increase in contract liabilities primarily attributable to the receipts in advance of SpiderNet ecosystem solutions income.

Net cash generated from operating activities for the fiscal year ended April 30, 2020 was HK$213.8 million (US$27.6 million), which consists of our profit before tax of HK$182.0 million (US$23.5 million) as adjusted for non-cash items and the effects of changes in operating assets and liabilities. Adjustments for non-cash items included HK$43.6 million (US$5.6 million) of changes in fair value on financial assets measured at FVTPL in connection with our digital investments business and HK$5.9 million (US$0.8 million) of fair value change from derivative financial liability. The principal item accounting for the changes in operating assets and liabilities was HK$60.6 million (US$7.8 million) of increase in contract liabilities primarily attributable to the receipts in advance of SpiderNet ecosystem solutions income.

Net cash generated from operating activities for the fiscal year ended April 30, 2019 was HK$24.6 million, which consists of our profit before tax of HK$22.2 million as adjusted for non-cash items and the effects of changes in operating assets and liabilities. Adjustments for non-cash items included HK$19.3 million of changes in fair value on financial assets measured at FVTPL in connection with our digital investments business. The principal items accounting for the changes in operating assets and liabilities were (i) HK$28.1 million of decrease in prepayments and other receivables primarily attributable to the settlement of other receivables, and (ii) HK$5.3 million of decrease in other payables and accruals primarily attributable to the settlement of balances.

Investing activities

Net cash from investing activities for the nine months ended January 31, 2021 was HK$110.2 million (US$14.2 million), which was attributable to (i) HK$36.4 million (US$4.7 million) of collection of proceeds receivable from disposal of investments taken place in the fiscal year ended April 30, 2020 and HK$20.7 million (US$2.7 million) of payments for additions of financial assets at fair value through profit or loss, (ii) net cash inflow from acquisition of subsidiaries of HK$20.7 million (US$2.7 million), and (iii) HK$73.9 million (US$9.5 million) of movement in amounts due from group companies in connection with intra-group treasury fund allocation.

Net cash used in investing activities for the fiscal year ended April 30, 2020 was HK$674.5 million (US$87.0 million), which was attributable to (i) HK$318.1 million (US$41.0 million) of proceeds from disposal of financial assets at fair value through profit or loss, and (ii) HK$1,008.2 million (US$130.0 million) of movement in amounts due from group companies in connection with intra-group treasury fund allocation.

Net cash used in investing activities for the fiscal year ended April 30, 2019 was HK$3,071.5 million, which was attributable to (i) HK$78.8 million of net increase in financial assets at fair value through profit or loss primarily attributable to the net addition of investments, and (ii) HK$2,977.2 million of movement in amounts due from group companies in connection with intra-group treasury fund allocation.

Financing activities

Net cash from financing activities for the nine months ended January 31, 2021 was HK$82.5 million (US$10.6 million), which was attributable to (i) HK$27.1 million (US$3.5 million) through ordinary shares issuance, and (ii) HK$55.4 million (US$7.1 million) of movement in amounts due to group companies in connection with intra-group treasury fund allocation.

 

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Net cash from financing activities for the fiscal year ended April 30, 2020 was HK$651.2 million (US$84.0 million), which was attributable to (i) HK$987.8 million (US$127.4 million) through ordinary shares issuance and exercise of warrants, and (ii) HK$316.6 million (US$40.8 million) of movement in amounts due to group companies in connection with intra-group treasury fund allocation.

Net cash from financing activities for the fiscal year ended April 30, 2019 was HK$2,682.6 million, which was attributable to movement in amounts due to group companies in connection with intra-group treasury fund allocation.

Capital Expenditure

Our capital expenditure was nil for the fiscal years ended April 30, 2019 and 2020, and HK$0.2 million (US$25.8 thousand) for the nine months ended January 31, 2021. We will make capital expenditure to meet the expected growth of our business. We intend to fund our future capital expenditure with our existing cash and bank balances.

Contractual Obligations

Our subsidiary, AMTD Digital Holdings Pte. Ltd., entered into a binding term sheet in December 2019 with Xiaomi Corporation, SP Group, and Funding Societies to establish a consortium in which we expect AMTD Digital Holdings Pte. Ltd. to be the largest shareholder. The consortium intends to pursue opportunities in Singapore through Singa Bank, a digital wholesale banking platform to be established to provide comprehensive services to SME and corporate clients in Singapore, the launch of which is subject to obtaining a digital wholesale banking license from the MAS and other regulatory requirements.

