F-4/Atrue0001728190Share-based compensation was allocated to cost of revenues and operating expenses as follows: For the six months ended June 30,2019 2020 2020 RMB RMB US$ Cost of revenues 8,290 30,587 4,329 Research and development expenses 25,755 71,518 10,123 Sales and marketing expenses 1,811 5,118 724 General and administrative expenses 80,579 110,834 15,688During the six months ended June 30, 2020, the Company acquired equity interests of two privately-held entities with a total consideration of RMB49,065.The deferred income tax benefits for the six months ended June 30, 2020 represented mainly the deferred tax related to unrealized losses arisen from intercompany transactions.Short-term investments represented the investments issued by commercial banks and financial institution with a variable interest rate indexed to the performance of underlying assets within one year. For the instruments whose fair value is provided by banks at the end of each period, the Company classifies the valuation techniques that use these inputs as Level 1 of fair value measurements. For the instruments whose fair value is estimated based on quoted prices of similar products provided by banks at the end of each period, the Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements.As of June 30, 2020, the other currencies consist of Hong Kong dollar, Brazilian real and Thai Baht. Each ADS represents one Class A ordinary share.Purchases of services from JOYY mainly consist of office rental, payment handling services and bandwidth services which are charged at market price.Operation support services from Tencent mainly consist of bandwidth and payment handling services which are charged at market price.In February 2020, the Group repurchased 1,429,906 shares of unvested restricted shares from one of the Gogo Glocal’s founders with a consideration of US$1 due to the early termination of his requisite employment service, which was considered as a forfeiture of the unvested restricted shares.In 2016, the Group invested RMB10 million for 8.5% equity interest in Shayu, a live streaming platform in PRC and accounted for this investment as an equity security without a readily determinable fair value. In May 2020, to restructure and increase its investment in Shayu, the Group completed the following transactions: The Group acquired 19.125% equity interest in Shayu from Mr. Chen Shaojie, the Group’s CEO and shareholder for a cash consideration of RMB24,850,000. The purchase price paid by the Group was below fair value of the acquired equity interest, which is determined to be RMB43,617,750 by the Group with the assistance of an independent valuer. The excess amount of RMB18,767,750 between the fair value of the equity interest acquired in Shayu over the price paid is accounted as contribution from shareholder in the condensed consolidated statement of change in shareholders’ equity. The Company injected cash of RMB 80,000,000 and its holding of 100% equity interest in Chengdu Shuangsi Culture Broadcasting Co., Ltd (“Shuangsi”) with a fair value determined to be RMB54,391,900 into Shayu, in exchange of 8.309% newly issued equity interest in Shayu. Shuangsi ceased to be a subsidiary of the Group and a gain on disposal of subsidiary in the amount of RMB23,525,694 was recognized in the condensed consolidated statement of comprehensive income, representing the difference between the fair value of Shuangsi and its carrying value at the date of the transaction. Upon the completion of these transactions, the Group has 35.084% equity interest of Shayu and accounts for its investment in Shayu under the equity method.In 2018, the Group made investments in four talent agencies with aggregate cash consideration of RMB3,600,000, none of which was individually material. In April 2020, the Group lost significant influence over these four talent agencies. Thus, these equity method investees with carrying amount of RMB4,077,376 were reclassified as equity securities without readily determinable fair values.In May 2018, as an integrated step of the 2018 Restructuring, in order to comply with certain PRC foreign currency control rules and regulations, Beijing Sequoia has to redeem its investment in Series A Preferred Equity in Wuhan Douyu for US$197,443,500 from Wuhan Douyu and the redemption amount in full is to be reinvested to the Company as capital contribution. The redemption amount, equivalent to RMB1,323,049,149, has been paid by Wuhan Douyu in first half year of 2019.The Group opened accounts with external online payment service providers to collect funding from users.In February 2020, the Group canceled 557,455 unvested restricted shares granted. 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As filed with the Securities and Exchange Commission on January 29, 2021.
Registration No. 333-250016
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Amendment No.1 to
FORM
F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
HUYA Inc.
(Exact name of registrant as specified in its charter)
N/A
(Translation of registrant name into English)
 
 
 
Cayman Islands
 
7370
 
N/A
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification Number)
Building A3,
E-Park
280 Hanxi Road
Panyu District, Guangzhou 511446
People’s Republic of China
Tel: +86 20 2290-7888
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
Cogency Global Inc.
122 East 42nd Street, 18th Floor
New York, NY 10168
+1-212-947-7200
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
Copies of all communications to:
 
Z. Julie Gao, 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
 
Haiping Li, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Jing An Kerry Centre, Tower II, 46th Floor
1539 Nanjing West Road
Shanghai 200040
People’s Republic of China
+86-21-6193-8200
 
Peter X. Huang, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
30/F, China World Office 2
No. 1, Jian Guo Men Wai Avenue
Beijing 100004, China
Tel:
+86-10-6535-5500
     
Benjamin Su, Esq.
Frank Sun, Esq.
Latham & Watkins LLP
18th Floor, One Exchange Square
8 Connaught Place
Central, Hong Kong
Telephone: +852 2912-2500
 
Li He, Esq.
Davis Polk & Wardwell LLP
c/o 18th Floor, The Hong Kong Club Building
3A Chater Road
Central, Hong Kong
+852-2533-3300
 
Howard Zhang, Esq.
Davis Polk & Wardwell LLP
2201 China World Office 2
No. 1 Jian Guo Men Wai Avenue
Chaoyang District, Beijing, 100004
People’s Republic of China
+86-10-8567-5000
 
 
Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after the effective date of this registration statement.
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.    ☐

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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.    ☐
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule
13e-4(i)
(Cross-Border Issuer Tender Offer)              ☐
Exchange Act Rule
14d-1(d)
(Cross-Border Third-Party Tender Offer)    ☐
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
(1)
 
Amount
to be
registered
(2)
 
Proposed
maximum
offering price
per unit
 
Proposed
maximum
aggregate
offering price
(3)
 
Amount of
registration fee
(4)
Class A Ordinary Shares, par value US$0.0.0001 per share
 
243,564,120
 
N/A
 
US$5,003,073,937.61
 
US$545,835.37
 
 
(1)
This registration statement relates to Class A ordinary shares, par value $0.0001 per share (the “Huya Class A shares”), of HUYA Inc. (“Huya”, or the “registrant”), an exempted company with limited liability incorporated under the laws of the Cayman Islands, to be issued to holders of ordinary shares, par value $0.0001 per share (the “DouYu shares”), of DouYu International Holdings Limited (“DouYu”), an exempted company with limited liability incorporated under the laws of the Cayman Islands, pursuant to the agreement and plan of merger, dated as of October 12, 2020, by and among Huya, Tiger Company Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly owned subsidiary of Huya, DouYu, and Nectarine Investment Limited (“Nectarine”), a business company with limited liability incorporated under the laws of the British Virgin Islands and a wholly owned subsidiary of Tencent Holdings Limited (“Tencent Holdings”). A separate registration statement on Form
F-6
has previously been filed (Registration
No. 333-224563)
for the registration of the registrant’s American depositary shares, each representing one Huya Class A share (the “Huya ADSs”), to be delivered in connection with the proposed Merger (as defined below).
(2)
Represents the estimated maximum number of Huya Class A shares expected to be offered and sold in the U.S. registered offering and a portion of the Huya Class A shares that are to be offered and sold outside of the United States in the Regulation S offering that may be resold from time to time in the United States or to U.S. persons.
(3)
Estimated solely for the purpose of calculating the registration fee. The registration fee is required by Section 6(b) of the Securities Act of 1933, as amended (“the Securities Act”) and computed pursuant to Rules 457(f) and 457(c) under the Securities Act. Pursuant to Rule 457(f) under the Securities Act, the proposed maximum aggregate offering price of the Huya Class A shares is equal to US$5,003,073,937.61, the Aggregate DouYu Share Sum (as defined below), multiplied by ten (being the number of DouYu’s American depositary shares representing each DouYu share), and then multiplied by US$14.995, the average of the high and low prices of the DouYu ADSs trading on the NASDAQ Global Select Market on November 3, 2020. The “Aggregate DouYu Share Sum” means the estimated maximum number of DouYu shares which Huya will acquire from DouYu shareholders and DouYu ADS holders in exchange for Huya Class A shares and Huya ADSs, respectively, in the Merger, which includes (1) DouYu shares currently held by DouYu shareholders, (2) DouYu shares underlying outstanding DouYu ADS, and (3) DouYu shares underlying DouYu restricted share unit awards held by the applicable grantees directly which have become vested as of the effective time of the merger, and (4) DouYu ADSs to be issued to certain senior management of DouYu as a result of acceleration of vesting of their DouYu restricted share unit awards prior to the Effective Time.
(4)
Calculated at a rate equal to 0.00010910 multiplied by the proposed maximum aggregate offering price.
 
 
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 (THE “SECURITIES ACT”), OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
 
 
 

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The information in this preliminary proxy statement/prospectus is not complete and may be changed. HUYA Inc. may not sell these securities until the registration statement filed with the Securities and Exchange Commission, in which this proxy statement/prospectus is included, is declared effective. This preliminary proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale of these securities is not permitted.
 
SUBJECT TO COMPLETION, DATED JANUARY 29, 2021
PRELIMINARY PROSPECTUS OF HUYA INC.
PRELIMINARY PROXY STATEMENT OF DOUYU INTERNATIONAL HOLDINGS LIMITED
 
Dear Shareholder:
On behalf of the board of directors of DouYu International Holdings Limited (“DouYu”), an exempted company with limited liability incorporated under the laws of the Cayman Islands, we would like to invite you to an extraordinary general meeting of DouYu shareholders (the “EGM”) to be held on                , 2021 at                , local time, at 7F, Building 2, Riverside International Plaza, 1062 Yangshupu Road, Yangpu District, Shanghai 200082, People’s Republic of China. At the EGM, you will be asked to approve and adopt the agreement and plan of merger (the “Merger Agreement”), dated October 12, 2020, by and among HUYA Inc., an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Huya”), Tiger Company Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands and a direct wholly owned Subsidiary of Huya (“Merger Sub”), DouYu, and Nectarine Investment Limited, a business company with limited liability incorporated under the laws of the British Virgin Islands and a wholly owned Subsidiary of Tencent Holdings Limited, and the plan of merger by and between Merger Sub and DouYu (the “Plan of Merger”) (such Merger Agreement being in the form attached as Annex A to this proxy statement/prospectus and such Plan of Merger being in the form attached as Exhibit A to the Merger Agreement), pursuant to which Merger Sub will be merged with and into DouYu (the “Merger”), with DouYu continuing as the surviving company and as a wholly owned subsidiary of Huya. Following the Merger, DouYu will cease to be a publicly traded company. At the EGM, you will also be asked to approve other proposals related to the completion of the Merger.
If the Merger is completed, the merger consideration that holders of DouYu’s ordinary shares, par value $0.0001 per share (“DouYu shares”) and DouYu’s American depositary shares, ten of which represent one DouYu share (“DouYu ADSs”) will respectively receive in the Merger is as follows:
 
 
 
each outstanding DouYu share will be canceled in consideration of the right to receive 7.30 Huya Class A ordinary shares, par value $0.0001 per share (“Huya Class A share”); and
 
 
 
each outstanding DouYu ADS will be canceled in consideration of the right to receive 0.730 Huya American depositary share (“Huya ADS”). Each Huya ADS represents one Huya Class A share;
provided that,
 
 
 
each DouYu share and each DouYu ADS issued and outstanding immediately prior to the effective time of the Merger that is (i) issued to and held by DouYu Employee Benefit Trust, or (ii) repurchased and held by DouYu in treasury either in the form of DouYu shares or DouYu ADSs (collectively, the “Excluded DouYu Shares”) shall automatically be canceled and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor; and
 
 
 
if a DouYu Shareholder (such DouYu Shareholder, a “Purported Dissenting Shareholder”) provides any notice of objection, notice of dissent, written demand for appraisal or takes any other action that purports to exercise any dissenter rights pursuant to Section 238 of the Cayman Islands Companies Law (2020 Revision) (the “Cayman Companies Law”), such Purported Dissenting Shareholder shall not be entitled to receive the Per Share Merger Consideration with respect to DouYu Shares owned by such Purported Dissenting Shareholder (the “Purported Dissenters Shares”) unless and until either (i) such Purported Dissenting Shareholder shall have withdrawn such objection, dissent, demand or

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other action in such manner as would render such Purported Dissenting Shareholder to be deemed to have effectively withdrawn its dissent from the Merger if Section 238 of the Cayman Companies Law were to apply in such case, or (ii) a court of the Cayman Islands with competent jurisdiction either strikes out the petition for determination of fair value under Section 238 of the Cayman Companies Law on the grounds that Section 239 of the Cayman Companies Law applies to the Merger, or makes a declaration, or otherwise grants a final and
non-appealable
judgement confirming, that Section 239 of the Cayman Companies Law applies to the Merger.
Each Huya ADS represents one Huya Class A share, and each DouYu ADS represents
one-tenth
of a DouYu share. The Huya ADSs are listed on the New York Stock Exchange (the “NYSE”) under the stock symbol “HUYA.” The closing price of a Huya ADS on the NYSE on November 9, 2020 was $21.02.
DouYu’s ADSs are currently listed on the Nasdaq Global Select Market (“NASDAQ”) under the symbol “DOYU.” DouYu ADSs will be delisted upon completion of the Merger. The closing price of a DouYu ADS on NASDAQ on November 9, 2020 was $14.28.
A special committee of the DouYu board of directors, comprised of DouYu directors unaffiliated with Huya, Tencent Entities and Merger Sub (the “DouYu Special Committee”), unanimously (1) determined that the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, is in the best interests of DouYu and its shareholders, and declared it advisable to enter into the Merger Agreement, (2) approved the execution, delivery and performance of the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, (3) recommended the approval and adoption of the Merger Agreement by the DouYu shareholders, and (4) directed that the Merger Agreement be submitted to DouYu shareholders for their approval. Based in part on the unanimous recommendation of the DouYu Special Committee, the DouYu board of directors determined that the Merger is advisable and in the best interests of DouYu and its shareholders, and approved and adopted the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger.
 ACCORDINGLY, THE DOUYU BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE AUTHORIZATION, APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE PLAN OF MERGER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND THE PLAN OF MERGER INCLUDING THE
 MERGER.
In order for the Merger to be completed, the Merger Agreement must be approved by a special resolution of DouYu passed by an affirmative vote of shareholders representing
two-thirds
or more of the DouYu shares present and voting in person or by proxy as a single class at the EGM authorizing the Plan of Merger and approving and adopting the Merger Agreement.
This proxy statement/prospectus provides DouYu shareholders and DouYu ADS holders with detailed information about the EGM and the Merger. You can also obtain information from publicly available documents filed with or furnished to the Securities and Exchange Commission (“SEC”) by Huya and DouYu. We encourage you to read this entire document carefully before voting.
In particular, you should carefully consider the section titled “Risk Factors” beginning on page 18.
We look forward to the successful completion of the Merger.
Very sincerely yours,
 
