Fang Holdings' VIE Revenue Share Drops to 49.6% Amid PRC Regulatory Scrutiny

TL;DR

**Fang Holdings' reliance on VIEs is shrinking, but regulatory risk from Beijing is still a massive overhang, making SFUNY a speculative play.**

AI Summary

Fang Holdings Ltd (SFUNY) reported a significant shift in its revenue contribution from Variable Interest Entities (VIEs) for the fiscal year ended December 31, 2024. Revenues from VIEs accounted for 49.6% of total revenues in 2024, a notable decrease from 66.8% in 2023 and 66.1% in 2022. This indicates a potential restructuring or re-evaluation of its operational reliance on VIEs. The company, a Cayman Islands holding company, conducts its primary operations through wholly-owned PRC subsidiaries and VIEs in China due to foreign investment restrictions in the Internet industry. Key risks highlighted include the enforceability of contractual arrangements with VIEs in PRC courts, potential conflicts of interest with VIE shareholders, and substantial uncertainties regarding the interpretation and application of current and future PRC laws concerning VIE structures. The filing also emphasizes the PRC government's significant oversight over business operations, which could lead to material adverse changes and impact the value of its ADSs. No specific dollar amounts for total revenue or net income were provided in the excerpt, nor were specific percentages for changes in these metrics.

Why It Matters

This filing reveals a critical shift in Fang Holdings' operational structure, with VIEs contributing significantly less to total revenue in 2024 compared to previous years. For investors, this signals increased regulatory risk and potential instability in the company's core business model, which relies heavily on these contractual arrangements due to PRC foreign investment restrictions. Employees and customers might face uncertainty if the PRC government disallows the VIE structure, potentially disrupting operations. In the broader market, this highlights the ongoing challenges and risks associated with investing in China-based companies utilizing VIE structures, especially given the PRC government's increasing oversight and evolving regulatory landscape, impacting competitive dynamics in the real estate and online advertising sectors.

Risk Assessment

Risk Level: high — The risk level is high due to the substantial uncertainties regarding the interpretation and application of current and future PRC laws concerning VIE structures, as stated in 'Item 3. Key Information-D. Risk Factors-Risks Related to Our Corporate Structure.' The filing explicitly notes that revenues contributed by VIEs accounted for 49.6% of total revenues in 2024, indicating a significant portion of the company's business is exposed to these regulatory risks. Furthermore, the contractual arrangements with VIEs 'may not be as effective as direct ownership' and 'have not been tested in PRC courts,' posing a direct threat to operational control and enforceability.

Analyst Insight

Investors should exercise extreme caution and consider the significant regulatory risks associated with Fang Holdings' VIE structure. Given the declining revenue contribution from VIEs and the explicit warnings about potential PRC government intervention, investors should re-evaluate their exposure and potentially reduce positions in SFUNY, as the value of its securities could 'significantly decline or become worthless.'

Revenue Breakdown

Key Numbers

• 49.6% — VIE revenue contribution to total revenue (Decreased from 66.8% in 2023, indicating a significant shift in operational reliance.)
• 66,020,679 — Class A ordinary shares outstanding (As of December 31, 2024, representing a portion of the company's capital structure.)
• 24,336,650 — Class B ordinary shares outstanding (As of December 31, 2024, representing another portion of the company's capital structure.)
• HK$1.00 — Par value per share (Applies to both Class A and Class B ordinary shares.)
• 10 — Class A ordinary shares per ADS (Each American depositary share represents ten Class A ordinary shares.)
• 2024 — Fiscal year end (The period covered by this annual report on Form 20-F.)
• 2025-11-21T00:00:00.000Z — Filing date (Date the 20-F was filed with the SEC.)

Key Players & Entities

• Fang Holdings Ltd (company) — registrant and Cayman Islands holding company
• Vincent Tianquan Mo (person) — Executive Chairman of Fang Holdings Ltd
• PRC government (regulator) — regulates operations and foreign investment in China
• US$49.6% (dollar_amount) — percentage of total revenues contributed by VIEs in 2024
• US$66.8% (dollar_amount) — percentage of total revenues contributed by VIEs in 2023
• US$66.1% (dollar_amount) — percentage of total revenues contributed by VIEs in 2022
• Cayman Islands (company) — jurisdiction of incorporation for Fang Holdings Limited
• China Index Holdings Limited (company) — company separated from Fang Holdings via stock distribution on June 11, 2019
• Beijing Tuo Shi Huan Yu Network Technology Co., Ltd. (company) — wholly-owned PRC subsidiary
• Tianjin Jia Tian Xia Network Technology Co., Ltd. (company) — wholly-owned PRC subsidiary