In June 2020, we entered into a binding term sheet pursuant to which we expect to acquire 55% of CapBridge Financial Pte. Ltd.’s equity interest. We expect to complete the acquisition through CapBridge Group Limited in 2021. The completion of our acquisition of CapBridge is subject to a number of conditions, including final negotiation of terms of the transaction, MAS approval, and satisfaction of our closing obligations.

We entered into several movie income right agreements with third party independent production houses, pursuant to which we are entitled to benefits generated from the distribution of certain film programs. Under the agreements, we are obligated to make further contributions in case of budget overrun of film programs and the amount of contribution is subject to the terms of the agreements.

Off-Balance Sheet Commitments and Arrangements

Except for those disclosed under “Contractual Obligations”, we have not entered into off-balance sheet commitments to guarantee the payment obligations of any third parties. Except for the warrants issued in December 2019 and fully exercised in March 2020, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity, or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or product development services with us.

Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with IFRS issued by the IASB, which requires us to make judgments, estimates, and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience, and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the

 

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financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates.

The following descriptions of significant accounting policies, judgments, and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this prospectus. When reviewing our financial statements, you should consider (i) our selection of significant accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies, and (iii) the sensitivity of reported results to changes in conditions and assumptions.

Fair value measurement

We measure our derivative financial instruments and equity investment at fair value through profit and loss at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, we take into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

For financial instruments which are transacted at fair value and a valuation technique that unobservable inputs are to be used to measure fair value in subsequent periods, the valuation technique is calibrated so that at initial recognition the results of the valuation technique equals the transaction price.

In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

 

   

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

 

   

Level 2 inputs are inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

 

   

Level 3 inputs are unobservable inputs for the asset or liability.

For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, we determine whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Financial instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instrument. All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place.

Financial assets and financial liabilities are initially measured at fair value except for accounts receivable arising from contracts with customers which are initially measured in accordance with IFRS 15 Revenue from Contracts with Customers. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss, or FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

 

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The effective interest method is a method of calculating the amortized cost of a financial asset or financial liability and of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Financial assets

Our financial assets consist of cash and cash equivalents, fiduciary bank balance, accounts and other receivables, amounts due from immediate holding company and from fellow subsidiaries, and financial asset at FVTPL.

Classification and subsequent measurement of financial assets

Financial assets that meet the following conditions are subsequently measured at amortized cost:

 

   

the financial asset is held within a business model whose objective is to collect contractual cash flows; and

 

   

the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive income, or FVTOCI:

 

   

the financial asset is held within a business model whose objective is achieved by both selling and collecting contractual cash flows; and

 

   

the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All other financial assets are subsequently measured at FVTPL.

A financial asset is held for trading if:

 

   

it has been acquired principally for the purpose of selling in the near term; or

 

   

on initial recognition it is a part of a portfolio of identified financial instruments that we manage together and have a recent actual pattern of short-term profit-taking; or

 

   

it is a derivative that is not designated and effective as a hedging instrument.

In addition, we may irrevocably designate a financial asset that is required to be measured at the amortized cost or FVTOCI as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.

 

  (i)

Amortized cost and interest income

Interest income is recognized using the effective interest method for financial assets measured subsequently at amortized cost. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired. For financial assets that have subsequently become credit-impaired, interest income is recognized by applying the effective interest rate to the amortized cost of the financial asset from the next reporting period. If the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognized by applying the effective interest rate to the gross carrying amount of the financial asset from the beginning of the reporting period following the determination that the asset is no longer credit-impaired.

 

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  (ii)

Financial assets at FVTPL

Financial assets that do not meet the criteria for being measured at amortized cost or FVTOCI or designated as FVTOCI are measured at FVTPL.

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognized in profit or loss. The net gain or loss recognized in profit or loss includes any dividend or interest earned on the financial asset and is included in the “changes in fair value on financial assets measured at FVTPL ” line item.