DouYu International Holdings Limited
   
By:
 
 
 
 
Name: Zhaoming Chen Title: Chairman of the Special Committee of the Board of Directors
 
ii

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Neither the SEC nor any state securities regulator has approved or disapproved of the Merger described in this proxy statement/prospectus, or the issuance of the Huya Class A shares and Huya ADSs in connection with the Merger, or passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosure in this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated                 , 2021 and is expected to first be mailed to DouYu shareholders on or about                 , 2021.
 
iii

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THIS PROXY STATEMENT/PROSPECTUS INCORPORATES ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and financial information about Huya and DouYu from documents that Huya and DouYu have respectively filed with or furnished to the SEC, but that has not been included in or delivered with this proxy statement/prospectus. For a listing of documents incorporated by reference in this proxy statement/prospectus, please see the section titled “Where You Can Find More Information” on page 199.
You can obtain any of the documents filed with or furnished to the SEC by Huya or DouYu at no cost from the SEC’s website at www.sec.gov. You may also request copies of these documents, including documents incorporated by reference into this proxy statement/prospectus, at no cost by contacting either Huya or DouYu.
Huya will provide you with copies of the documents it has filed with the SEC relating to Huya, without charge, upon written request to:
Investor Relations
HUYA Inc.
Building A3,
E-Park
280 Hanxi Road
Panyu District, Guangzhou 511446
People’s Republic of China
Phone: +86 20 2290-7829
E-mail:
ir@huya.com
DouYu will provide you with copies of the documents it has filed with the SEC relating to DouYu, without charge, upon written request to:
Investor Relations
DouYu International Holdings Limited
7F, Building 2, Riverside International Plaza
1062 Yangshupu Road
Yangpu District, Shanghai 200082
People’s Republic of China
Phone: +86 21 5882-2595
E-mail:
ir@douyu.tv
In order for you to receive timely delivery of the documents in advance of the EGM, you must request the documents no later than five business days prior to the EGM, or                 .
Please see “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference” on page 199 and page 200, respectively, for more details.
 
iv

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ABOUT THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus, which forms part of a registration statement on Form
F-4
filed with the SEC by Huya (File
No. 333-250016),
constitutes a prospectus of Huya under Section 5 of the Securities Act with respect to the Huya Class A shares to be issued to DouYu shareholders and the Huya ADSs to be issued to the DouYu ADS holders in the Merger pursuant to the Merger Agreement.
This proxy statement/prospectus is also a notice of meeting and a proxy statement with respect to the EGM, at which DouYu shareholders will be asked to consider and vote upon a proposal to approve and adopt the Merger Agreement and the Plan of Merger and approve certain related proposals.
No person has been authorized to provide you with information that is different from that which is contained in, or incorporated by reference into, this proxy statement/prospectus. Neither Huya nor DouYu takes any responsibility for, and can provide no assurances as to the reliability of, any other information that others may give you and, if given, such information must not be relied upon as having been authorized. This proxy statement/prospectus is dated                 , 2021. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. Neither the mailing of this proxy statement/prospectus to DouYu nor the issuance by Huya of the Huya Class A shares and the Huya ADSs in connection with the Merger will create any implication to the contrary.
This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation. Information contained in this proxy statement/prospectus regarding Huya has been provided by Huya, information contained in this proxy statement/prospectus regarding DouYu has been provided by DouYu and information contained in this proxy statement/prospectus regarding the Tencent Entities and the Penguin Business has been provided by the Tencent Entities.
Neither Huya shareholders nor DouYu shareholders should construe the contents of this proxy statement/prospectus as legal, tax or financial advice. Huya shareholders and DouYu shareholders should consult with their own legal, tax, financial or other professional advisors. All summaries of, and references to, the agreements governing the terms of the transactions described in this proxy statement/prospectus are qualified by the full copies of and complete text of such agreements in the forms attached hereto as annexes.
Unless otherwise indicated and except where the context otherwise requires, references in this proxy statement/prospectus to:
 
 
 
“China” or “PRC” refers to the People’s Republic of China, excluding, for the purpose of this proxy statement/prospectus only, Taiwan, Hong Kong and Macau;
 
 
 
“Closing Date” refers to the closing date of the Merger;
 
 
 
“Effective Time” refers to the effective time of the Merger;
 
 
 
“Huya Class B shares” refers to Huya’s Class B ordinary shares, par value $0.0001 per share;
 
 
 
“Penguin” or “Penguin Business” refers to the game live streaming business operated by the Tencent group under the “Penguin
e-Sports”
brand;
 
 
 
“Reassignment” refers to the proposed reassignment of the Penguin Business by Nectarine to DouYu, whereby upon its completion DouYu will beneficially own and operate the Penguin Business;
 
 
 
“Reassignment Agreement” refers to agreement, dated October 12, 2020, by and between DouYu and Nectarine, which is attached as Annex B to this proxy statement/prospectus; and
 
 
 
all references to “RMB” or “Renminbi” are to the legal currency of China, and all references to “$,” “dollars,” “US$” and “U.S. dollars” are to the legal currency of the United States.
 
 
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NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON                 , 2021
Dear Shareholder:
Notice is hereby given to the shareholders of DouYu International Holdings Limited (“DouYu”), an exempted company with limited liability incorporated under the laws of the Cayman Islands, that an extraordinary general meeting of DouYu shareholders (the “EGM”) will be held on                 , 2021, beginning at                  local time at 7F, Building 2, Riverside International Plaza, 1062 Yangshupu Road, Yangpu District, Shanghai 200082, People’s Republic of China.
Only holders of ordinary shares of DouYu, par value $0.0001 per share (“DouYu shares”), of record on the close of business on                 , 2021 (New York City time) or their proxy holders are entitled to vote at this EGM or any adjournment or postponements thereof. At the meeting, you will be asked to consider and vote upon the following resolutions:
 
   
as a special resolution:
THAT
 the agreement and plan of merger (the “Merger Agreement”), dated October 12, 2020, by and among HUYA Inc., an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Huya”), Tiger Company Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands and a direct wholly owned Subsidiary of Huya (“Merger Sub”), DouYu, and Nectarine Investment Limited, a business company with limited liability incorporated under the laws of the British Virgin Islands and a wholly owned Subsidiary of Tencent Holdings Limited (such Merger Agreement being in the form attached as Annex A to the accompanying proxy statement/prospectus), and the plan of merger by and between Merger Sub and DouYu (the “Plan of Merger”) required to be registered with the Registrar of Companies in the Cayman Islands (such Plan of Merger being in the form attached as Exhibit A to the Merger Agreement) in order to give effect to the Merger (as defined below), and each of which will also be produced and made available for inspection at the EGM), pursuant to which Merger Sub will be merged with and into DouYu, with DouYu being the surviving company (the “Merger”), and any and all transactions contemplated thereby, including, without limitation, (i) the Merger, (ii) upon the Merger becoming effective, the amendment and restatement of the fourth amended and restated memorandum and articles of association of DouYu (as the surviving company) by the deletion in their entirety and the substitution in their place of the new amended and restated memorandum and articles of association in the form attached as Appendix II to the Plan of Merger and (iii) upon the Merger becoming effective, the amendment of the authorized share capital of DouYu (as the surviving company) from US$100,000 divided into 500,000,000 ordinary shares of a par value of US$0.0001 per share and 500,000,000 shares of a par value of US$0.0001 per share as the board of directors may determine, to US$100,000 divided into 1,000,000,000 ordinary shares of a par value of US$0.0001 each as set forth in the Plan of Merger, be authorized, approved and adopted by DouYu; and
 
   
if necessary, as an ordinary resolution:
THAT,
 in the event that there are insufficient proxies received at the time of the EGM to authorize, approve and adopt the Merger Agreement and the Plan of Merger proposed at the EGM, the chairman of the EGM be instructed to adjourn the EGM in order to allow DouYu to solicit additional proxies in favor of the approval of the Merger and the authorization, approval and adoption of the Merger Agreement and Plan of Merger.
 
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If the Merger is completed, the merger consideration that holders of DouYu’s ordinary shares, par value $0.0001 per share (“DouYu shares”) and DouYu’s American depositary shares, ten of which represent one DouYu share (“DouYu ADSs”) will respectively receive in the Merger is as follows:
 
   
each outstanding DouYu share will be canceled in consideration of the right to receive 7.30 Huya Class A ordinary shares, par value $0.0001 per share (“Huya Class A share”); and
 
   
each outstanding DouYu ADS will be canceled in consideration of the right to receive 0.730 Huya American depositary share (“Huya ADS”). Each Huya ADS represents one Huya Class A share;
provided that,
 
   
each DouYu share and each DouYu ADS issued and outstanding immediately prior to the effective time of the Merger that is (i) issued to and held by DouYu Employee Benefit Trust, or (ii) repurchased and held by DouYu in treasury either in the form of DouYu shares or DouYu ADSs (collectively, the “Excluded DouYu Shares”) shall automatically be canceled and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor; and
 
   
if a DouYu Shareholder (such DouYu Shareholder, a “Purported Dissenting Shareholder”) provides any notice of objection, notice of dissent, written demand for appraisal or takes any other action that purports to exercise any dissenter rights pursuant to Section 238 of the Cayman Islands Companies Law (2020 Revision) (the “Cayman Companies Law”), such Purported Dissenting Shareholder shall not be entitled to receive the Per Share Merger Consideration with respect to DouYu Shares owned by such Purported Dissenting Shareholder (the “Purported Dissenters Shares”) unless and until either (i) such Purported Dissenting Shareholder shall have withdrawn such objection, dissent, demand or other action in such manner as would render such Purported Dissenting Shareholder to be deemed to have effectively withdrawn its dissent from the Merger if Section 238 of the Cayman Companies Law were to apply in such case, or (ii) a court of the Cayman Islands with competent jurisdiction either strikes out the petition for determination of fair value under Section 238 of the Cayman Companies Law on the grounds that Section 239 of the Cayman Companies Law applies to the Merger, or makes a declaration, or otherwise grants a final and
non-appealable
judgement confirming, that Section 239 of the Cayman Companies Law applies to the Merger.
Huya has filed with the U.S. Securities and Exchange Commission (the “SEC”) a registration statement on
Form F-4,
which includes a preliminary prospectus of Huya relating to the Huya Class A shares and Huya ADSs to be offered as consideration in the Merger and which also functions as a proxy statement of DouYu in relation to the EGM of DouYu shareholders at which DouYu shareholders will be asked to approve and adopt the Merger Agreement and the Plan of Merger. The proxy statement/prospectus is referred to herein as the “Proxy Statement/Prospectus.” Please see page 4 of this Notice of EGM for information on how to access the Proxy Statement/Prospectus.
A list of the shareholders of DouYu will be available at 7F, Building 2, Riverside International Plaza, 1062 Yangshupu Road, Yangpu District, Shanghai 200082, People’s Republic of China, during ordinary business hours for the two business days immediately prior to the EGM.
If you own DouYu ADSs, you cannot vote at the EGM directly because the DouYu shares underlying the DouYu ADSs are registered in the name of JPMorgan Chase Bank, N.A. as depositary for the benefit of holders of ADRs and not in your name, but you may instruct JPMorgan Chase Bank, N.A. (the “DouYu depositary”), the depositary under the deposit agreement, dated as of July 16, 2019, by and among DouYu, the DouYu depositary and all holders and beneficial owners from time to time of DouYu American Depositary Receipts (“ADRs”) issued thereunder (the “DouYu Deposit Agreement”), how to vote the DouYu shares underlying your ADSs. The DouYu depositary must receive such instructions no later than 12 p.m. New York City time on                 , 2021 in order to vote the underlying DouYu shares at the EGM. Alternatively, you may vote at the EGM if you cancel your DouYu ADSs, provide instructions for the re-registration in your name of the DouYu shares underlying such cancelled DouYu ADSs, pay the fees required to be paid under the DouYu Deposit Agreement to the DouYu Depositary for such surrender and cancellation, follow the other procedures required pursuant to the
 
