United States securities and exchange commission logo
June 13, 2023
Shannon Shen
Chief Financial Officer
Gaotu Techedu Inc.
5F, Gientech Building, 17 East Zone,
10 Xibeiwang East Road
Haidian District, Beijing 100193
People s Republic of China
Re: Gaotu Techedu Inc.
Report of Foreign
Issuer on Form 6-K
Filed February 28,
2023
Annual Report on
Form 20-F for the Fiscal Year Ended December 31, 2022
Filed April 18,
2023
Dear Shannon Shen:
We have reviewed your filings 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 these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 6-K filed February 28, 2023
Exhibit 99.1 - Press Release
About Non-GAAP Financial Measures, page 9
1. We note that your
non-GAAP net income (loss) measure excludes share-based
compensation expenses,
and such adjustments exclude the impact on income tax. Please
tell us how your
presentation complies with the guidance in Question 102.11 of the Non-
GAAP Performance
Measures Compliance and Disclosure Interpretations and revise your
disclosure as
necessary.
Shannon Shen
FirstName LastNameShannon Shen
Gaotu Techedu Inc.
Comapany
June NameGaotu Techedu Inc.
13, 2023
June 13,
Page 2 2023 Page 2
FirstName LastName
Form 20-F for the Fiscal Year Ended December 31, 2022
Item 3. Key Information
Our Holding Company Structure and Contractual Arrangements with the VIE, page 7
2. Please disclose that the VIE structure involves unique risks to
investors, and explain
whether the VIE structure is used to provide investors with exposure
to foreign investment
in China-based companies where Chinese law prohibits direct foreign
investment in the
operating companies.
3. Provide a diagram of the company s corporate structure, identifying
the person or entity
that owns the equity in each depicted entity. Describe all contracts
and arrangements
through which you claim to have economic rights and exercise control
that results in
consolidation of the VIE s operations and financial results into
your financial statements.
Identify clearly the entity in which investors hold their interest and
the entities in which
the company s operations are conducted.
The Holding Foreign Companies Accountable Act, page 9
4. Please disclose the location of your auditor.
Cash Flows through Our Organization, page 10
5. Provide cross-references to the condensed consolidating schedule and
the consolidated
financial statements.
6. Please amend your disclosure here and in the summary risk factors and
risk factors
sections to state that, to the extent cash or assets in the business
is in the PRC/Hong Kong
or a PRC/Hong Kong entity, the funds or assets may not be available to
fund operations or
for other use outside of the PRC/Hong Kong due to interventions in or
the imposition of
restrictions and limitations on the ability of you, your subsidiaries,
or the consolidated
VIE by the PRC government to transfer cash or assets. State that there
is no assurance the
PRC government will not intervene in or impose restrictions on the
ability of you, your
subsidiaries, and the consolidated VIEs to transfer cash or assets.
Provide cross-
references to these other discussions in your summary risk factors and
risk factors.
7. Disclose the source of your cash management policies (e.g., whether
they are contractual
in nature, pursuant to regulations, etc.).
Permissions Required from the PRC Authorities for Our Operations, page 11
8. Disclose each permission or approval that you, your subsidiaries, or
the VIE are required
to obtain from Chinese authorities to operate your business and to
offer the securities
being registered to foreign investors. In this regard, we note you
include a cross reference
to the risk factors and a non-exclusive list of permissions that are
required. The disclosure
here should not be qualified by materiality. State whether you, your
subsidiaries, or the
Shannon Shen
FirstName LastNameShannon Shen
Gaotu Techedu Inc.
Comapany
June NameGaotu Techedu Inc.
13, 2023
June 13,
Page 3 2023 Page 3
FirstName LastName
VIE are covered by permissions requirements from the Cyberspace
Administration of
China (CAC) or any other governmental agency that is required to
approve the VIE s
operations, and state affirmatively whether you have received all
requisite permissions or
approvals and whether any permissions or approvals have been denied.
Regarding the
CAC, your disclosure does not state whether or not you are subject to
any permissions or
approvals. Please also describe the consequences to you and your
investors if you, your
subsidiaries, or the VIE: (i) do not receive or maintain such
permissions or approvals, (ii)
inadvertently conclude that such permissions or approvals are not
required, or (iii)
applicable laws, regulations, or interpretations change and you are
required to obtain such
permissions or approvals in the future.
Summary of Risk Factors, page 19
9. In your summary of risk factors, disclose the risks that your
corporate structure and being
based in or having the majority of the company s operations in China
poses to
investors. In particular, describe the significant regulatory,
liquidity, and enforcement
risks with cross-references to the more detailed discussion of these
risks in the prospectus.