Revenue from contracts with customers

Revenue are derived from the commissions and fees from the insurance brokerage services and membership fee from the SpiderNet ecosystem solutions services.

Insurance Brokerage Services

We earn commission income by acting as an agent in facilitating the arrangement between insurance company partners and individuals/businesses. The service promised to the customer is obtaining on a best-effort-basis the quotation and subsequent placement (if quotation is accepted by the customer) of an effective insurance or reinsurance policy. Commission revenue are usually a percentage of the premium ultimately paid by the customer and generally depend upon the type and amount of insurance, the insurance company partner and the nature of the services provided. Revenue is recognized at a point in time upon execution and effectiveness of insurance contracts. The term for the insurance product sold by us is typically one month to three years. We allow a credit period of 15 days to our customers.

We act as broker for insureds, insurance underwriters, and other brokers in the areas of insurance and reinsurance broking services and earns commission. Commission rates and fees vary in amount and can depend upon a number of factors, including the premium rate levels in the insurance/reinsurance markets, type of insurance or reinsurance coverage provided, the particular insurer or reinsurer selected, the capacity in which the broker acts and negotiates with clients, the value of the insured risks, the amount of risk retained by insurance and reinsurance clients themselves, and volume, growth, and total retention of clients placed by us. The trends and comparisons of revenue from one period to the next can be affected by changes in premium rate levels, fluctuations in client risk retention, and increases or decreases in the value of risks that have been insured, as well as new and lost business, and the volume of business from new and existing clients.

We do not determine the insurance premiums on which our commissions are generally based. Our revenues and profitability are subject to change to the extent that premium rates fluctuate or trend in a particular direction. The potential for changes in premium rates is significant, due to the normal cycles of pricing in the commercial insurance and reinsurance markets. As traditional insurance companies continue to rely on non-affiliated brokers or agents to generate premium, those insurance companies may seek to reduce their expenses by lowering their commission rates. The reduction of these commission rates, along with general volatility or declines in premiums, may significantly affect our revenue and profitability. Because we do not determine the timing or extent of premium pricing changes, it is difficult to accurately forecast our commission revenues, including whether they will significantly decline. As a result, we may have to adjust our plans for future acquisitions, capital expenditures, dividend payments, loan repayments and other expenditures to account for unexpected changes in revenues, and any decreases in premium rates may adversely affect the results of our operations.

Demand for many types of insurance and reinsurance generally rises or falls as economic growth expands or slows. This dynamic affects the level of commissions and fees generated by us. It is affected by, among other things, global economic conditions, including changes in clients’ particular industries and markets. To the extent our clients become adversely affected by declining business conditions, they may choose to limit their purchases

 

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of insurance and reinsurance coverage, as applicable, which would inhibit our ability to generate commission revenue. Also, the insurance they seek to obtain through us may be impacted by changes in their assets, property values, sales, or number of employees, which may reduce our commission revenue and inhibit our ability to generate fee revenue. Moreover, insolvencies and combinations associated with an economic downturn, especially insolvencies and combinations in the insurance industry, could adversely affect our brokerage business through the loss of clients or by limiting our ability to place insurance and reinsurance business.

In addition to movements in premium rates, our ability to generate premium-based commission revenue may be challenged by disintermediation and the growing availability of alternative methods for clients to meet their risk-protection needs. This trend includes a greater willingness on the part of corporations to self-insure, the use of captive insurers, and the presence of capital markets-based solutions for traditional insurance and reinsurance needs. Further, our business depends on our ability to obtain payment from our clients of the amounts they owe us for the work we perform. Macroeconomic or political conditions could result in financial difficulties for our clients, which could cause clients to delay payments to us, request modifications to their payment arrangements that could increase our receivables balance or default on their payment obligations to us. In addition, we compete principally on sophistication, range, quality, and cost of the services and products we offer to clients. We encounter strong competition from other insurance and reinsurance brokerage firms that operate on a global, regional, national, or local scale, from insurance and reinsurance companies that market, distribute, and service their insurance and reinsurance products without the assistance of brokers or agents and from other businesses, including commercial and investment banks, accounting firms, consultants, and online platforms, that provide risk-related services and products or alternatives to traditional insurance brokerage services. In addition, third-party capital providers have entered the insurance and reinsurance risk transfer market offering products and capital directly to the Company’s clients. Their presence in the market increases the competitive pressures that the Company faces. Certain insureds and groups of insureds have established programs of self-insurance (including captive insurance companies) as a supplement or alternative traditional third-party insurance, thereby reducing in some cases their need for insurance placements. Certain insureds also obtain coverage directly from insurance providers. There are also many other providers of managing general agency, affinity programs, and private client services, including specialized firms, insurance companies, and other institutions.