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DouYu Deposit Agreement and described herein, and become a registered holder of DouYu shares by the close of business on the DouYu share record date on                 2021 (New York City time). In addition, if you hold your ADSs through a financial intermediary such as a broker, you must contact and rely on the procedures of the financial intermediary through which you hold your DouYu ADSs if you wish to vote at the EGM.
After careful consideration and upon the unanimous recommendation of a special committee of the DouYu board of directors comprised of directors unrelated to Huya, Tencent Holdings and Merger Sub (the “DouYu Special Committee”), the DouYu board of directors approved the Merger Agreement and recommends that you vote FOR the approval of the Merger and the authorization, approval and adoption of the Merger Agreement and the Plan of Merger and the other transactions contemplated thereby and FOR the proposal to instruct the chairman of the EGM to adjourn the EGM in order to allow DouYu to solicit additional proxies in favor of the approval of the Merger and the authorization, approval and adoption of the Merger Agreement and the Plan of Merger in the event that there are insufficient proxies received at the time of the EGM to authorize, approve and adopt the Merger Agreement and the Plan of Merger.
In order for the Merger to be completed, the Merger Agreement must be approved by a special resolution (as defined in the Cayman Companies Law) of DouYu, which requires an affirmative vote of shareholders representing
two-thirds
or more of the DouYu shares present and voting in person or by proxy as a single class at the EGM authorizing, approving and adopting the Merger Agreement and the Plan of Merger.
Regardless of the number of DouYu shares that you own, your vote is very important. Even if you plan to attend the EGM in person, we request that you submit your proxy in accordance with the instructions set forth on the proxy card as promptly as possible. You should simply indicate on your proxy card how you want to vote, sign and date the proxy card, and mail the proxy card in the enclosed return envelope as soon as possible but in any event at least 48 hours before the time of the EGM so that your DouYu shares will be represented and may be voted at the EGM. If you receive more than one proxy card because you own DouYu shares that are registered in different names, please vote all of your DouYu shares shown on all of your proxy cards in accordance with the instructions set forth on the proxy card.
The proxy card is the “instrument appointing a proxy” and “instrument of proxy” referred to in, and for the purposes of, DouYu’s memorandum and articles of association.
Completing the proxy card in accordance with the instructions set forth on the proxy card will not deprive you of your right to attend the EGM and vote your DouYu shares in person. Please note, however, that if your DouYu shares are held of record by a broker, bank or other nominee and you wish to vote at the EGM in person, you must obtain from the record holder a proxy issued in your name. If you submit your proxy card without indicating how you wish to vote, the DouYu shares represented by your proxy card will not be counted, unless (1) you appoint the chairman of the meeting as proxy, in which case the DouYu shares represented by your proxy card will be voted FOR the authorization, approval and adoption of the Merger Agreement and the Plan of Merger and FOR any adjournment of the EGM referred to above, or (2) you appoint a person other than the chairman of the meeting as proxy, in which case the DouYu shares represented by your proxy card will be voted (or not submitted for voting) as your proxy determines.
PLEASE DO NOT SEND YOUR SHARE CERTIFICATES OR DOUYU ADRS AT THIS TIME. IF THE MERGER IS COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR SHARE CERTIFICATES.
If you have any questions or need assistance in voting your DouYu shares or DouYu ADSs, you can contact Investor Relations of DouYu by calling at +86 21 5882-2595, emailing at ir@douyu.tv, or mailing at DouYu International Holdings Limited, 7F, Building 2, Riverside International Plaza, 1062 Yangshupu Road, Yangpu District, Shanghai 200082, People’s Republic of China.
The Merger Agreement and the Merger are described in the Proxy Statement/Prospectus, and copies of the Merger Agreement and the Plan of Merger are included as Annex A to the Proxy Statement/Prospectus. The
 
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Proxy Statement/Prospectus, which is included in the registration statement on
Form F-4
which Huya has filed with the SEC, can be viewed free of charge on the SEC’s website at www.sec.gov. A physical copy of the Proxy Statement/Prospectus can be mailed to you without charge by contacting Investor Relations of DouYu, at the contact information in the preceding paragraph. We urge you to read the entire Proxy Statement/Prospectus carefully.
Notes:
 
  1.
In the case of joint holders the vote of the senior holder who tenders a vote whether in person or by proxy (or, if a corporation or other
non-natural
person, by its duly authorized representative or proxy), shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the register of members of DouYu.
 
  2.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorized in writing or, if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorized.
 
  3.
A proxy need not be a member (registered shareholder) of DouYu.
 
  4.
The chairman of the meeting may at his discretion direct that a proxy card shall be deemed to have been duly deposited. A proxy card that is not deposited in the manner permitted shall be invalid.
Votes given in accordance with the terms of a proxy card shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the DouYu share in respect of which the proxy is given unless notice in writing of such death, insanity, revocation or transfer was received by DouYu at the registered office of DouYu International Holdings Limited, being the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman,
KY1-1104,
Cayman Islands before the commencement of the general meeting, or adjourned meeting at which it is sought to use the proxy.
 
BY ORDER OF THE BOARD OF DIRECTORS,
    
Name: Zhaoming Chen
Title: Director
 
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SUMMARY
This summary, together with the section titled “Questions and Answers about the Merger and the Extraordinary General Meeting,” summarizes the material information in this proxy statement/prospectus. However, it may not contain all of the information that may be important to your consideration of the proposed Merger. To understand the Merger fully and for a more complete description of the legal terms of the Merger, you should carefully read this entire proxy statement/prospectus and the other documents to which this proxy statement/prospectus refers, including the annexes that are attached to this proxy statement/prospectus and incorporated by reference into this proxy statement/prospectus. Please see also “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference” on page 199 and page 200, respectively. Page references included parenthetically in this summary direct you to the more complete description found elsewhere in this proxy statement/prospectus.
The Parties Involved in the Merger
HUYA Inc.
Huya is a leading game live streaming platform in China. Huya is incorporated under the laws of the Cayman Islands and carries out its operation primarily through its subsidiaries and consolidated affiliated entities in China. For a description of Huya’s operation and business in China, please see “Item 4. Information on the Company—A. History and Development of the Company” on page 55 of Huya’s annual report on Form
20-F
for the year ended December 31, 2019, as filed with the SEC on April 27, 2020 (the “Huya 2019
20-F”)
and incorporated by reference to the registration statement on Form
F-4
of which this proxy statement/prospectus is a part.
Due to PRC legal restrictions on foreign ownership and investment in internet-based businesses such as distribution of online information and value-added telecommunications services, Huya operates its business primarily through Guangzhou Huya Information Technology Co., Ltd. (“Guangzhou Huya”), its variable interest entity in China, and the subsidiaries of Guangzhou Huya. Huya does not hold equity interests in Guangzhou Huya. However, through a series of contractual arrangements with Guangzhou Huya and its shareholders, Huya effectively controls, and is able to derive substantially all of the economic benefits from, Guangzhou Huya and its subsidiaries.
As of October 12, 2020, Linen Investment Limited, an affiliate of Tencent Holdings, beneficially owned 112,012,054 Huya Class B shares.
Huya’s principal executive offices are located at Building A3,
E-Park,
280 Hanxi Road, Panyu District, Guangzhou 511446, People’s Republic of China, and its telephone number is +86 20 2290-7888. Huya’s registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman,
KY1-1104,
Cayman Islands.
Huya ADSs are listed on the NYSE under the symbol “HUYA.”
Tiger Company Ltd.
Merger Sub was incorporated on September 11, 2020 under the laws of the Cayman Islands as an exempted company with limited liability. Merger Sub is a direct and wholly owned subsidiary of Huya and was formed solely for the purpose of effecting the Merger. Merger Sub has not conducted any business operations other than incidental to its formation and in connection with the transactions contemplated by the Merger Agreement.


 
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Merger Sub’s business offices are located at Building A3,
E-Park,
280 Hanxi Road, Panyu District, Guangzhou 511446, People’s Republic of China, and its telephone number is +86 20 2290-7888. Merger Sub’s registered office in the Cayman Islands is located at the office of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman
KYI-1104,
Cayman Islands.
DouYu International Holdings Limited
DouYu is a leading game-centric live streaming platform in China and a pioneer in the eSports value chain. DouYu operates its platform both on PC and mobile apps, through which users can enjoy immersive and interactive games and entertainment live streaming. DouYu was incorporated in January 2018 under the laws of the Cayman Islands as an exempted company with limited liability. DouYu, through its subsidiaries and consolidated affiliated entities, is principally engaged in operating live streaming platforms. For a description of DouYu’s operation and business in China, please see “Item 4. Information on the Company—4.A. History and Development of the Company” on page 46 of DouYu’s annual report on Form
20-F
for the year ended December 31, 2019, as filed with the SEC on April 28, 2020 (the “DouYu 2019
20-F”)
and incorporated by reference to the registration statement on Form
F-4
of which this proxy statement/prospectus is a part.
As of October 12, 2020, the Tencent Entities beneficially owned 12,068,104 DouYu shares.
DouYu’s principal executive offices are located at 20/F, Building A, New Development International Center, No. 473 Guanshan Avenue, Hongshan District, Wuhan, Hubei Province, People’s Republic of China, and its telephone number is +86 27 8775 0710. DouYu’s registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman,
KY1-1104,
Cayman Islands.
DouYu’s ADSs are listed on NASDAQ under the symbol “DOYU.”
Nectarine Investment Limited
Nectarine Investment Limited (“Nectarine”) is a company organized under the laws of the British Virgin Islands and a wholly-owned subsidiary of Tencent Holdings. The registered address of Nectarine is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola VG1110, British Virgin Islands.
As of the date of the proxy statement, Nectarine held 12,068,104 DouYu shares constituting approximately 37.5% of the total outstanding DouYu shares and 37.5% of the voting power of DouYu.
Tencent Holdings Limited
Tencent Holdings is an exempted company with limited liability incorporated under the laws of the Cayman Islands. The business address of Tencent Holdings is 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong and its business telephone number is +852 2179 5122. Tencent Holdings is an Internet company headquartered in China providing value-added Internet services, including communications and social, entertainment, content, online advertising, FinTech and cloud services. It has been listed on the Main Board of the Hong Kong Stock Exchange since June 16, 2004 (stock code: 700). Throughout this proxy statement/prospectus, Nectarine and Tencent Holdings are collectively referred to as the “Tencent Entities”.
Mr. Shaojie Chen and Warrior Ace Holding Limited
Mr. Shaojie Chen is the founder, chief executive officer and director of DouYu and is a citizen of the People’s Republic of China. His principal occupation is as a director and officer of DouYu. Warrior Ace Holding


 
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Limited is a business company incorporated with limited liability under the laws of the British Virgin Islands wholly-owned by Mr. Chen. The business address of Mr. Chen and Warrior Ace Holding Limited is 20/F, Building A, New Development International Center, No. 473 Guanshan Avenue, Hongshan District, Wuhan, Hubei Province, the People’s Republic of China.
Mr. Wenming Zhang and Starry Zone Investments Limited
Mr. Wenming Zhang is the co-founder, co-chief executive officer and director of DouYu and is a citizen of the People’s Republic of China. His principal occupation is as a director and officer of DouYu. Starry Zone Investments Limited is a business company incorporated with limited liability under the laws of the British Virgin Islands wholly-owned by Mr. Zhang. The business address of Mr. Zhang and Starry Zone Investments Limited is 20/F, Building A, New Development International Center, No. 473 Guanshan Avenue, Hongshan District, Wuhan, Hubei Province, the People’s Republic of China.
Mr. Shaojie Chen, Warrior Ace Holding Limited, Mr. Wenming Zhang and Starry Zone Investments Limited are collectively referred to as “Founder Filing Persons.”
Additional information regarding the parties to the Merger is set forth in Annex H, which is attached hereto and incorporated herein by reference.
Risk Factors
An investment in Huya Class A shares and Huya ADSs involves risks, some of which are related to the Merger. In considering the proposed Merger, you should carefully consider the information about these risks set forth under “Risk Factors” beginning on page 18, together with the other information included or incorporated by reference in this proxy statement/prospectus. These risks include, without limitation, the following:
 
   
The market price of the Huya ADSs may decline following the completion of the Merger or during the period of time between the EGM and the date on which DouYu shareholders and DouYu ADS holders actually receive Huya Class A shares and Huya ADSs pursuant to the Merger Agreement;
 
   
Huya and DouYu may not achieve the expected benefits of the proposed Merger;
 
   
Huya and DouYu will incur transaction and integration costs in connection with the Merger;
 
   
Failure to complete the proposed Merger and Reassignment, in a timely manner or at all, could disrupt Huya’s and DouYu’s business plans and operations and have a material adverse effect on the trading price of each company’s ADSs; and
 
   
The market price of the Huya ADSs may be affected by factors different from those affecting the price of DouYu ADSs.
The Extraordinary General Meeting of DouYu Shareholders
DouYu will hold the EGM on                , 2021, beginning at                (local time) at 7F, Building 2, Riverside International Plaza, 1062 Yangshupu Road, Yangpu District, Shanghai 200082, People’s Republic of China. At the EGM, you will be asked:
 
  1.
to authorize, approve and adopt the Merger Agreement and the Plan of Merger and any and all transactions contemplated by the Merger Agreement and the Plan of Merger, including the Merger; and upon the Merger becoming effective, the amendment and restatement of the fourth amended and restated memorandum and articles of association of the DouYu (as the surviving company) in the form attached as Appendix II to the Plan of Merger and the amendment of the authorized share capital of the


 
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  DouYu (as the surviving company) from US$100,000 divided into 500,000,000 ordinary shares of a par value of US$0.0001 per share and 500,000,000 shares of a par value of US$0.0001 per share as the board of directors may determine, to US$100,000 divided into 1,000,000,000 ordinary shares of a par value of US$0.0001 each as set forth in the Plan of Merger; and
 
  2.
in the event that there are insufficient proxies received at the time of the EGM to authorize, approve and adopt the Merger Agreement and the Plan of Merger, to approve a proposal that the chairman of the EGM be instructed to adjourn the EGM in order to allow DouYu to solicit additional proxies in favor of the approval of the Merger and the authorization, approval and adoption of the Merger Agreement and the Plan of Merger.
Item 1
Based in part on the unanimous recommendation of the DouYu Special Committee, the DouYu board of directors (the “DouYu Board”), by actions taken without the participation of four directors who either recused themselves or were not present at the meeting (Mr. Shaojie Chen and Mr. Wenming Zhang, who recused themselves because of the conflicts of interest, Mr. Haiyang Yu, who recused himself because of his current employment with Tencent Holdings, and Ms. Song Zhou, who recused herself because of her current employment with Tencent Holdings), (1) has determined that the Merger is advisable and in the best interests of DouYu and its unaffiliated shareholders and ADS holders, as defined in Rule
13e-3
of the Exchange Act (the “Unaffiliated Security Holders”); (2) has approved and adopted the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger; and (3) recommends that DouYu shareholders vote “FOR” the authorization, approval and adoption of the Merger Agreement and the Plan of Merger.
Item 2
A vote on the proposal to instruct the chairman of the EGM to adjourn the EGM as described above would only occur if there are insufficient proxies received at the time of the EGM to authorize, approve and adopt the Merger Agreement and the Plan of Merger.
Vote Required; DouYu Voting Agreements
In order for the Merger to be completed, the Merger Agreement must be approved by a special resolution of DouYu passed by an affirmative vote of shareholders representing
two-thirds
or more of the DouYu shares present and voting in person or by proxy as a single class at the EGM authorizing, approving and adopting the Merger Agreement and the Plan of Merger.
As of October 31, 2020, there were 32,152,393 DouYu shares issued and outstanding and entitled to vote. As of the same date, the Tencent Entities beneficially owned 12,068,104 DouYu shares, representing 37.5% of the issued and outstanding DouYu shares, and has advised the DouYu Board that it intends to vote all of its DouYu shares in favor of the authorization, approval and adoption of the Merger Agreement and the Plan of Merger.
Huya, Nectarine and, solely for the limited purposes set forth therein, DouYu entered into voting agreements dated as of October 12, 2020, with each of Mr. Shaojie Chen (“Mr. Chen”) and Mr. Wenming Zhang (“Mr. Zhang”), the chief executive officer and
co-chief
executive officer of DouYu, respectively, pursuant to which each of Mr. Chen and Mr. Zhang has agreed to vote, respectively, 4,800,629 and 651,239 DouYu shares beneficially owned by them, representing in total 17.0% of the issued and outstanding DouYu shares, in favor of the authorization, approval and adoption of the Merger Agreement and the Plan of Merger, and the transactions contemplated thereby, including the Merger.


