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September 21, 2018
Jun Xu
Chief Executive Officer and Director
360 Finance, Inc.
China Diamond Exchange Center, Building B
No. 555 Pudian Road, No. 1701 Century Avenue
Pudong New Area, Shanghai 200122
People's Republic of China
Re: 360 Finance, Inc.
Amendment No. 1 to
Draft Registration Statement on Form F-1
Submitted September 10, 2018
CIK No. 0001741530
Dear Mr. Xu:
We have reviewed your amended draft registration statement and have the
following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments. Unless we note otherwise, our references to prior comments are to
comments in our
August 23, 2018 letter.
Amendment No. 1 to Draft Registration Statement on Form F-1
Prospectus Summary, page 1
1. We note your revisions in response to comments 1 and 4. However, it
appears that
understanding the material terms of your loan products, your target
market and its growth
prospects, and the recent changes to your business in response to recent
Chinese
Jun Xu
FirstName LastNameJun Xu
360 Finance, Inc.
Comapany 21, 2018 Finance, Inc.
September Name360
September 21, 2018 Page 2
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regulations are all key aspects of your offering. Accordingly, please
revise your
prospectus summary to disclose:
The necessary qualifications for "prime borrowers" and support
your belief that this
market is "underserved."
An overview of your loan products, such as the average or range of
your credit lines,
drawdowns, and terms.
An overview of how you monetize these products, such as the types
of fees or interest
you charge, identifying the party that pays the fee or interest
(i.e. borrower, lender,
referral partner) and their relative importance to your business.
The recent significant changes to your business in response to
recent Chinese
regulations which have required "considerable measures to comply
with," highlighting
such material changes, addressing the penalties for noncompliance,
and addressing the
degree to which your present operations are comparable to your
historical operations in light of these apparently material
changes.
Our Challenges, page 7
2. We note your revisions in response to comments 6 and 26. Please revise
your fifth bullet
to disclose the material ways in which your operations are not
currently in compliance
with regulations for the online consumer finance industry or
value-added
telecommunications services and the current or potential future impact
on your business
operations.
Conventions that Apply to this Prospectus, page 11
3. We note your disclosure on page 12 now states that the M1+ and M3+
delinquency rates
exclude loans past due 180+ days unless content in the filing states
otherwise. Please
address the items below.
Clarify for us whether this is an actual methodology change. If so,
tell us the reason
for the change.
To supplement the graphs provided on page 92, present (preferably in
tabular format)
the M1+ and M3+ delinquency rates for all periods presented in your
financial
statements. Include expanded narrative to discuss material trends
and their drivers.
Risk Factors
Risks Related to Our Business and Industry
The laws and regulations..., page 21
4. We note your revisions in response to comment 9. Please further revise
your first bullet to
disclose, as of a recent date, the proportion of loan originations
where either you or your
PRC subsidiaries guaranteed the deposits of, or provided guarantees or
other credit
enhancements services to, your institutional funding partners without
the relevant
guarantee license.
Jun Xu
FirstName LastNameJun Xu
360 Finance, Inc.
Comapany 21, 2018 Finance, Inc.
September Name360
September 21, 2018 Page 3
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FirstName LastName
Dilution, page 75
5. We note your revisions in response to comment 12. However, the last
paragraph on page
76 appears to contradict the revised disclosure in your footnote to
these two tables. Please
revise or explain this apparent discrepancy.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Specific Factors Affecting Our Results of Operations, page 91
6. We note your response to comment 13. To provide more clarity for
investors regarding
initial utilization compared with ongoing active usage, please address
the items below.
Tell us the overall utilization rate for the periods presented. If
there is a material
difference between the first year utilization rate and the overall
utilization rate, revise
your disclosure to present both and address the differences.
Tell us whether you consider other metrics such as average number of
monthly active
users or accumulated active borrowers. If so, revise your
disclosures to discuss and
quantify such metrics or explain to us why you feel that they
would not be meaningful
to investors.