SpiderNet Ecosystem Solutions Services

We provide our corporate clients exclusive access to the AMTD SpiderNet ecosystem for a membership fee, under the SpiderNet ecosystem solutions services segment, which provides its members networking opportunities with prestigious corporate members, prominent business executives and partners. Contract terms generally ranged from two months to three years. Revenue from such service is recognized over time as the customers simultaneously receive and consumes the service provided by us. We generally require customers to provide partial upfront payments of total service fees. Upfront payment is due immediately at the point our customer entered into the service contracts. The remaining payments will be settled according to the repayment schedules stated in the service contracts. When we receive an upfront payment, this will give rise to contract liabilities at the time of the initial sales transaction and revenue is recognized ratably over the membership service period.

A contract liability represents our obligation to transfer goods or services to a customer for which we have received consideration (or an amount of consideration is due) from the customer.

Business acquisition under fusion-in program

As part of our fusion-in program, we may acquire controlling interests in leading companies in the digital financial industry with cash consideration and share swap (i.e. issuance of our ordinary shares in exchange for the equity interests of the acquiree). The acquisitions are accounted for using the acquisition method. The consideration transferred is measured at fair value, which is calculated as the sum of the fair values of the assets (i.e. cash consideration) on the acquisition date transferred by us and the ordinary shares issued by us in exchange for control of the acquiree.

 

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At the acquisition date, the identifiable assets acquired and the liabilities assumed are generally recognized at their fair value. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree over the net amount of the identifiable assets acquired, and the liabilities assumed on the acquisition date. If, after re-assessment, the net amount of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the excess is recognized immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the relevant subsidiary’s net assets in the event of liquidation are initially measured at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets or at fair value.

Internal Control Over Financial Reporting

Prior to this offering, we have been a private company with limited accounting personnel and other resources with which to address our internal control. Our management has not completed an assessment of the effectiveness of our internal control and procedures over financial reporting and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. In the course of auditing our consolidated financial statements as of April 30, 2019 and 2020. For the fiscal years ended April 30, 2019 and 2020, we and our independent registered public accounting firm identified one material weakness in our internal control over financial reporting as of April 30, 2019 and 2020. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

The material weakness identified is relating to lack of internal audit function and audit committee to monitor, evaluate and communicate internal control deficiencies. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control under the Sarbanes-Oxley Act for purposes of identifying and reporting any weakness in our internal control over financial reporting. We and they are required to do so only after we become a public company. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional control deficiencies may have been identified.

To remediate our identified material weakness subsequent to April 30, 2019 and 2020, we have appointed two independent directors and established an audit committee, and plan to adopt measures to improve our internal control over financial reporting, including, among others: establishing an internal audit department with sufficient resources and experienced personnel to design, review and monitor internal control over financial reporting.

However, we cannot assure you that all these measures will be sufficient to remediate our material weakness in time, or at all. See “Risk Factors—Risks Relating to Our Business and Industry—We have identified a material weakness in our internal control over financial reporting, and if we fail to implement and maintain an effective system of internal control to remediate our material weakness over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations, or prevent fraud.”

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 JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements 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.

 

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Holding Company Structure

AMTD Digital Inc. is a holding company with no material operations of its own. We conduct our operations primarily through its subsidiaries. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries. If our existing subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.

Inflation

To date, inflation in Singapore and Hong Kong has not materially affected our results of operations. According to the Singapore Department of Statistics, the year-over-year percent changes in the consumer price index for April 30, 2019 was increase of 0.9%, for April 30, 2020 was decrease of 0.7%, and for January 31, 2021 was increase of 0.2%. According to the Census and Statistics Department of Hong Kong, the year-over-year percent changes in the consumer price index for April 30, 2019 and 2020, and January 31, 2021 were increases of 2.9%, 1.9%, and 1.9%, respectively. Although we have not been materially affected by inflation in the past, we may be affected if Singapore or Hong Kong experiences higher rates of inflation in the future.