 
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DouYu Shareholders and ADS Holders Entitled to Vote; Voting Material
As of                , 2021, there were                DouYu shares issued and outstanding and entitled to be voted at the EGM. Only DouYu shareholders entered in the register of members of DouYu at the close of business on                , 2021 (New York City time), the DouYu share record date, will receive copies of the proxy card directly from DouYu. DouYu shareholders registered in the register of members of DouYu as of the close of business on the DouYu share record date or their proxy holders are entitled to vote, with each DouYu share carrying one vote, and may participate in the EGM or any adjournment thereof, unless they sell their DouYu shares before                , 2021. DouYu shareholders wanting to vote by proxy should simply indicate on their proxy card how they want to vote, sign and date the proxy card, and mail the proxy card in the return envelope as soon as possible but in any event at least 48 hours before the time of the EGM.
Holders of DouYu ADSs as of the close of business on                , 2021 (New York City time) who have not cancelled their DouYu ADSs by the time and date and as described in the paragraph below and elsewhere herein cannot attend or vote at the EGM directly, but may instruct JPMorgan Chase Bank, N.A. (the “DouYu depositary”), as depositary under the deposit agreement, dated as of July 16, 2019 (the “DouYu Deposit Agreement”), by and among DouYu, the DouYu depositary, and all holders and beneficial owners from time to time of DouYu American Depositary Receipts (“
DouYu ADRs
”) issued thereunder, how to vote the shares underlying the ADSs by completing and signing an ADS voting instruction card provided by the DouYu depositary and returning it in accordance with the instructions printed on it as soon as possible but, in any event, so as to be received by the DouYu depositary no later than 12:00 p.m. New York City time on                , 2021. The DouYu depositary shall endeavor, insofar as practicable, to vote or cause to be voted the DouYu shares represented by DouYu ADSs in accordance with your voting instructions.
Holders of DouYu ADSs may vote at the EGM if they cancel their DouYu ADSs, provide instructions for the re-registration in their name of the DouYu shares underlying such DouYu ADSs, pay the fees and expenses required to be paid under the DouYu Deposit Agreement to the DouYu depositary for such surrender and cancellation, follow the other procedures required pursuant to the DouYu Deposit Agreement and described herein, and become a registered holder of the DouYu shares underlying such cancelled DouYu ADSs by the close of business on                , 2021 (New York City time). DouYu ADS holders wanting to cancel their ADSs need to make such arrangements with the DouYu depositary sufficiently in advance to ensure they are registered holders of such DouYu shares by the close of business in New York City on                 , 2021 (New York City time).
Persons holding DouYu ADSs in a brokerage, bank or nominee account should consult with their broker, bank or nominee to obtain directions on how to provide such broker, bank or nominee with instructions on how to vote their DouYu ADSs.
Each holder of DouYu ADSs is solely responsible for the forwarding of voting notices and the ADS voting instruction card to the beneficial owner of the DouYu ADSs registered in such DouYu ADS holder’s name. There is no guarantee that holders and beneficial owners of DouYu ADSs generally or any holder or beneficial owner of DouYu ADSs in particular will receive the notices and ADS voting instruction card described above with sufficient time to enable such holder or beneficial owner of DouYu ADSs to return any voting instructions to the DouYu depositary in a timely manner. Under the DouYu Deposit Agreement, the DouYu depositary and its agents are not responsible for any failure to carry out any instructions to vote any of the DouYu shares underlying the DouYu ADSs, for the manner in which any voting instructions are given, including instructions to give a discretionary proxy to a person designated by DouYu, for the manner in which any vote is case, including, without limitation, any vote cast by a person to whom the DouYu depositary is instructed to grant a discretionary proxy, or for the effect of any such vote.


 
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The Merger Agreement and Plan of the Merger
On October 12, 2020, Huya, Merger Sub, DouYu and Nectarine entered into the Merger Agreement, which provides for the merger of Merger Sub with and into DouYu, with DouYu continuing as the surviving company and as a wholly owned subsidiary of Huya. Upon completion of the Merger, DouYu will cease to be a publicly traded company, and you will cease to have any rights in DouYu as a shareholder or an ADS holder.
Copies of the Merger Agreement and the Plan of Merger are attached as Annex A to this proxy statement/prospectus. Both Huya and DouYu encourage you to read the entire Merger Agreement and Plan of Merger carefully because they are the principal legal documents governing the Merger.
Merger Consideration
The Merger Consideration that DouYu shareholders and DouYu ADS holders will receive in the Merger is described in more detail in “The Merger Agreement and Plan of Merger—Merger Consideration” on page 136. In summary, if the Merger is completed:
(1) Other than as provided in paragraph (2) immediately below, each DouYu share issued and outstanding immediately prior to the Effective Time (other than DouYu shares represented by DouYu ADSs, the Excluded DouYu Shares and any Purported Dissenters Shares), shall be canceled in exchange for the right of the holder of the relevant DouYu share to receive 7.30 Huya Class A shares; and
(2) each DouYu ADS issued and outstanding immediately prior to the Effective Time will be canceled in exchange for the right to receive 0.730 Huya ADSs.
Huya anticipates that, following the Merger, the DouYu ADS holders and DouYu shareholders prior to the Merger will own approximately 50% of Huya’s share capital on a fully diluted basis.
The value of the Merger Consideration will fluctuate based on the trading price for Huya ADSs. Regardless of the trading price of Huya’s ADSs on the NYSE on the date of the Effective Time, DouYu shareholders will receive 7.30 Huya Class A shares for each DouYu share they own and DouYu ADS holders will receive 0.730 Huya ADS for each DouYu ADS they own. The market value of the Huya Class A shares and Huya ADSs that DouYu shareholders and DouYu ADS holders, respectively, will receive in the Merger will increase or decrease as the trading price of Huya ADSs increases or decreases, and may be different at the time the Merger is completed than it was at the time the Merger Agreement was signed or will be at the time of the EGM to approve the Merger. The market price of Huya ADSs could be lower at any time prior to the completion of the Merger or at any time thereafter than it was at the date of the Merger Agreement. As of November 9, 2020, the closing price of Huya ADSs on the NYSE was US$21.02 per Huya ADS. DouYu shareholders are urged to obtain current trading prices for Huya ADSs on the website of the New York Stock Exchange at http://www.nyse.com/. Information on this website is not incorporated by reference into this proxy statement/prospectus.
Treatment of DouYu RSU Awards
Each award of restricted share units (“DouYu RSU Award”) granted pursuant to the Amended and Restated Restricted Share Unit Scheme of DouYu (the “DouYu Restricted Share Unit Scheme”) that is outstanding and unvested and held directly by the applicable grantee immediately prior to the Effective Time shall be assumed by Huya and converted into a restricted share unit award (an “Assumed RSU Award”) with respect to a number of Huya Class A shares equal to the product obtained by multiplying (i) the applicable number of DouYu shares subject to such DouYu RSU Award immediately prior to the Effective Time by (ii) 7.30, rounded to the nearest whole share. Each Assumed RSU Award shall continue to have, and shall be subject to, the same terms and conditions as applied to the corresponding DouYu RSU Award immediately prior to the Effective Time (taking


 
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into account any changes thereto by reason of the Merger Agreement or the Merger), except for changes made as appropriate to effectuate the administration of the Assumed RSU Awards and certain other changes agreed by DouYu.
Each DouYu RSU Award that is outstanding and vested and held directly by the applicable grantee immediately prior to the Effective Time shall be canceled in exchange for the right to receive a number of Huya Class A shares equal to the product obtained by multiplying (i) the applicable number of DouYu shares subject to such DouYu RSU Award immediately prior to the Effective Time by (ii) 7.30, rounded to the nearest whole share.
Plans for DouYu after the Merger
After the Effective Time, Huya anticipates that DouYu’s operations will be conducted substantially as they are currently being conducted, except that DouYu will cease to be a publicly traded company and will instead be a wholly owned subsidiary of Huya.
DouYu Reasons for the Merger and Recommendation of the DouYu Board and DouYu Special Committee
The DouYu Board, acting with the advice and assistance of DouYu’s management and financial and legal advisors, evaluated the proposed Merger, including the terms and conditions of the Merger Agreement. On October 12, 2020, the DouYu Board (1) determined that the proposed Merger, on the terms and subject to the considerations set forth in the Merger Agreement, is in the best interests of DouYu and its shareholders, and declared it advisable to enter into the Merger Agreement; (2) approved the execution, delivery and performance by DouYu of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger; (3) recommended the approval and adoption of the Merger Agreement by the shareholders of DouYu; and (4) directed that the Merger Agreement be submitted to the shareholders of DouYu for their approval. Accordingly, the DouYu Board recommends that DouYu shareholders vote “FOR” the resolution to authorize, approve and adopt the Merger Agreement, the Plan of Merger and the Merger. For a summary of the material factors considered by the DouYu Board in reaching its decision to authorize and adopt the Merger Agreement, the Plan of Merger and The Merger, please see “Special Factors—DouYu Reasons for the Merger and Recommendation of the DouYu Board and DouYu Special Committee” beginning on page 57.
Opinion of Morgan Stanley Asia Limited as Independent Financial Advisor to DouYu Special Committee
The DouYu Special Committee retained Morgan Stanley Asia Limited (“Morgan Stanley”) to provide it with financial advisory services and a financial opinion in connection with the Merger. The DouYu Special Committee selected Morgan Stanley to act as its independent financial advisor based on Morgan Stanley’s qualifications, expertise and reputation and its knowledge of the business and the relevant industry. At the meeting of the DouYu Special Committee on October 12, 2020, Morgan Stanley rendered its oral opinion to the DouYu Special Committee, which was subsequently confirmed in writing by delivery of Morgan Stanley’s written opinion dated October 12, 2020, to the DouYu Special Committee, that as of the date of such opinion and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by Morgan Stanley as set forth in the written opinion, the Share Exchange Ratio and the ADS Exchange Ratio pursuant to the Merger Agreement (which, for the avoidance of doubt, contemplates consummation of the Reassignment substantially concurrently with the consummation of the Merger) are fair from a financial point of view to the holders of DouYu ordinary shares (other than Excluded DouYu Shares and Purported Dissenters Shares) and the holders of DouYu ADSs (other than DouYu ADSs representing Excluded Shares), respectively.


 
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Morgan Stanley’s opinion was directed to the DouYu Special Committee (in its capacity as such) and addressed only the fairness from a financial point of view of the Share Exchange Ratio and the ADS Exchange Ratio pursuant to the Merger Agreement to the holders of DouYu ordinary shares (other than Excluded DouYu Shares and Purported Dissenters Shares) and the holders of DouYu ADSs (other than DouYu ADSs representing Excluded DouYu Shares), respectively, and did not address any other aspect or implication of the Merger or any other agreement, arrangement or understanding. The summary of Morgan Stanley’s opinion in this proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex F to this proxy statement/prospectus. You are encouraged to read Morgan Stanley’s opinion carefully. The written opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by Morgan Stanley in rendering its opinion. However, neither Morgan Stanley’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement/prospectus are intended to be, and do not constitute, advice or a recommendation to any holders of DouYu ordinary shares or holders of DouYu ADSs as to how to vote in connection with the shareholders’ meeting to be held in connection with the Merger or otherwise act with respect to the Merger, the Reassignment or any matter related thereto.
See “Special Factors—Opinion of Morgan Stanley Asia Limited as Independent Financial Advisor to DouYu Special Committee” beginning on page 75 for additional information.
Huya Reasons for the Merger and Recommendation of the Huya Special Committee
The Huya Board, acting upon the unanimous recommendation of the Huya Special Committee, which Huya Special Committee acted with the advice and assistance of Huya’s management and the Huya Special Committee’s legal and financial advisors, evaluated the proposed Merger, including the terms and conditions of the Merger Agreement.
The Huya Special Committee reviewed and considered the terms and conditions of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement, including the Merger. On October 12, 2020, the Huya Special Committee, after due consideration, unanimously (a) determined that the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, is in the best interests of Huya, (b) approved and declared it advisable for Huya to enter into the Merger Agreement, the Plan of Merger, other transaction documents, and consummate the transactions contemplated thereby, including the Merger, and (c) recommended that the Huya Board approve and authorize the Merger Agreement, the Plan of Merger, other transaction documents, and the transactions contemplated thereby, including the Merger.
On October 12, 2020, the Huya Board (other than Mr. Lingdong Huang, Mr. Zhi Cheng, Mr. Hai Tao Pu, Mr. Guang Xu and Mr. Lei Zheng, who abstained from voting due to affiliation with Tencent Holdings, and Mr. Rongjie Dong who abstained from voting due to his participation in a separate share transfer agreement with an affiliate of Tencent Holdings), acting upon the unanimous recommendation of the Huya Special Committee, at a duly held meeting, has (a) determined that the execution by Huya of the Merger Agreement and the Plan of Merger and consummation of the transactions contemplated thereby, including the Merger, are fair to and in the best interests of Huya and (b) approved and declared advisable the Merger Agreement, the Plan of Merger and the transactions contemplated thereby, including the Merger.
For a summary of the material factors considered by the Huya Special Committee in reaching its decision, please see “Special Factors—Huya Reasons for the Merger and Recommendation of the Huya Special Committee” beginning on page 54.