Business
Our Transaction Process, page 133
7. We note your response to comment 16 and your revised disclosure on
page 134 stating
that you do not consider referrals as a main source of income.
However, given that
revenue from referring borrowers appears to have constituted more than
10% of your total
net revenues for the periods presented, please present this amount as
a separate line item
on the face of your Combined and Consolidated Statements of
Operations. See Rule 5-03
of Regulation S-X.
Description of American Depositary Shares
Governing Law, page 190
8. We note your revisions in response to comment 29 that the deposit
agreement includes
both mandatory arbitration and exclusive forum provisions. Please
indicate whether these
provisions impact the ability of ADS holders to pursue claims under US
federal securities
laws. We further note that your contractual arrangements with your
VIEs provide for the
resolution of disputes through arbitration in China. Please revise
your disclosures on
page 43 to state, if true, that the arbitration provisions relate to
the claims arising out of
the contractual relationship created by the VIE agreements, rather
than claims under the
US federal securities laws and do not prevent shareholders of the
company from pursuing
claims under the US federal securities laws.
Jun Xu
FirstName LastNameJun Xu
360 Finance, Inc.
Comapany 21, 2018 Finance, Inc.
September Name360
September 21, 2018 Page 4
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Notes to the Combined and Consolidated Financial Statements...
2. Summary of Significant Accounting Policies, page F-14
9. We note your response to comment 34. Please revise your disclosures to
include your
accounting policy for the borrower referral program, including the
amounts of cash
rewards for the periods presented.
Multiple element revenue recognition, page F-18
10. We note in your disclosures on page F-17 that your services mainly
consist of (1)
performing credit assessment and matching and (2) providing repayment
processing. We
further note that, on page F-18, you consider loan facilitation
services and post-origination
services as a multiple deliverable revenue arrangement. Your
disclosures go on to state
that, when applicable, you first allocate fees collected to guarantee
liabilities, then to the
two previously mentioned deliverables. Please address the items below.
Clarify the timing for your recognition of loan facilitation
services; i.e., given that you
receive fees on a monthly basis over the life of a loan, describe
how you determine
when the four criteria identified on page F-17 are met for loan
facilitation services,
which are presumably completed up-front.
Clarify whether you consider the guarantee to be a deliverable when
it is present. If
so, revise your disclosures to state this.
If you do not consider the guarantee to be a deliverable, explain
how you reached your
conclusion.
Notes to the Unaudited Condensed Combined and Consolidated for the Six Months
Ended June
30, 2017 and 2018
2. Summary of Significant Accounting Policies
Consolidated Trusts, page F-46
11. We note your response to comment 33. Please revise your disclosure on
page F-46 to
include the amounts of repurchases for loans facilitated under the
consolidated trust for
the periods presented or disclose that they are immaterial.
Guarantee Liabilities, page F-48
12. We note your response to comment 21 and related revised disclosure
regarding guarantees
for funding partners. Please address the items below.
Provide us with a set of sample journal entries for back-to-back
guarantees from
inception to release, including an example where a partial or full
recovery of defaulted
money is made and one in which there is no recovery.
For comparative purposes, also provide a set of sample journal
entries for a transaction
in which you have provided a security deposit.
Tell us if all non-back-to-back guarantees require a security
deposit. If not, provide us
with a sample set of journal entries for a transaction in which a
guarantee is provided
Jun Xu
360 Finance, Inc.
September 21, 2018
Page 5
but no security deposit is required.
You may contact Lory Empie, Staff Accountant, at (202) 551-3714 or Cara
Lubit, Staff
Accountant, at (202) 551-5909 if you have questions regarding comments on the
financial
statements and related matters. Please contact Christopher Dunham, Staff
Attorney, at (202) 551-
3783 or Michael Clampitt, Senior Counsel, at (202) 551-3434 with any other
questions.
Sincerely,
FirstName LastNameJun Xu
Division of
Corporation Finance
Comapany Name360 Finance, Inc.
Office of Financial
Services
September 21, 2018 Page 5
cc: Will H. Cai, Esq.
FirstName LastName