Quantitative and Qualitative Disclosures about Market Risk

Foreign exchange risk

Most of our revenue and expenses are denominated in Hong Kong dollars or U.S. dollars. Certain of our transactions are denominated in foreign currencies and therefore we are exposed to foreign currency risk. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk. Although our exposure to foreign exchange risks should be limited in general, the value of your investment in the ADSs will be affected by the exchange rate between U.S. dollars and Hong Kong dollars or between Singapore dollars and Hong Kong dollars because the value of our business is mainly denominated in Hong Kong dollars, while the ADSs will be traded in U.S. dollars.

In addition, foreign exchange risk also arises from the possibility that fluctuations in foreign exchange rates can impact the value of financial instruments. We are exposed to minimal foreign exchange risk since Hong Kong dollars are pegged against U.S. dollars. The impact of foreign exchange fluctuations in our earnings is included in foreign exchange differences, net in the consolidated statements of cash flows.

To the extent we need to convert U.S. dollars into Hong Kong dollars for our operations, appreciation of Hong Kong dollars against U.S. dollars would reduce the amount in Hong Kong dollars we receive from the conversion. Conversely, if we decide to convert Hong Kong dollars into U.S. dollars for the purpose of making payments for dividends on our Class A ordinary shares or ADSs, servicing our outstanding debt, or for other business purposes, appreciation of U.S. dollars against Hong Kong dollars would reduce the U.S. dollar amounts available to us.

Equity price risk

We are exposed to equity price risk through our investments in equity securities measured at FVTPL. We invested in certain unquoted equity securities for investees operating in digital and technology industry sectors for long term strategic purposes which had been measured as FVTPL. We have appointed a special team to monitor the price risk and will consider hedging the risk exposure should the need arise.

Interest rate risk

Our exposure to interest rate risk primarily relates variable-rate cash held on behalf of customers and bank balances. Our exposure to interest rate risk is limited because the current market interest rates on bank deposits are relatively low and stable.

 

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Credit risk

Our credit risk exposures are primarily attributable to accounts receivable, other receivables, bank balances, cash held on behalf of customers, and amounts due from immediate holding company and fellow subsidiaries. We do not hold any collateral or other credit enhancements to cover our credit risks associated with our financial assets.

Recently Issued Accounting Pronouncements

A list of recently issued accounting pronouncements that are relevant to us is included in note 3 to our consolidated financial statements included elsewhere in this prospectus.

 

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INDUSTRY

Overview of the Digital Financial Services Industry in Asia

Digital financial services represent the use of digital channels to deliver financial services, such as deposits, lending, remittances, payments, and insurance. Digital financial services are rapidly transforming traditional financial services, serving as the foundation to support the growth of the entire digital economy by providing a convenient and efficient way for consumers and businesses to access financial services and carry out transactions digitally.

Mainland China is leading the development of digital financial services in Asia in terms of number of users and market size. Other major Asian countries and regions such as Hong Kong, Singapore, and Malaysia have also experienced robust growth in recent years.

The penetration rate of mobile wallet is often used as a key indicator of the development stage of a digital financial services industry. In 2020, Mainland China had the highest penetration rate of mobile wallet in Asia at 12.5%. Although the mobile wallet penetration rates in other Asian countries and regions, such as Hong Kong and Singapore, were much lower, they have increased rapidly in recent years. The penetration rate of mobile wallet in Hong Kong increased from 2.3% in 2017 to 7.2% in 2020, primarily driven by strong government support, increasing interaction with Mainland China and evolving consumer preferences for faster and more convenient services. The penetration rate of mobile wallet in Hong Kong is expected to reach 11.6% by 2024. The penetration rate of mobile wallet in Singapore increased from 0.1% in 2017 to 3.0% in 2020, primarily driven by a steadily growing economy, favorable government policies, and growing adoption of smartphones and Internet. The penetration rate of mobile wallet in Singapore is expected to reach 8.7% by 2024.