 
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Opinion of Citigroup Global Markets Inc. as Independent Financial Advisor to Huya Special Committee
The Huya Special Committee retained Citigroup Global Markets Inc. (“Citigroup”) as its independent financial advisor in connection with the transactions contemplated by the Merger Agreement and the Reassignment Agreement. In connection with this engagement, the Huya Special Committee requested Citigroup to evaluate the fairness, from a financial point of view, of the Share Exchange Ratio to Huya. On October 12, 2020, Citigroup rendered its oral opinion, which was subsequently confirmed in writing by delivery of Citigroup’s written opinion dated October 12, 2020, to the Huya Special Committee, that, as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citigroup as set forth in its written opinion, the Share Exchange Ratio was fair, from a financial point of view, to Huya.
The full text of the written opinion of Citigroup, dated October 12, 2020, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken in connection with the opinion, is attached as Annex E to this proxy statement/prospectus and is incorporated herein by reference. The descriptions of the opinion of Citigroup set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. You are urged to read the opinion in its entirety. Citigroup’s opinion was provided for the information of the Huya Special Committee (in its capacity as such) in connection with its evaluation of the Share Exchange Ratio from a financial point of view and did not address any terms or any other aspects or implications of the Merger Agreement, the Reassignment Agreement or the transactions contemplated by the Merger Agreement and the Reassignment Agreement. Citigroup’s opinion does not address the underlying business decision of Huya to effect the transactions contemplated by the Merger Agreement and the Reassignment Agreement, the relative merits of such transactions as compared to any alternative business strategies that might exist for Huya or the effect of any other transaction in which Huya may engage, the likelihood that such transactions are consummated, or any legal, regulatory, tax or accounting matters. Citigroup’s opinion is not intended to be and does not constitute a recommendation to any shareholder of Huya or DouYu as to how such shareholder should vote or act on any matters relating to the transactions contemplated by the Merger Agreement and the Reassignment Agreement or otherwise.
See “Special Factors—Opinion of Citigroup Global Markets Inc. as Independent Financial Advisor to the Huya Special Committee” beginning on page 83 for additional information.
Tencent Entities Reasons for the Merger
Under SEC rules governing going-private transactions, the Tencent Entities are required to express their reasons for the Merger to the Unaffiliated Security Holders.
Each of the Tencent Entities is making the statements included in this section solely for the purpose of complying with the requirements of Rule
13e-3
and related rules under the Exchange Act. For the Tencent Entities, the purpose of the Merger is to enable Huya to acquire 100% of DouYu, in a transaction in which the ordinary shares and the ADSs of DouYu (other than the Excluded DouYu Shares and any Purported Dissenters Shares) will be canceled in exchange for the right to receive 7.30 validly issued, fully paid,
non-assessable
Huya Class A Shares, so that Huya will bear the rewards and risks of the sole ownership of DouYu after the ordinary shares and ADSs of DouYu are canceled, including any increases in value of DouYu as a result of improvements to DouYu’s operations or acquisitions of other businesses. In addition, the Merger will allow the Tencent Entities and their affiliates to increase their ownership percentage in DouYu through their ownership in Huya, as further described in this proxy statement/prospectus under the section titled “Special Factors—Interests of the Tencent Entities in the Merger.”


 
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The Tencent Entities believe the combination between Huya and DouYu will create operational and financial synergies, including through leveraging live streaming content over a larger user base, and help Huya and DouYu respond to competitive pressure from other online video services including short video platforms. In the course of considering the going-private transaction, the Tencent Entities did not consider alternative transaction structures because the Tencent Entities believed the Merger was the most direct and effective way to enable Huya to acquire ownership and control of DouYu.
Position of Huya, Merger Sub, the Tencent Entities and the Founder Filing Persons as to the Fairness of the Merger
Each party involved in the Merger believes that the Merger is fair to the Unaffiliated Security Holders of DouYu. Their belief is based upon the factors discussed under the section entitled “Special Factors—Position of Huya, Merger Sub, the Tencent Entities and the Founder Filing Persons as to the Fairness of the Merger” beginning on page 62.
Conditions to the Completion of the Merger
The obligations of DouYu, Huya and Merger Sub to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction of the following conditions:
 
   
the Required DouYu Vote shall have been obtained;
 
   
the registration statement on Form
F-4
(of which this proxy statement/prospectus is a part) having become effective under the Securities Act, and not having become the subject of any stop order, or any proceedings to seek a stop order, to suspend the effectiveness of the Form
F-4;
 
   
the Huya ADSs issuable as Merger Consideration pursuant to the Merger Agreement having been approved for listing on the NYSE, subject to official notice thereof; and
 
   
no governmental entity of competent jurisdiction having enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order which (1) is in effect and (2) permanently enjoins or prohibits the consummation of the transaction contemplated by the Merger Agreement.
The obligations of each of Huya and Merger Sub to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction, or waiver by Huya and Nectarine, of the following conditions; provided that the last bullet point of the following conditions may be waived by Nectarine only:
 
   
the representations and warranties of DouYu in the Merger Agreement being true and correct in all respects save for de minimis inaccuracies as of the date of the Merger Agreement and as of the Closing Date, with certain other representations and warranties subject to a material adverse effect exception;
 
   
(1) certain representations and warranties of DouYu in the Merger Agreement being true and correct in all respects save for de minimis inaccuracies as of the date of the Merger Agreement and as of the Closing Date as if made on and as of such date and time, and (2) subject to certain exceptions, certain representations and warranties of DouYu set forth in the Merger Agreement being true and correct interpreted without giving effect to certain materiality qualifiers;
 
   
DouYu having performed or complied in all material respects with all covenants and agreements required to be performed or complied with by it under the Merger Agreement prior to or at the time of closing of the Merger;
 
   
there having been no material adverse effect on DouYu and the DouYu Subsidiaries since the date of the Merger Agreement;


 
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The actions described under the section titled “The Merger Agreement and Plan of Merger—DouYu Corporate Structure Matters” having been completed;
 
   
DouYu shareholders holding no more than 10% of DouYu shares shall have provided any notice of objection, written demand for appraisal or taken any other action that purports to exercise any rights pursuant to Section 238 of the Cayman Companies Law;
 
   
DouYu shall have, within 20 days immediately following the date on which the Required DouYu Vote is obtained, given written notice thereof to each Purported Dissenting Shareholder, and the listing of DouYu shares on the NASDAQ Global Select Market shall have been maintained for a minimum of twenty (20) days after such notice date;
 
   
all closing conditions under the Reassignment Agreement shall have been satisfied or waived as of the closing, which waiver shall be subject to prior written consent of Huya and the closing of the Reassignment (as defined in the Reassignment Agreement) shall have occurred in accordance with the Reassignment Agreement substantially concurrently with the closing of the transactions contemplated by the Merger Agreement;
 
   
all PRC regulatory filings to be made or obtained in connection with the Merger and the other transactions contemplated by the Merger Agreement prior to closing shall have been duly made or obtained, or the statutory clearance
or non-objection period
in respect of any such regulatory filing or notification has expired and no objection has been raised with respect to the Merger, in each case in accordance with applicable PRC laws.
The obligations of DouYu to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction, or waiver by DouYu and Nectarine:
 
   
the representations and warranties of Huya and Merger Sub in the Merger Agreement being true and correct in all respects save for de minimis inaccuracies as of the date of the Merger Agreement and as of the Closing Date, with certain other representations and warranties subject to a material adverse effect exception;
 
   
Huya and Merger Sub having performed or complied in all material respects with all covenants and agreements required to be performed or complied with by it under the Merger Agreement prior to or at the time of closing of the Merger; and
 
   
there having been no Huya Material Adverse Effect since the date of the Merger Agreement.
Neither Huya, DouYu nor Nectarine can assure you that all of the conditions to completing the Merger will be satisfied or waived.
Termination of the Merger Agreement
The Merger Agreement may be terminated by both of Huya and DouYu or any of Huya, DouYu and Nectarine, as described in more detail in “The Merger Agreement and Plan of Merger—Termination of the Merger Agreement.”
Termination Fees
Huya is required to pay DouYu a termination fee of US$177,000,000 if the Merger Agreement is terminated by DouYu or Nectarine because:
 
   
the representations and warranties of Huya and Merger Sub shall not be true and correct or Huya or Merger Sub shall have breached or failed to perform any of its covenants or agreements contained in the Merger Agreement, or


 
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(1) all of the closing conditions to the completion of the Merger or to the obligations of Huya and Merger Sub to consummate the Merger have been satisfied, (2) DouYu and Nectarine have confirmed by notice to Huya that all conditions to their obligation to consummate the Merger have been satisfied or that they are willing to waive any such unsatisfied conditions, and (3) Huya fails to consummate the Merger within three business days following the date the closing should have occurred as set forth in the Merger.
DouYu is required to pay Huya a termination fee of US$177,000,000 if the Merger Agreement is terminated by Huya or Nectarine because:
 
   
the representations and warranties of DouYu shall not be true and correct or DouYu shall have breached or failed to perform any of its covenants or agreements contained in the Merger Agreement, or
 
   
(1) all of the closing conditions to the completion of the Merger or to the obligations of DouYu to consummate the Merger have been satisfied, (2) Huya and Nectarine have confirmed by notice to DouYu that all conditions to their obligation to consummate the Merger have been satisfied or that they are willing to waive any such unsatisfied conditions, and (3) DouYu fails to consummate the Merger within three business days following the date the closing should have occurred as set forth in the Merger.
In addition, in the event that (1) the Merger Agreement is terminated by DouYu, Huya or Nectarine due to the failure to obtain the Required DouYu Vote other than as a result of Nectarine’s breach of its obligations under the section titled “The Merger Agreement and Plan of Merger—Voting of DouYu Shares by Nectarine” (2) the DouYu Board has effected a change of recommendation and (3) the Merger Agreement is not at such time able to be terminated by Huya or Nectarine, DouYu shall pay Huya a termination fee of US$44,000,000.
Fees and Expenses
Whether or not the Merger is completed, all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such expenses except as otherwise provided in the Merger Agreement.
Listing of Huya ADSs
Huya ADSs currently trade on the NYSE under the symbol “HUYA.” It is a condition to completion of the Merger that the Huya ADSs to be delivered to DouYu ADS holders in connection with the Merger be approved for listing on the NYSE, subject to official notice of issuance. Huya will use its reasonable best efforts to cause any Huya ADSs to be issued in connection with the Merger to be approved for listing on the NYSE.
Delisting of DouYu ADSs
DouYu ADSs currently trade on NASDAQ under the symbol “DOYU.” If the Merger is completed, all of the DouYu ADSs will be
de-listed
from NASDAQ, and the DouYu ADSs and the underlying DouYu shares will be deregistered under the Exchange Act.
Acquisition Proposals Relating to DouYu
DouYu will not, nor will it permit any of its subsidiaries or consolidated affiliated entities (collectively, the “DouYu Subsidiaries”) to, nor will it authorize or permit any officer, director or employee or any investment banker, attorney, accountant or other advisor or representative of DouYu or any of the DouYu Subsidiaries to,


 
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directly or indirectly, (i) solicit, initiate or encourage any inquiry or the making of any proposal or offer or any other effort or attempt that constitutes, or may reasonably be expected to lead to, any acquisition proposal, (ii) engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any
non-public
information with respect to DouYu or any of the DouYu Subsidiaries, or take any other action to facilitate, any acquisition proposal, or (iii) enter into any letter of intent, agreement or agreement in principle with respect to an acquisition proposal.
Prior to obtaining the required DouYu shareholder approval of the Merger Agreement (the “Required DouYu Vote”), the DouYu Board may effect a change of recommendation if the DouYu Board has determined in good faith, after consultation with its financial advisor and outside legal advisor, that failure to take such action would constitute a breach of the directors’ fiduciary duties under applicable law; provided, however, that prior to taking such action or announcing the intention to do so, (1) DouYu has complied in all material respect with the section titled “The Merger Agreement and Plan of Merger—Acquisition Proposals Relating to DouYu; DouYu Board Recommendation”, (2) the DouYu Board has given DouYu at least ten business days’ prior written notice of its intention to take such action and a description of the reasons for taking such action, (3) DouYu has negotiated, and has caused its representatives to negotiate, in good faith with Huya during such notice period to enable Huya to revise the terms of the Merger Agreement in such a manner that would obviate the need for taking such action, and (4) following the end of such notice period, the DouYu Board acting upon recommendation of the DouYu Special Committee) shall have considered in good faith any revisions to the Merger Agreement proposed in writing by Huya in a manner that would form a binding contract if accepted by DouYu, and shall have determined in good faith, after consultation with its financial advisor and outside legal counsel, that failure to effect a change of recommendation would constitute a breach of the directors’ fiduciary duties under applicable law.
Dissenters’ Rights
Huya and DouYu have considered whether the DouYu shareholders will be entitled to exercise statutory dissenters’ rights in respect of the Merger under the Cayman Companies Law. Huya and DouYu have been advised that the exemption in Section 239 of the Cayman Companies Law will apply, so that dissenters’ rights will not be available under the Cayman Companies Law, and DouYu shareholders will not be entitled to seek payment of the fair value of their DouYu shares by means of appraisal by the Cayman Islands court. For more information on appraisal rights, please see the question “Am I entitled to dissenters’ rights?” below and its answer.
Interests of DouYu’s Directors and Executive Officers in the Merger
In considering the recommendation of the DouYu Board that DouYu shareholders vote for the authorization and approval of the Merger, Merger Agreement and Plan of Merger, DouYu shareholders should be aware that certain members of the DouYu Board have agreements and arrangements that provide them with interests in the merger that may differ from, or be in addition to, the interests of other DouYu shareholders generally. The DouYu Board was aware of these agreements and arrangements during its deliberations of the merits of the merger and in determining to recommend that DouYu shareholders vote for the authorization and approval of the Merger, Merger Agreement and Plan of Merger.
For more detail on the interests of DouYu’s directors and executive officers in the Merger, please see “Special Factors—Interests of DouYu’s Directors and Executive Officers in the Merger” beginning on page 93.
Interests of the Tencent Entities in the Merger
As of the date of this proxy statement/prospectus, the Tencent Entities beneficially own approximately 37.5% of the total issued and outstanding share capital of DouYu, representing approximately 37.5% of DouYu’s