For example, specifically discuss risks arising from the legal system
in China, including
risks and uncertainties regarding the enforcement of laws and that
rules and regulations in
China can change quickly with little advance notice; and the risk that
the Chinese
government may intervene or influence your operations at any time, or
may exert more
control over offerings conducted overseas and/or foreign investment in
China-based
issuers, which could result in a material change in your operations
and/or the value of the
securities you are registering for sale. Acknowledge any risks that
any actions by the
Chinese government to exert more oversight and control over offerings
that are conducted
overseas and/or foreign investment in China-based issuers could
significantly limit or
completely hinder your ability to offer or continue to offer
securities to investors and
cause the value of such securities to significantly decline or be
worthless. Include a cross-
reference to the relevant individual detailed risk factor.
D. Risk Factors
Our business is subject to complex and evolving laws and regulations of
mainland China..., page
24
10. Please revise your disclosure to explain to what extent you believe
that you are compliant
with the regulations or policies that have been issued by the CAC to
date.
If the PRC government finds that the agreements that establish the structure
for operating certain
of our operations..., page 39
11. Revise to acknowledge that if the PRC government determines that the
contractual
arrangements constituting part of the VIE structure do not comply with
PRC regulations,
or if these regulations change or are interpreted differently in the
future, your securities
may decline in value or become worthless if the determinations,
changes, or
interpretations result in your inability to assert contractual control
over the assets of your
Shannon Shen
FirstName LastNameShannon Shen
Gaotu Techedu Inc.
Comapany
June NameGaotu Techedu Inc.
13, 2023
June 13,
Page 4 2023 Page 4
FirstName LastName
PRC subsidiaries or the VIEs that conduct all or substantially all of
your operations.
The PRC government's significant oversight and discretion over our business
operations..., page
46
12. Where you state that the Chinese government may intervene or influence
your operations
at any time, revise to clarify that this could result in a material
change in your operations
and/or the value of your securities. Also, given recent statements by
the Chinese
government indicating an intent to exert more oversight and control
over offerings that are
conducted overseas and/or foreign investment in China-based issuers,
acknowledge the
risk that any such action could significantly limit or completely
hinder your ability to offer
securities to investors and cause the value of such securities to
significantly decline or be
worthless.
Item 5. Operating and Financial Review and Prospects
Results of Operations, page 104
13. In the year to year comparison of the results of operations, you have
no discussion of the
changes in interest income, realized gains from investments and other
income. Please
revise to discuss the changes in these line items. Refer to Item 5 of
Form 20-F.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections,
page 147
14. We note your statement that you reviewed the register of members and
certain public
filings in connection with your required submission under paragraph
(a). Please
supplementally describe any additional materials that were reviewed
and tell us whether
you relied upon any legal opinions or third party certifications such
as affidavits as the
basis for your disclosure under paragraph (a). In your response,
please provide a similarly
detailed discussion of the materials reviewed and legal opinions or
third party
certifications relied upon in connection with the required disclosures
under paragraphs
(b)(2) and (3).
15. In order to clarify the scope of your review, please supplementally
describe the steps you
have taken to confirm that none of the members of the board of you or
your consolidated
foreign operating entities are officials of the Chinese Communist
Party. For instance,
please tell us how the board members current or prior memberships
on, or affiliations
with, committees of the Chinese Communist Party factored into your
determination. In
addition, please tell us whether you have relied upon third party
certifications such as
affidavits as the basis for your disclosure.
16. With respect to your disclosure pursuant to Item 16I (b)(5), we note
that you have
included language that such disclosure is to our knowledge.
Please supplementally
confirm without qualification, if true, that your or your consolidated
foreign operating
entities articles do not contain wording from any charter of the
Chinese Communist
Party.
Shannon Shen
Gaotu Techedu Inc.
June 13, 2023
Page 5
17. We note that your disclosures pursuant to Items 16I(b)(2), (b)(3), and
(b)(5) are provided
for Gaotu Techedu Inc. or the VIE. We also note that your list of
subsidiaries in Exhibit
8.1 appears to indicate that you have subsidiaries in Hong Kong that are
not included in
your VIEs. Please note that Item 16I(b) requires that you provide
disclosures for yourself
and your consolidated foreign operating entities, including variable
interest entities or
similar structures.
With respect to (b)(2), please supplementally clarify the
jurisdictions in which your
consolidated foreign operating entities are organized or
incorporated and provide the
percentage of your shares or the shares of your consolidated
operating entities owned
by governmental entities in each foreign jurisdiction in which you
have consolidated
operating entities in your supplemental response.
With respect to (b)(3) and (b))(5), please provide the required
information for you
and all of your consolidated foreign operating entities in your
supplemental response.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Scott Stringer at 202-551-3272 or Joel Parker at
202-551-3651 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Taylor Beech at 202-551-4515 or Dietrich King at 202-551-8071 with any
other
questions.
Contact Austin Pattan at 202-551-6756 or Jennifer Gowetski at
202-551-3401 if you have
any questions about comments related to your status as a Commission-Identified
Issuer during
your most recently completed fiscal year.
Sincerely,
FirstName LastNameShannon Shen
Division of
Corporation Finance
Comapany NameGaotu Techedu Inc.
Office of Trade &
Services
June 13, 2023 Page 5
cc: Yilin Xu, Esq.
FirstName LastName