Penetration Rate of Mobile Wallet*, Major Asian Countries and Regions, 2017 – 2024E

 

  

 

 

LOGO

  

 

Note:

*

Penetration rate of mobile wallet refers to the transaction value of payment via smartphone applications (so-called “mobile wallets”) as a percentage of the total retail consumption. Well-known providers of mobile wallets are Alipay, WeChat Pay, Apple Pay, Google Wallet and Samsung Pay.

 

 

Source: China Insights Consultancy

 

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Key Drivers of the Digital Financial Services Industry in Asia

Digital financial services in Asia have experienced robust growth and are expected to continue to grow rapidly, driven by the following factors:

Favorable Government Policies and Initiatives

Governments in major Asian countries and regions have been proactively promoting digital financial services in recent years, and have launched various initiatives to streamline the process of issuing digital banking licenses and digital insurance licenses, accelerate approval process for FinTech patents and products, and strengthen supervisory framework for digital financial services. For example, the Hong Kong Monetary Authority has launched several “smart banking” initiates, including the introduction of digital banking licenses, while the Hong Kong Insurance Authority has launched pilot measures to support digital insurance services. The MAS has announced its objective to create a smart financial center, releasing digital banking licenses, and introducing initiatives to improve the national payments infrastructure. The following table sets forth a summary of key initiatives regarding digital financial services.

 

Major

Countries/

Regions

  

Policies

  

Key Contents

Mainland China    Plan for Promoting the Development of Financial Inclusion (2016-2020)   

•  The issuance of the plan aims to help the financial sector better serve the building of a moderately prosperous society in Mainland China, benefitting the development of vulnerable areas and groups including micro and small enterprises.

 

  

•  The plan primarily promotes the concept of financial inclusion from several perspectives, including establishing a diversified and extensive network of financial institutions, innovating financial products and services, accelerating financial infrastructure development, and improving legal framework.

   FinTech Development Plan (2019-2021)   

•  The plan outlines the guidance ideology, basic principles, development targets, key missions, and guarantee mechanisms for FinTech work over the upcoming three years since 2019.

 

  

•  Under the guidance of the plan, China’s FinTech development will be strongly supported by strengthening FinTech application capability, in-depth integration and coordinated development of finance and technology, and enhanced level of satisfaction of the public regarding digitized, Internet, smart financial products and services.

 

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Major

Countries/

Regions

  

Policies

  

Key Contents

   Guiding Opinions of the People’s Bank of China and the China Banking Regulatory Commission on Enhancing the Financial Support for New Consumption Areas   

•  The guiding opinions are released in order to satisfy the financial needs of the key new consumption areas in a better way and make innovation on the modes of financial support and services.

 

•  The measures include optimizing online consumer credit management models, encouraging banking financial institutions to explore the use of the Internet and other technical means to carry out remote credit, promoting the integration of consumer credit and Internet technology, and encouraging banking financial institutions to employ big data analysis and other technologies to develop standardized online small credit loans and create self-service consumer loan platforms.

   Guiding Opinions Concerning Further Strengthening Micro, Small and Medium-sized Enterprise Financial Services   

•  The “Opinions” points out the use of financial technology to empower financial services for micro, small and medium-sized enterprises, and encourages commercial banks to use big data and AI to establish risk pricing and management and control models, and reform the credit approval and issuance process.

  

 

•  The “Opinions” affirms the application value of the above technologies in related scenarios, and also points out the direction of implementation, as well as provides policy advice for the target group transformation of the AI+ financial industry, which is from consumers to enterprises.

   Interim Measures for the Administration of Internet Loans of Commercial Banks   

The “Measures” regulates commercial banks’ Internet loan business operations from multiples levels such as commercial banks, loan assistance platforms, and borrowers, to promote Internet loan business compliance development in customer acquisition, product design, risk control, and cash collection.

     Financial Technology Development Indicators (JR/T 0201-2020) Financial Industry Standards   

•  The “Standards” is composed of three major indicators: institutional indicators, industry indicators, and regional indicators. It aims to form a set of scientific, comprehensive, and quantifiable evaluation standards for financial technologies development, which are applicable to the development of financial technologies in different institutions, industries, and regions.

Hong Kong    Stored Value Facilities (SVF) and Retail Payment Systems   

•  In November 2015, the regulatory regime for stored value facilities and retail payment systems under the Payment Systems and Stored Value Facilities Ordinance (the Ordinance) commenced operation.