 
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total voting power, and their affiliate Linen Investment owns approximately 47.6% of the total issued and outstanding share capital of Huya, representing approximately 69.7% of Huya’s total voting power. As a result of the Merger, after taking into consideration the additional Huya Shares to be acquired by Linen Investment immediately prior to the closing of the Merger pursuant to that certain Share Transfer Agreement entered into as of October 12, 2020 between Linen Investment and certain affiliates of Mr. Rongjie Dong and the additional DouYu shares to be acquired by the Tencent Entities immediately prior to the closing of the Merger pursuant to that certain Share Transfer Agreement entered into as of August 13, 2020 between Nectarine and Mr. Chen, the Tencent Entities and Linen Investment will collectively own approximately 67.5% of the total voting power in the surviving company on a fully diluted basis immediately following the completion of the Merger. Pursuant to the terms of the voting undertaking provided by Nectarine in the Merger Agreement, Nectarine has agreed to, among other things, vote, or cause to be voted, or provide written consent with respect to, all DouYu ordinary shares owned beneficially or of record by it or any of its subsidiaries in favor of the approval of the Merger Agreement, the terms and conditions thereof and the transactions contemplated thereby, including the Merger, the approval of the execution and delivery by DouYu of the Merger Agreement, and the approval of any actions required in furtherance of the Merger Agreement and the transactions contemplated thereby, including the Merger.
Because of the Tencent Entities’ equity interest in the surviving company through their equity interest in Huya, the Tencent Entities will indirectly enjoy the benefits from any future earnings and growth of DouYu after the Merger which, if DouYu is successfully managed, could exceed the value of their original investment in DouYu. The Tencent Entities will also indirectly bear the corresponding risks of any possible decreases in the future earnings, growth or value of DouYu. The investment by the Tencent Entities in the surviving company through Huya will be less liquid than the investment by the Tencent Entities in DouYu, because there is no public trading market for the surviving company’s shares and the Tencent Entities may not be able to sell their interest in the surviving company without also disposing their interest in Huya.
The Merger may also provide additional means to enhance shareholder value for the Tencent Entities, including improved profitability due to decrease in the expenses associated with the reporting and compliance obligations of a publicly traded company, and additional means for making liquidity available to the Tencent Entities through Huya, such as through dividends or other distributions.
Board of Directors and Senior Management of the Combined Company
Huya shall take all actions necessary in accordance with the applicable laws and the memorandum and articles of association of Huya to cause (i) Mr. Chen to be appointed a director on the Huya Board, and (ii) Mr. Chen and Mr. Rongjie Dong to be appointed
Co-Chief
Executive Officers of Huya, in each case effective as of the Effective Time. The members of the Huya Board immediately prior to the Effective Time shall remain as directors of Huya immediate after the Effective Time.
Regulatory Matters
Completion of the Merger is subject to receipt of clearance from the State Administration for Market Regulation, the PRC regulatory authority responsible for merger control. There can be no assurance that a challenge to the Merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.
Litigation Relating to the Merger
Huya, DouYu and the Tencent Entities are not aware of any legal proceedings challenging the Merger Agreement, the Plan of Merger, the Merger, or the related transactions.


 
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Accounting Treatment
The Merger will be accounted for as follows under accounting principles generally accepted in the United States (“U.S. GAAP”):
(i) The acquisition of DouYu by Huya is accounted for as a business combination using the acquisition method.
(ii) With respect to the Reassignment of the Penguin Business from Tencent Holdings via Nectarine to DouYu, given that Huya is a consolidated subsidiary of Tencent Holdings and Tencent Holdings through its affiliate will remain as the parent company of Huya after the closing of the Merger, the assets and liabilities of Penguin assigned to Huya through the Reassignment to DouYu will be accounted for at historical cost in accordance with the guidance in Transactions Between Entities Under Common Control Subsections of
ASC 805-50.
For more detail on the accounting treatment of the Merger, please see “Unaudited Pro Forma Condensed Combined Financial Information—Notes to Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 123.
Tax Consequences of the Merger
United States Federal Income Tax Consequences
The Merger is intended to qualify as a reorganization under section 368(a) of the Code (as defined below) for U.S. federal income tax purposes. Assuming that the Merger qualifies as a reorganization under section 368(a) of the Code and neither Huya or DouYu is or has been a PFIC (as defined below), DouYu shareholders will not recognize gain or loss on the exchange of their DouYu shares for Huya Class A shares, and DouYu ADS holders will not recognize gain or loss on the exchange of their DouYu ADSs for Huya ADSs, although gain or loss may be recognized upon the receipt of cash in lieu of fractional interests in a Huya Class A share or Huya ADS.
Huya and DouYu cannot assure DouYu shareholders and DouYu ADS holders that the IRS (as defined below) will agree with the treatment of the Merger as a reorganization under section 368(a) of the Code. Tax matters are complicated, and the tax consequences of the Merger to each DouYu shareholder or each DouYu ADS holder will depend on each holder’s circumstances. DouYu shareholders and DouYu ADS holders are urged to read the discussion under the section titled “Special Factors—Tax Consequences of the Merger—U.S. Federal Income Tax Consequences” and to consult their tax advisors for a full understanding of the tax consequences of their participation in the Merger.
PRC Income Tax Consequences
DouYu does not believe that it would be considered a resident enterprise under the PRC Enterprise Income Tax Law (the “EIT Law”) or that the gain, if any, recognized on the receipt of the Merger Consideration for DouYu shares or DouYu ADSs should otherwise be subject to PRC income tax to holders of such DouYu shares or DouYu ADSs that are not PRC residents. If, however, the PRC tax authorities were to determine that DouYu should be considered a resident enterprise under the EIT Law or that the receipt of the Merger Consideration for DouYu shares or DouYu ADSs should otherwise be subject to PRC income tax, then a gain recognized on the receipt of the Merger Consideration for DouYu shares or DouYu ADSs pursuant to the Merger by DouYu shareholders or DouYu ADS holders, respectively, who are
non-resident
enterprises under the EIT Law could be treated as
PRC-source
income that would be subject to PRC withholding tax at a rate of 10%, unless otherwise reduced pursuant to an applicable tax treaty. None of Huya, Merger Sub or DouYu currently intends to deduct or


 
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withhold any amount from the Merger Consideration under applicable PRC law. In the event that circumstances change and a deduction or withholding is required, each of the surviving company, DouYu, Huya and the exchange agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Merger Agreement such amounts as it reasonably determines is required to deduct and withhold with respect to the making of such payment under any applicable tax laws of the PRC. To the extent that amounts are so withheld and paid over to the appropriate governmental entity by the surviving company, DouYu, Huya or the exchange agent, as the case may be, such withheld amounts shall be treated for all purposes of the Merger Agreement as having been paid to the holder of DouYu shares or DouYu ADSs in respect to which such deduction and withholding was made by the surviving company or Huya, as the case may be. In the event that deduction or withholding in respect of PRC tax is necessary, Huya and DouYu will revise this proxy statement/prospectus to describe the proposed deduction or withholding, and Huya will file with the SEC an amendment to its registration statement on Form
F-4,
which will include the revised proxy statement/prospectus. You should consult your own tax advisor for a full understanding of the tax consequences of the Merger to you, including any PRC tax consequences. Please see “Special Factors—Tax Consequences of the Merger—PRC Income Tax Consequences” beginning on page 99 for additional information.
Cayman Islands Tax Consequences
The Cayman Islands currently has no form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax. No taxes, fees or charges will be payable (either by direct assessment or withholding) to the Cayman Islands government or other taxing authority in the Cayman Islands under the laws of the Cayman Islands in respect of the Merger or the receipt of the Merger Consideration by DouYu shareholders or DouYu ADS holders under the terms of the Merger Agreement. This is subject to the qualifications that (1) Cayman Islands stamp duty may be payable if any original transaction documents, including the Merger Agreement, are brought to or executed in the Cayman Islands; and (2) registration fees will be payable to the Cayman Islands Registrar of Companies to register the Plan of Merger and other filings required in connection with the Merger.
Comparison of Rights of Huya and DouYu Shareholders
In the Merger, DouYu shareholders will receive Huya Class A shares. The rights of Huya shareholders are governed by Cayman Islands law and the memorandum and articles of association of Huya, and the rights of DouYu shareholders are governed by Cayman Islands law and the memorandum and articles of association of DouYu. Upon completion of the Merger, the rights of DouYu shareholders who become shareholders of Huya in the Merger will be governed by Cayman Islands law and the memorandum and articles of association of Huya. There are certain differences between the rights of DouYu shareholders and the rights of Huya shareholders due to differences between the two companies’ memorandum and articles of association. For a discussion of these differences, please see “Comparison of Rights of Huya and DouYu Shareholders” beginning on page 182.
Comparison of Rights of Huya and DouYu ADS Holders
In the Merger, DouYu ADS holders will receive Huya ADSs. The rights of DouYu ADS holders are governed by the DouYu Deposit Agreement, and the rights of Huya ADS holders are governed by the Huya Deposit Agreement. Upon completion of the Merger, the rights of DouYu ADS holders who become Huya ADS holders in the Merger will be governed by the Huya Deposit Agreement. There are certain differences between the rights of DouYu ADS holders and those of Huya ADS holders under the respective deposit agreement. For a comparison of the material differences, please see “Comparison of Rights of Huya and DouYu ADS Holders” beginning on page 191.
Comparative Market Price and Dividend Information
The Huya ADSs have been listed on the NYSE since May 11, 2018 under the symbol “HUYA.” The DouYu ADSs have been listed on the NASDAQ Global Select Market since July 17, 2019 under the symbol “DOYU.”


 
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Neither Huya nor DouYu has declared or paid any dividends on its ordinary shares or ADSs since their initial public offerings in May 2018 and July 2019, respectively, other than the Huya Closing Dividend and the DouYu Closing Dividend contemplated under the Merger Agreement.
The following table presents the high and low sales prices for Huya ADSs on the NYSE for each quarter during the period from May 11, 2018 through November 9, 2020, and the high and low sales prices for DouYu ADSs on the NASDAQ Global Select Market for each quarter during the period from July 17, 2019 through November 9, 2020.
 
    
Huya ADSs
(1)
    
DouYu ADSs
(2)
 
     ($)      ($)  
     High      Low      High      Low  
2018
           
Second Quarter
     50.82        15.25        —          —    
Third Quarter
     40.60        23.02        —          —    
Fourth Quarter
     24.04        14.44        —          —    
2019
           
First Quarter
     30.00        15.12        —          —    
Second Quarter
     29.45        19.48        —          —    
Third Quarter
     28.20        19.30        11.88        7.77  
Fourth Quarter
     25.90        16.40        8.60        7.01  
2020
           
First Quarter
     21.73        11.78        9.50        6.11  
Second Quarter
     20.78        14.50        12.19        6.17  
Third Quarter
     30.62        18.81        17.85        10.88  
Fourth Quarter (through November 9, 2020)
     25.87        20.23        16.37        13.12  
 
  (1)
Each Huya ADS represents one Huya Class A share.
  (2)
10 DouYu ADSs represent one DouYu share.
On August 7, 2020, the last full trading day prior to the public announcement by Huya that it received a preliminary
non-binding
proposal letter, dated August 10, 2020, from Tencent Holdings, proposing that Huya and DouYu enter into a
stock-for-stock
merger to be effected pursuant to applicable laws, the reported closing price of Huya ADSs on the NYSE and that of DouYu ADSs on the NASDAQ Global Select Market were $26.66 per ADS and $15.27 per ADS, respectively. On October 9, 2020, the last full trading day prior to the public announcement by Huya and DouYu of the execution of the Merger Agreement, the reported closing price of Huya ADSs on the NYSE and that of DouYu ADSs on the NASDAQ Global Select Market were $25.79 per ADS and $14.00 per ADS, respectively. On November 9, 2020, the last trading day for which this information could be calculated prior to the filing of Huya’s registration statement on Form
F-4,
of which this proxy statement/prospectus is a part, the reported closing price of Huya ADSs on the NYSE and that of DouYu ADSs on the NASDAQ Global Select Market were $21.02 per ADS and $14.28 per ADS, respectively.
DouYu shareholders and ADS holders will not receive the Merger Consideration until the proposed Merger is completed, which may be a substantial period of time after the EGM to which this proxy statement/prospectus relates. There can be no assurance as to the trading prices of the Huya ADSs at the time of the closing of the proposed Merger. The market prices of the Huya ADSs and DouYu ADSs are likely to fluctuate prior to consummation of the Merger and cannot be predicted. You are urged to obtain current trading prices for Huya ADSs and DouYu ADSs before you vote.