FAQ

Risk Factors

• Enforceability of VIE Contracts [high — legal]: The enforceability of contractual arrangements with VIEs in PRC courts is subject to legal uncertainties. Changes in PRC laws or interpretations could materially affect the company's ability to control its VIEs and consolidate their financial results.
• PRC Government Oversight [high — regulatory]: The PRC government exercises significant oversight over business operations. Changes in government policies, regulations, or their enforcement could lead to material adverse changes in the company's operations and the value of its ADSs.
• Conflicts of Interest with VIE Shareholders [medium — legal]: Potential conflicts of interest may arise with the shareholders of the VIEs. The company's ability to resolve such conflicts may be limited, potentially impacting its business operations.
• Uncertainty of VIE Structure Legality [high — regulatory]: Substantial uncertainties exist regarding the interpretation and application of current and future PRC laws concerning VIE structures. The PRC government could in the future take a view that contractual arrangements are not compliant, impacting the company's structure.

Industry Context

Fang Holdings operates within China's internet and real estate information services sector, which is subject to significant government regulation and oversight. The industry is characterized by intense competition and evolving digital platforms. The company's reliance on VIE structures underscores the challenges of operating in sectors with foreign investment restrictions.

Regulatory Implications

The company faces substantial regulatory risks due to its reliance on VIE structures in China. Potential changes in PRC laws or enforcement regarding VIEs, foreign investment, and data security could materially impact its operations and financial performance.

What Investors Should Do

1. Monitor VIE-related regulatory developments in China.
2. Assess the company's strategy for mitigating VIE risks.
3. Evaluate the impact of reduced VIE reliance on future revenue and profitability.

Key Dates

• 2024-12-31: Fiscal Year End — Marks the end of the reporting period for the 20-F filing.
• 2025-11-21: Filing Date of 20-F — Indicates when the annual report was submitted to the SEC, providing updated financial and operational information.

Glossary

ADSs

American depositary shares, which represent ownership in the ordinary shares of a non-U.S. company. (Each ADS represents ten Class A ordinary shares of Fang Holdings Ltd, impacting share equivalency for investors.)

VIEs

Variable Interest Entities, structures used by Chinese companies to bypass foreign ownership restrictions in certain industries. (Fang Holdings' reliance on VIEs for nearly half its revenue in 2024 highlights significant regulatory and legal risks.)

Class A ordinary shares

A class of ordinary shares with a par value of HK$1.00. (These shares, along with Class B, form the capital structure of the company, with Class A shares underpinning the ADSs.)

Class B ordinary shares

Another class of ordinary shares with a par value of HK$1.00. (Represents a portion of the company's capital structure, distinct from Class A shares.)

PRC

The People's Republic of China. (The primary jurisdiction where Fang Holdings operates, making PRC laws and regulations critical to its business.)

Year-Over-Year Comparison

The most significant change highlighted is the substantial decrease in revenue contribution from Variable Interest Entities (VIEs), falling to 49.6% in 2024 from 66.8% in 2023. This indicates a potential restructuring or a response to regulatory pressures concerning VIE arrangements. While specific financial metrics like revenue growth or net income changes are not detailed in the provided excerpt, this shift in operational structure is a key point of comparison and concern.

Key Financial Figures

• $1.00 — Class A ordinary shares, par value HK$1.00 each share (Title of Class) Securi

Filing Documents

• sfuny-20241231x20f.htm (20-F) — 4332KB
• sfuny-20241231xex8d1.htm (EX-8.1) — 56KB
• sfuny-20241231xex12d1.htm (EX-12.1) — 14KB
• sfuny-20241231xex12d2.htm (EX-12.2) — 14KB
• sfuny-20241231xex13d1.htm (EX-13.1) — 6KB
• sfuny-20241231xex13d2.htm (EX-13.2) — 6KB
• sfuny-20241231xex15d1.htm (EX-15.1) — 8KB
• sfuny-20241231xex15d2.htm (EX-15.2) — 2KB
• sfuny-20241231x20f003.jpg (GRAPHIC) — 121KB
• sfuny-20241231xex15d1002.jpg (GRAPHIC) — 7KB
• sfuny-20241231xex15d2001.jpg (GRAPHIC) — 3KB
• 0001104659-25-114997.txt ( ) — 16593KB
• sfuny-20241231.xsd (EX-101.SCH) — 119KB
• sfuny-20241231_cal.xml (EX-101.CAL) — 104KB
• sfuny-20241231_def.xml (EX-101.DEF) — 404KB
• sfuny-20241231_lab.xml (EX-101.LAB) — 839KB
• sfuny-20241231_pre.xml (EX-101.PRE) — 655KB
• sfuny-20241231x20f_htm.xml (XML) — 3042KB

Item 18

Item 17 Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No Table of Contents TABLE OF CONTENTS Page PART I 3 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS 3 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 3 ITEM 3. KEY INFORMATION 3 ITEM 4. INFORMATION ON THE COMPANY 60 ITEM 4A. UNRESOLVED STAFF COMMENTS 91 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 91 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 106 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 123 ITEM 8. FINANCIAL INFORMATION 131 ITEM 9. THE OFFER AND LISTING 131 ITEM 10. ADDITIONAL INFORMATION 132 ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 142 ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 143 PART II 146 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 146 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 146 ITEM 15.