  

 

•  As of the date of the prospectus, 18 SVF licenses (including 3 licensed banks that are regarded as SVF licensees) has been granted by the Hong Kong Monetary Authority.

 

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Major

Countries/

Regions

  

Policies

  

Key Contents

   Seven Smart Banking Initiatives   

•  The Hong Kong Monetary Authority announced a series of initiatives in September 2017 to prepare Hong Kong to move into a new era of smart banking, including:

  

•  full connectivity of digital retail payments through the Faster Payment System;

  

•  upgrading existing FinTech Supervisory Sandbox 1.0 to Version 2.0;

  

•  facilitating the introduction of virtual banking in Hong Kong;

  

•  introducing a new Banking Made Easy initiative to reduce regulatory frictions and improve customer experience;

  

•  developing an Open Application Programming Interface framework;

  

•  stepping up cross-border cooperation in FinTech; and

  

•  enhancing research and talent development.

   Guideline on Authorization of Virtual Banks   

•  The Hong Kong Monetary Authority published a revised Guideline on Authorization of Virtual Banks, which sets requirements for the authorization criteria of virtual banks, including the roles of controllers, senior management, capital amounts, risk control, reserve requirements, disclosure mechanisms, and exit plans.

  

 

•  Eight virtual banking license recipients were ultimately approved as of the date of the prospectus.

   Fast Track for Applications Authorizations—New Insurers Owning and Operating Solely Digital Distribution Channels   

•  The fast track provides a dedicated queue for new authorization applications from applicants, which would own and operate solely digital distribution channels, without the use of any conventional channels involving agents, banks, or brokers.

  

 

•  The Insurance Authority had granted authorization under the fast track to four virtual insurers as of the date of the prospectus.

 

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Major

Countries/

Regions

  

Policies

  

Key Contents

   Open API Framework for the Hong Kong Banking Sector   

•  This framework takes a risk-based principle and a four-phase approach to implement various Open API functions, and recommends prevailing international technical and security standards to ensure fast and safe adoption. It also lays out detailed expectations on how banks should onboard and maintain relationship with TSPs in a manner that ensures consumer protection. The Hong Kong Monetary Authority believes that this framework will serve as an important guide for the banking industry in Hong Kong to adopt APIs effectively and strike a good balance between innovation and risks.

   Fintech Supervisory Sandbox (FSS) & FSS2.0   

•  The Fintech Supervisory Sandbox (FSS), launched by the HKMA in September 2016, allows banks and their partnering technology firms to conduct pilot trials of their fintech initiatives involving a limited number of participating customers without the need to achieve full compliance with the HKMA’s supervisory requirements.

 

    

•  In light of the experience obtained in operating the FSS, the HKMA has upgraded the FSS to FSS 2.0. FSS 2.0 has several new features, such as Fintech Supervisory Chatroom to provide feedback to banks and technology firms at an early stage of their fintech projects, and single point of entry to connect SFC and HKIA.

Singapore    Digital Bank (DFB and DWB) Licenses   

•  MAS announced on June 28, 2019 that it will issue up to two digital full bank (DFB) licenses and three digital wholesale bank (DWB) licenses. On December 4, 2020, the MAS announced an initial batch of four successful digital bank applicants. Two applicants were selected for the award of digital full bank licenses, while another two applicants were selected for the award of digital wholesale bank licenses. The MAS will review and consider granting more such licenses in the future.

 

  

•  The digital bank licenses will allow entities, including non-bank players, to conduct digital banking businesses in Singapore. These new digital bank licenses mark the new chapter in Singapore’s banking liberalization journey, and ensure that Singapore’s banking sector continues to be resilient, competitive, and vibrant.

 

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Major

Countries/

Regions

  

Policies

  

Key Contents

   Payment Services Act   

•  The act provides for the licensing and regulation of payment service providers, and the oversight of payment systems, which aims at improving the regulatory framework for payment services, enhances consumer protection, and increases awareness of the use of electronic payments in Singapore.

   Fast-Track Initiative for FinTech Innovations   

•  FinTech Fast-Track (FTFT) has been launched on April 26, 2018 by the Intellectual Property Office of Singapore, aiming at providing an initiative to advance the file-to-grant process for FinTech patents, which include electronic payment, blockchain, banking, and insurance technology in Singapore.