 
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RISK FACTORS
Investing in Huya Class A shares or Huya ADSs involves risks, some of which are related to the Merger. In considering the proposed Merger, you should carefully consider the following information about these risks, as well as the other information included in or incorporated by reference into this proxy statement/prospectus, including Huya 2019
20-F
and the extensive risk factors relating to the businesses of Huya described in the Huya 2019
20-F
beginning on page 6. The business of the combined company, as well as the respective businesses of Huya and DouYu, and their respective financial condition or results of operations, could be materially adversely affected by any of these risks, as well as other risks and uncertainties not currently known to Huya or not currently deemed to be material.
Huya also encourages you to read and consider the risk factors specific to DouYu’s businesses (that may also affect Huya) described in DouYu 2019
20-F
beginning on page 3.
Please see “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference” on page 199 and page 200, respectively, for information on where you can find the documents Huya and DouYu have filed with or furnished to the SEC and which are incorporated into this proxy statement/prospectus by reference.
Risks Related to the Merger
The market price of the Huya ADSs may decline following the completion of the Merger or during the period of time between the EGM and the date on which DouYu shareholders and DouYu ADS holders actually receive Huya Class A shares and Huya ADSs pursuant to the Merger Agreement.
At the Effective Time, (1) each DouYu share issued and outstanding immediately prior to the Effective Time (other than DouYu shares represented by DouYu ADSs, the Excluded DouYu Shares and any Purported Dissenters Shares), shall be canceled in exchange for the right of the holder of the relevant DouYu share to receive 7.30 Huya Class A shares, and (2) each DouYu ADS issued and outstanding immediately prior to the Effective Time will be surrendered in exchange for the right to receive 0.730 Huya ADSs; provided that the Excluded DouYu Shares and the DouYu shares and DouYu ADSs issued and outstanding immediately prior to the Effective Time that are issued to and held by DouYu RSU Trust shall automatically be canceled and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefore.
In regards to the Huya Class A share and Huya ADS portion of the Merger Consideration to be delivered to Huya shareholders and Huya ADS holders, respectively, under the Merger Agreement, the Share Exchange Ratio of 7.30 and the ADS Exchange Ratio of 0.730 are fixed and will not be adjusted to reflect changes in the market value of Huya ADSs.
The market price of Huya ADSs may decline at any time following the completion of the Merger if, among other reasons:
 
   
the operational and financial synergies expected by Huya and DouYu across a number of areas, including leveraging live streaming content over a larger user base, and improving operation efficiencies are not achieved;
 
   
the effect of the Merger on the financial results of Huya is not consistent with the expectations of financial analysts or investors;
 
   
DouYu ADS holders sell a significant number of Huya ADSs after consummation of the Merger, or DouYu shareholders who receive Huya Class A shares under the Merger Agreement later sell a significant number of Huya ADSs in the open market; or
 
   
adverse changes in laws, regulations, rules, policies or guidelines, or the general political, economic, industry or capital markets environment, or the impact of a pandemic including the continuing impact of
COVID-19.
 
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In addition, the market price of the Huya ADSs may fluctuate or decline during the period of time between the EGM and the date on which DouYu shareholders and DouYu ADS holders entitled to receive Huya Class A shares and Huya ADSs, respectively, pursuant to the Merger Agreement, actually receive Huya Class A shares and Huya ADSs. These fluctuations may be caused by changes in the businesses, operations, financial results and prospects of Huya and DouYu, market expectations of the likelihood that the Merger will be completed and the timing of the completion of the Merger, laws, regulations, rules, policies or guidelines, general political, economic, industry or capital markets conditions or other factors. At the time they cast their votes regarding the authorization and approval of the Merger Agreement, DouYu shareholders and ADS holders will not know the actual market value of the Huya Class A shares and Huya ADSs they will receive when the Merger is finally completed. The actual market value of the Huya Class A shares and Huya ADSs, when received by DouYu shareholders and DouYu ADS holders, will depend on the market value of those Huya Class A shares and Huya ADSs on that date. This market value may be less than the value of the Huya Class A shares and Huya ADSs at the time the Merger Agreement was signed or when the EGM is held.
Huya and DouYu may not achieve the expected benefits of the proposed Merger.
The anticipated benefits from the Merger are, necessarily, based on projections and assumptions about the combined businesses of Huya, DouYu and Penguin, which may not materialize as expected or which may prove to be inaccurate. Huya’s ability to achieve the anticipated benefits will depend on Huya’s ability to successfully and efficiently integrate the business and operations of DouYu and Penguin with Huya’s business and achieve the expected synergies. Huya may encounter significant challenges with successfully integrating and recognizing the anticipated benefits of the proposed Merger, including the following:
 
   
potential disruption of, or reduced growth in, Huya’s core businesses, due to diversion of management attention and uncertainty with our current client relationships;
 
   
consolidating and integrating corporate, information technology, finance and administrative infrastructures, and integrating and harmonizing business systems;
 
   
coordinating efforts to effectively maintain and grow user base, as well as attract and retain key talent agencies or talented and popular broadcasters;
 
   
difficulties in achieving anticipated operational and financial synergies, business opportunities and growth prospects from combining DouYu’s and Penguin’s business with Huya’s business;
 
   
limitations prior to the completion of the Merger on the ability of management of Huya and DouYu to conduct planning regarding the integration of the two companies;
 
   
the increased scale and complexity of operations resulting from the Merger;
 
   
difficulties in anticipating and responding to actions that may be taken by competitors in response to the Merger; and
 
   
potential adverse changes in laws, regulations, rules, policies or guidelines, or the general political, economic, industry or capital markets environment, or the impact of a pandemic including the continuing impact of
COVID-19.
In addition, Huya’s anticipated benefits of the Merger contemplate certain synergies. Consequently, even if Huya is able to successfully integrate the operations of DouYu and Penguin with Huya’s operations, Huya may not realize the full benefits of the Merger if it is unable to identify and implement the anticipated synergies or if the actions taken to implement such synergies have unintended consequences on Huya’s other business operations.
Huya and DouYu will incur transaction and integration costs in connection with the Merger.
Huya and DouYu have incurred, and expect to continue to incur, significant costs in connection with the Merger. Huya will also incur integration costs following the completion of the Merger as DouYu and Penguin’s
 
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operations are integrated with Huya’s operations. The operational and financial synergies expected to arise from the Merger across a number of areas, including leveraging live streaming content over a larger user base, and improving operational efficiency, may not be achieved in the near term or at all, and if achieved, may not be sufficient to offset the costs associated with the Merger. Unanticipated costs, or the failure to achieve such expected improvement, may have an adverse impact on the results of operations of the combined company following the completion of the Merger.
Failure to complete the proposed Merger and Reassignment, in a timely manner or at all, could disrupt Huya and DouYu’s business plans and operations and have a material adverse effect on the trading price of each company’s ADSs.
Although Huya and DouYu expect to complete the Merger promptly after receiving DouYu shareholder approval at its EGM and DouYu and Nectarine expect to complete the Reassignment concurrently with the closing of the Merger, the transactions are subject to certain customary closing conditions including receipt of the required DouYu shareholder approval and the effectiveness of the registration statement of which this prospectus forms a part. Additionally, pursuant to the Merger Agreement, all closing conditions under the Reassignment Agreement shall have been satisfied as of the closing of the Merger and the closing of the Reassignment shall have occurred in accordance with the Reassignment Agreement substantially concurrently with the closing of the Merger. Pursuant to the Reassignment, the closing of the Reassignment is subject to completion of the
pre-closing
restructuring of Penguin in accordance with the restructuring schedule as agreed by and between DouYu and Nectarine. For more details, please see “The Merger Agreement and Plan of Merger—Conditions to the Completion of the Merger” and “The Reassignment—Closing Conditions.”
The Merger Agreement may be terminated in certain circumstances, including if the Merger shall not have been consummated by July 12, 2021, subject to an automatic three-month extension under certain circumstances, or if there is in effect any final and
non-appealable
governmental order, judgment, writ, injunction, decree or ruling that permanently enjoins or prohibits the consummation of the Merger or imposes certain
non-required
remedy.
Completion of the Merger is subject to receipt of clearance from the State Administration for Market Regulation, the PRC regulatory authority responsible for merger control. There can be no assurance that a challenge to the Merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful. Although Huya and DouYu expect that all required regulatory clearances and approvals will be obtained, Huya and DouYu cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the Merger. In particular, any antitrust filing imposed by the State Administration for Market Regulation may be time consuming and may have the effect of delaying or bringing uncertainty to the consummation of the Merger, imposing additional costs on Huya or DouYu and requiring commitment of management resources.
Failure to complete the Merger and the Reassignment on the expected schedule or at all would likely disrupt the business operations of Huya and DouYu and require them to revise their respective business plans, and could otherwise have a material adverse effect on their respective businesses and trading price. Moreover, if the Merger and Reassignment are not completed, both Huya and DouYu will be subject to several risks, including having to pay certain costs relating to the Merger and the Reassignment, the possibility of Huya or DouYu needing to pay a significant termination fee to the other, and the management teams of Huya and DouYu having their focus diverted from pursuing other opportunities that could be beneficial to Huya or DouYu, in each case, without realizing any of the benefits that might have resulted had the Merger and the Reassignment been completed.
 
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Uncertainty about the Merger may adversely affect the relationships between Huya or DouYu with its users, broadcasters and employees, which could negatively affect their business, financial condition and results of operations, whether or not the Merger is completed.
The announcement of the Merger on October 12, 2020, whether or not completed, may cause uncertainties in the relationships between Huya or DouYu with its users or broadcasters which could have a material and adverse effect on the business, financial condition and results of operations of Huya or DouYu. Furthermore, uncertainties about the Merger may cause the current and prospective employees of Huya or DouYu to experience uncertainty about their future with us. These uncertainties may impair the ability of Huya or DouYu to retain, recruit or motivate key employees which could affect its business.
Huya and DouYu may have difficulty attracting, motivating and retaining executives and other key employees due to uncertainty associated with the Merger.
Huya’s success after completion of the Merger will depend in part upon the ability of Huya to retain key employees of Huya and DouYu. Competition for qualified personnel can be intense. Current and prospective employees of Huya or DouYu may experience uncertainty about the effect of the Merger, which may impair Huya’s and DouYu’s ability to attract, retain and motivate key personnel prior to and following the Merger. Employee retention may be particularly challenging during the pendency of the Merger, as employees of Huya and DouYu may experience uncertainty about their future roles with the combined company.
In addition, if key employees of Huya or DouYu depart, the integration of the companies may be more difficult and the combined company’s business following the Merger may be harmed. Furthermore, the combined company may have to incur significant costs in identifying, hiring, training and retaining replacements for departing employees and may lose significant expertise and talent relating to the businesses of Huya or DouYu, and the combined company’s ability to realize the anticipated benefits of the Merger may thus be adversely affected. Furthermore, there could be disruptions to or distractions for the workforce and management associated with integrating employees into the combined company. Accordingly, no assurance can be given that Huya will be able to attract or retain key employees of Huya and DouYu to the same extent that those companies have been able to attract or retain their own employees in the past.
Certain directors and executive officers of DouYu have agreements and arrangements that may result in their having interests in the Merger different from, or in addition to, those of DouYu shareholders generally.
In considering the recommendation of the DouYu Board to DouYu shareholders to approve the Merger, Merger Agreement and Plan of Merger, DouYu shareholders should be aware that certain members of the DouYu Board and certain executive officers of DouYu have agreements and arrangements which may result in their having interests in the Merger different from, or in addition to, those of DouYu shareholders generally, including treatment of DouYu RSU Awards in the Merger for certain directors and executive officers of DouYu including Mr. Chen and Mr. Zhang and board representation rights on the Huya Board for Mr. Chen. The DouYu Board was aware of these agreements and arrangements during its deliberations of the merits of the Merger and in determining to recommend that DouYu shareholders approve the Merger, Merger Agreement and Plan of Merger. Please see “Special Factors—Interests of DouYu’s Directors and Executive Officers in the Merger” beginning on page 93 for more information.
The unaudited pro forma condensed combined financial information included in this proxy statement/prospectus is preliminary and the actual financial condition and results of operations after the Merger may differ materially.
The unaudited pro forma condensed combined financial information in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what Huya’s actual financial condition or results of operations would have been had the Merger been completed on the dates indicated. The pro forma
 