CONTROLS AND PROCEDURES

CONTROLS AND PROCEDURES 146 ITEM 16. [RESERVED] 147 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT 147 ITEM 16B. CODE OF ETHICS 147 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES 147 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 147 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 147 ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT 148 ITEM 16G. CORPORATE GOVERNANCE 148 ITEM 16H. MINE SAFETY DISCLOSURE 148 ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 149 ITEM 16J. INSIDER TRADING POLICIES 149 ITEM 16K. CYBERSECURITY 149 PART III 150 ITEM 17.

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS 150 ITEM 18.

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS 150 ITEM 19. EXHIBITS 150 i Table of Contents INTRODUCTION Except where the context otherwise requires and for purposes of this annual report on Form 20-F only: "ADSs" refers to our American depositary shares, with each ADS representing ten Class A ordinary shares, and "ADRs" refers to American depositary receipts, which, if issued, evidence our ADSs; "CIH" refers to China Index Holdings Limited, a Cayman Islands company which was separated from our company, via a stock distribution on June 11, 2019, and its subsidiaries and variable interest entity, Beijing Zhong Zhi Hong Yuan Data Information Technology Co., Ltd.; "China," "PRC" or "Chinese" refers to the People's Republic of China, excluding, for the purpose of this annual report only, the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan; "CSRC" refers to the China Securities Regulatory Commission; "Exchange Act" refers to the Securities Exchange Act of 1934, as amended; "Hong Kong dollars" or "HK

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS This annual report contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These forward-looking statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. 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," "is expected to," "anticipate," "aim," "estimate," "intend," "plan," "believe," "are 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: our anticipated growth strategies; our anticipated business activities and the expected impact of these actions on our results of operations and financial condition; expected changes in our revenues and certain cost or expense items; our ability to attract clients and further enhance our brand recognition; trends and competition in the real estate, home furnishings and improvement sites and online advertising industries; PRC laws, regulations and policies relating to the real estate, home furnishings and improvement sites and advertising and financing industries and the use of the Internet to conduct these activities; and the non-binding proposal letter from Mr. Richard Jiangong Dai and the potential transaction contemplated by such letter. You should read this annual report and the documents that we refer to in this annual report thoroughly

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable.

OFFER STATISTICS AND EXPECTED TIMETABLE

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable.

KEY INFORMATION

ITEM 3. KEY INFORMATION Our Holding Company Structure and Contractual Arrangements with the Variable Interest Entities Fang Holdings Limited is not a Chinese operating company but a Cayman Islands holding company with no equity ownership in the variable interest entities. We conduct our operations primarily through our wholly-owned PRC subsidiaries and the variable interest entities (including the variable interest entities and their subsidiaries) in China. PRC laws and regulations restrict and impose conditions on foreign investment in the Internet industry and there is uncertainty over administrative practice in advertising industries. Accordingly, we operate all our business through the variable interest entities, and rely on contractual arrangements among our PRC subsidiaries, the variable interest entities and their shareholders to conduct the business operations of the variable interest entities. Revenues contributed by the variable interest entities accounted for 66.1%, 66.8% and 49.6% of our total revenues for the years of 2022, 2023 and 2024, respectively. As used in this annual report, "we," "us," "our company" and "our" refers to Fang Holdings Limited and its subsidiaries. Holders of Fang's ADSs hold equity interest in Fang Holdings Limited, our Cayman Islands holding company; by investing in Fang's ADSs, they do not, and may never, have direct or indirect interest in the variable interest entities in China. The variable interest entities are PRC companies conducting operations in China, and their financial results have been consolidated into our consolidated financial statements under U.S. GAAP for accounting purposes. Fang is a holding company with no operations of its own. We do not have any equity ownership in the variable interest entities. A series of contractual agreements, which consist of exclusive technical consultancy and service agreements, equity pledge agreements, operating agreements, shareholders' proxy agreements, loan agreements and

View Full Filing

View this 20-F filing on SEC EDGAR