 

  

•  Once the technologies meet the requirements of FinTech inventions, the qualified applications could be granted as fast as 6 months, thereby enabling businesses to market and commercialize their products and services more rapidly.

   Open Banking/APIs Guidelines   

•  The MAS has, among other provided open banking/APIs guidelines, set out a framework, which currently operates the Financial Industry API Register and tracks APIs by functional category as they are launched.

  

 

•  The MAS, the International Finance Corporation, and the ASEAN Bankers Association jointly established AFIN, with AMTD Foundation as its first corporate founding member, which launched Industry Sandbox and APIX that sit between banks and FinTechs. This interoperable and scalable infrastructure will act as a method to standardize banking infrastructure and data while also allowing institutions to test applications and fast prototype.

   Sandbox Express   

•  Sandbox Express provides firms with a faster option to test certain innovative financial products and services in the market. Eligible applicants can begin market testing in the pre-defined environment of Sandbox Express within 21 days of applying to the MAS. PolicyPal is the first startup to graduate from MAS FinTech Regulatory Sandbox, promoting the development of digital insurance in Singapore.

   Statement-of-Intent Committing to Promote Digital Insurance Innovation in the ASEAN   

•  The MAS, the U.K. Department for International Trade and Investment, and 15 insurance industry representatives have signed a statement of intent committing in February 2017 to promote digital innovation in the Asian insurance sector and introduce ASEAN InsurTech Launchpad.

 

  

•  The ASEAN InsurTech Launchpad, which is the first in the world, allows startup insurers to run pilots and proof-of-concepts with Singapore-based insurers, leverage on their networks, and create successful partnerships in the region, thereby further advancing Singapore to the forefront of digital revolution in insurance.

 

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Major

Countries/

Regions

  

Policies

  

Key Contents

  

Financial Sector Technology & Innovation Scheme (FSTI2.0)

 

  

•  The MAS provides support for the creation of a vibrant ecosystem for innovation. The “Scheme” aims at accelerating the development of technologies and innovations in the financial industry, supporting large-scale innovation projects, and cultivating local financial technology talents.

     FinTech Service Prover (FSP) Compliance Readiness Framework   

•  The Singapore FinTech Association (SFA) announced the launch of a digital self-assessment framework and toolkit for fintech companies to accelerate the process of establishing partnerships between fintech companies and financial institutions, and promote the digital reform of Singapore’s financial industry.

Malaysia    Exposure Draft on Licensing Framework for Digital Banks   

•  This exposure draft sets out the proposed framework to allow entry of digital banks with innovative business models that seeks to serve the underserved and unserved market segments, enabling innovative application of technology in the financial sector. It aims to enable admission of digital banks with strong value propositions whilst safeguarding the integrity and stability of the financial system as well as depositors’ interest.

   Digital Free Trade Zone   

•  The digital free trade zone aims to encourage SMEs to engage in cross-border trading. In addition, it supports online and digital services that promote e-commerce and innovation globally, creating opportunities for FinTech businesses.

 
India    Guidelines for Licensing of Payments Banks   

•  The guidelines are published to create a framework to license small banks and other differentiated banks that serve niche interest, local area banks, and payment banks, satisfying the needs of small businesses and low income households.

   Union Budget of India (2019-2020)   

•  The Budget amends the Payment and Settlement Systems Act 2007 to include the policy that no bank or system provider shall impose any charge for using electronic modes for payments to a business that has total turnover exceeding INR500 million.

Vietnam    Circular No. 23/2019/TT-NHNN   

•  The State Bank of Vietnam releases new guidance on the customer identification and verification on e-wallet services, the Electronic Clearing System and the opening of payment guarantee accounts, which aims to develop digital financial services in Vietnam.

   Vietnam National E-commerce Development Program 2014-2020   

•  The program aims to build a national e-commerce payment system, set online shopping as a popular trading tool, and encourage to develop e-commerce infrastructure, products and solutions.

   Scheme on Development of Non-cash Payment in Vietnam 2016-2020   

•  The scheme improves the legal and policy framework regarding online payment, upgrades and expands the inter-bank electronic payment system, and promotes the overall development of retail payment systems and services.