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condensed combined financial information reflects adjustments, which are based upon preliminary estimates, to record the DouYu identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation reflected in this proxy statement/prospectus is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of Huya as of the date of completion of the Merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this proxy statement/prospectus. For more information, see “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 115 for more information.
The decline in financial forecast or the failure of actual financial results of each of Huya and DouYu to meet the forecasted results as disclosed elsewhere in this proxy statement/prospectus may adversely affect the future financial conditions, results of operations and prospects of the combined company.
Although the financial forecasts of Huya and DouYu are included in this proxy statement/prospectus, such forecasts are based on assumptions made by the managements of Huya and DouYu in preparing their respective financial forecasts, and are subject to significant uncertainties and contingencies that are difficult to predict and are beyond the control of Huya and DouYu. The financial forecasts may decline or the actual financial results of Huya and DouYu mail fail to meet the forecasted results, which may have an adverse impact on the financial conditions, results of operations and prospects of the combined company.
The Penguin Business’s unaudited carve out financial information included in this proxy statement/prospectus is presented for illustrative purposes only and does not represent the actual financial position or results of operations of the Penguin Business, DouYu or the surviving company following the Reassignment.
The Penguin Business’s unaudited carve out financial information contained in this proxy statement/prospectus is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates and does not represent the actual financial position or results of operations of the Penguin Business prior to the Reassignment or that of DouYu or the surviving company following the Reassignment and the Merger. In addition, the Reassignment and post-Reassignment integration process may give rise to unexpected liabilities and costs, including costs associated with the defense and resolution of Reassignment-related litigation or other claims. Unexpected delays in completing the Reassignment or in connection with the post-Reassignment integration process may significantly increase the related costs and expenses incurred by the Penguin Business and/or DouYu. The actual financial positions and results of operations of the Penguin Business prior to the Reassignment and that of DouYu and the surviving company following the Reassignment and the Merger may be different, possibly materially, from the unaudited carve out financial information included in this proxy statement/prospectus. In addition, the assumptions used in preparing the Penguin Business carve out financial information included in this proxy statement/prospectus may not prove to be accurate and may be affected by other factors, including factors beyond the control of each of the Penguin Business and DouYu.
If the IRS were to successfully challenge the qualification of the Merger as a reorganization under section 368(a) of the Internal Revenue Code, certain adverse tax consequences affecting the holders of DouYu shares and DouYu ADSs who respectively receive Huya Class A shares and Huya ADSs in the Merger may result, including such holders of DouYu shares and DouYu ADSs needing to recognize gain or loss with respect to the DouYu shares and DouYu ADSs surrendered in the Merger.
The Merger is intended to qualify as a reorganization under section 368(a) of the Internal Revenue Code for U.S. federal income tax purposes. If the Merger qualifies as a reorganization under section 368(a) of the Internal Revenue Code and neither Huya nor DouYu is or has been a PFIC, DouYu shareholders will not recognize gain or loss on the exchange of their DouYu shares for Huya Class A shares and DouYu ADS holders will not recognize gain or loss on the exchange of their DouYu ADSs for Huya ADSs, although gain or loss will be recognized upon the receipt of cash in lieu of fractional Huya Class A shares or Huya ADSs. Whether the Merger qualifies as a reorganization within the meaning of section 368(a) of the Internal Revenue Code with respect to
 
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which DouYu shareholders and DouYu ADS holders generally do not recognize gain or loss is uncertain and depends, in part, upon whether either Huya or DouYu is or has been a PFIC. Although neither Huya nor DouYu believes it is a PFIC, because PFIC status is a fact-intensive determination made on an annual basis and that depends on market conditions, no assurance can be given that Huya or DouYu will not be a PFIC.
Huya and DouYu cannot assure DouYu shareholders and DouYu ADS holders that the IRS will agree with the treatment of the Merger as a reorganization under section 368(a) of the Internal Revenue Code. If the IRS successfully challenges the qualification of the Merger as a reorganization under section 368(a) of the Internal Revenue Code, DouYu shareholders and DouYu ADS holders would generally be required to recognize gain or loss with respect to the DouYu shares and DouYu ADSs surrendered in the Merger in an amount equal to the difference between their adjusted tax basis in the surrendered DouYu shares or ADSs and the fair market value, as of the effective date of the Merger, of the Huya Class A shares or Huya ADSs received or to be received in the Merger. Generally, in such event, the tax basis in the Huya Class A shares or Huya ADSs received by DouYu shareholders and DouYu ADS holder would equal their fair market value as of the effective date of the Merger, and the holding period for the Huya Class A shares or Huya ADSs would begin on the day after the Merger.
Tax matters are complicated, and the tax consequences of the Merger to each DouYu shareholder or each DouYu ADS holder may also depend on each holder’s circumstances. DouYu shareholders and DouYu ADS holders are urged to read the discussion under “Special Factors—Tax Consequences of the Merger—United States Federal Income Tax Consequences” beginning on page 96 of this proxy statement/prospectus and to consult their tax advisors for a full understanding of the tax consequences of their participation in the Merger.
The issuance of Huya Class A shares to DouYu shareholders and Huya ADSs to DouYu ADS holders in the Merger will substantially reduce the percentage interests of Huya shareholders.
If the Merger is completed, Huya will issue new Huya Class A shares to DouYu shareholders and new Huya ADSs to DouYu ADS holders. DouYu shareholders before the Merger will own, in the aggregate, approximately 50% of the Huya shares outstanding immediately after the Merger on a fully diluted basis. The issuance of Huya Class A shares to DouYu shareholders and Huya ADSs to DouYu ADS holders in the Merger and the assumption of DouYu RSU Awards will substantially reduce the percentage interests of Huya shareholders.
Risks Related to Huya’s Business
Huya is, and will continue to be, subject to the risks described in “Item 3.D.—Key Information—Risk Factors” of the Huya 2019
20-F,
beginning on page 6, all of which are incorporated by reference into this proxy statement/prospectus.
Risks Related to DouYu’s Business
DouYu is, and will continue to be, subject to the risks described in “Item 3.D.—Key Information—Risk Factors” of the DouYu 2019
20-F,
beginning on page 3, all of which are incorporated by reference into this proxy statement/prospectus.
DouYu and certain of its current and former directors and officers have been named as defendants in several shareholder class action lawsuits, which could have a material adverse impact on DouYu’s business, financial condition, results of operation, cash flows and reputation.
DouYu will have to defend against the putative class actions described in “Important Information Regarding DouYu—Legal Proceedings,” including any appeals of such lawsuits should DouYu’s initial defense be unsuccessful. DouYu is currently unable to estimate the potential loss, if any, associated with the resolution of such lawsuits, if they proceed. DouYu anticipates that it will continue to be a target for lawsuits in the future, including putative class action lawsuits brought by shareholders. There can be no assurance that DouYu will be
 
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able to prevail in its defense or reverse any unfavorable judgment on appeal, and DouYu may decide to settle lawsuits on unfavorable terms. Any adverse outcome of these cases, including any plaintiffs’ appeal of the judgment in these cases, could result in payments of substantial monetary damages or fines, or changes to DouYu business practices, and thus have a material adverse effect on DouYu’s business, financial condition, results of operation, cash flows and reputation. In addition, there can be no assurance that DouYu insurance carriers will cover all or part of the defense costs, or any liabilities that may arise from these matters. The litigation process may utilize a significant portion of DouYu’s cash resources and divert management’s attention from the
day-to-day
operations of DouYu, all of which could harm DouYu’s business. DouYu also may be subject to claims for indemnification related to these matters, and it cannot predict the impact that indemnification claims may have on DouYu’s business or financial results.
Risks Related to Penguin’s Business
The Penguin Business’s limited operating history with a relatively new business model in a relatively new market makes it difficult to evaluate its business and growth prospects.
In 2016, Tencent Holdings commenced its game centric live streaming operation through the establishment of the Penguin Business. The Penguin Business is principally engaged in operating its own live streaming platform, which enables streamers and viewers to interact with each other during live streaming with game live streaming as its primary theme. At the same time, the platform has also extended themes to life and entertainment topics beyond games to cater for users’ growing entertainment demands. The Penguin Business’s growth in the past may not be indicative of its future performance, as its operating results represent a limited size of sample of operational results and may be hard to repeat in the future. Many of the elements of Penguin’s business are evolving. The markets for its live streaming platform and the related products and services are relatively new and rapidly developing and are subject to significant challenges, especially in terms of converting
non-paying
users to paying users, maintaining a stable paying user base and attracting new paying users. Penguin’s business plan relies heavily upon an expanding user base and the resulting increased revenue from live streaming and online advertising, as well as its ability to capitalize on the industry and explore other monetization avenues. The Penguin Business may not succeed in any of these aspects.
The Penguin Business has incurred net losses since inception, and the Penguin Business may continue to incur losses in the future.
The Penguin Business has incurred significant accumulated net losses to date. While the Penguin Business’s future revenue growth will be linked with the realization of the Penguin Business’s monetization strategies, which will be affected by user engagement, streamer retention and product offering, the Penguin Business’s cost-effective growth will rely on improvement of operational efficiency. The Penguin Business’s ability to improve operational efficiency will depend on its ability to maintain stronger bargaining position in contract negotiations with streamers, streamline the Penguin Business’s operation, achieve economies of scale and employ more advanced streaming technologies at lower cost, among other things. The Penguin Business cannot assure you that it will be able to improve its operational efficiency in the future.
If the Penguin Business fails to retain its existing users, keep them engaged or further grow its user base, Penguin’s business, operation, profitability and prospects may be materially and adversely affected.
The size of the Penguin Business’s user base and the level of the Penguin Business’s user engagement are critical to the Penguin Business’s success. The Penguin Business’s main monetization strategies—live streaming, online advertising and others depend on its ability to maintain and increase the size of its user base and user engagement level. If the Penguin Business’s user base becomes smaller or its users become less active, it is probable that they would spend less on the platform’s virtual gifts or visit the Penguin Business’s advertisements less frequently, or access the Penguin Business’s platform less in general. This would in turn drive streamers away from the Penguin Business’s platform, discourage companies from purchasing advertisements on the
 
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Penguin Business’s platform and dissuade game developers and publishers from distributing their games through the Penguin Business’s platform. The Penguin Business’s financial condition would suffer from the consequential decline in revenue, and its business and operating results will be materially and adversely impacted.
The Penguin Business may fail to offer attractive content, in particular popular game content, on the Penguin Business’s platform.
The Penguin Business offers live streaming content with a primary focus on online games. The Penguin Business’s content library is constantly evolving and growing. Game content has been the key component of the Penguin Business’s content offerings since inception. The Penguin Business actively tracks viewership growth and community feedback to identify trending content and encourage its streamers and talent agencies to create content that caters to viewers constantly changing tastes. However, if the Penguin Business fails to expand and diversify its content offerings, identify trending and popular genres, or maintain the quality of its content, it may experience decreased viewership and user engagement, which may materially and adversely affect the Penguin Business’s results of operations and financial conditions.
The Penguin Business largely relies on its streamers to create high-quality and fun live streaming content. The Penguin Business has in place a comprehensive and effective incentive mechanism to encourage streamers and talent agencies to supply content that is attractive to its viewers. Also, talent agencies cooperating with the Penguin Business may guide or influence streamers to live stream content that is well received by the Penguin Business’s viewers. However, if the Penguin Business fails to observe the latest trends and timely guide streamers and talent agencies accordingly, or fail to attract streamers who are capable of creating content based on popular games, or if streamers fail to produce content for trending games, The Penguin Business’s viewer number may decline and the Penguin Business’s financial condition and results of operations may be materially and adversely affected.
Penguin’s business may suffer if it fails to successfully implement its monetization strategies.
The Penguin Business’s monetization model is new and evolving. The Penguin Business’s streaming platform is free to access, and the Penguin Business generates revenues primarily from live streaming and online advertising. As a result, the Penguin Business’s revenue is affected by its ability to increase user engagement and convert
non-paying
users into paying users, which in turn depends on its ability to offer content, virtual gifts, advertisements and other services. The Penguin Business also generates a small portion of its revenue from game distribution, which involves revenue-sharing arrangements with game developers and publishers. If the Penguin Business is not successful in enhancing its ability to monetize its existing services or developing new approaches to monetization, the Penguin Business may not be able to maintain or increase its revenues and profits or recover any associated costs. The Penguin Business monitors market developments and may adjust its monetization strategies accordingly from time to time, which may result in decreases of the Penguin Business’s overall revenue or revenue contributions from some monetization channels. If new or enhanced services fail to engage customers or platform partners, the Penguin Business may fail to generate sufficient revenues to justify its investments, and its business and operating results may suffer as a result.
If the Penguin Business fails to effectively manage its growth and control its periodic spending to maintain such growth, its brand, business and results of operations may be materially and adversely affected.
The Penguin Business has experienced a period of significant growth and expansion that has placed, and continues to place, significant strain on its management and resources. The Penguin Business may encounter difficulties as it establishes and expands its operations, research and development, sales and marketing, and general and administrative capabilities. The Penguin Business cannot assure you that this level of growth will be sustainable or achieved at all in the future. The Penguin Business believes that its continued growth will depend on its ability to attract and retain viewers and streamers, develop an infrastructure to service and support an
 
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expanding body of viewers and streamers, explore new monetization avenues, convert
non-paying
users to paying users, increase user engagement levels and capitalize on the eSports industry. Managing the Penguin Business’s growth will require significant expenditures and the allocation of valuable management resources. If the Penguin Business fails to achieve the necessary level of efficiency in its organization as the Penguin Business grows, its business, operating results and financial condition could be harmed.
The Penguin Business’s content monitoring system may not be effective in preventing misconduct by its platform users and misuse of the Penguin Business’s platform and such misconduct or misuse may materially and adversely impact The Penguin Business’s brand image, business and operating results.
The Penguin Business is a game-centric live streaming platform that provides real-time streaming and interactions. Because the Penguin Business does not have full control over how and what streamers or viewers will use its platform to communicate, the Penguin Business’s platform may be misused by individuals or groups of individuals to engage in immoral, disrespectful, fraudulent or illegal activities. For example, The Penguin Business detects spam accounts through which illegal or inappropriate content is streamed or posted and illegal or fraudulent activities are conducted on a timely basis. The Penguin Business has implemented control procedures to detect and block illegal or inappropriate content and illegal or fraudulent activities conducted through the misuse of its platform, but such procedures may not prevent all such content from being broadcasted or posted or activities from being carried out. The Penguin Business and the public perception of its brand may be materially and adversely affected by misuse of its platform.
In response to any allegations of illegal or inappropriate activities conducted through the Penguin Business’s platform or any negative media coverage about the platform, PRC government authorities may intervene and hold the Penguin Business liable for
non-compliance
with PRC laws and regulations concerning the dissemination of information on the Internet and subject the Penguin Business to administrative penalties or other sanctions. Although the Penguin Business endeavors to ensure that all streamers are in compliance with relevant regulations, it cannot guarantee that all streamers will comply with all the PRC laws and regulations. Therefore, the Penguin Business’s live streaming service may be subject to investigations or subsequent penalties if content displayed on its platform is deemed to be illegal or inappropriate under PRC laws and regulations. As a result, the Penguin Business may suffer and its user base, revenues and profitability may be materially and adversely affected.
Risks Related to an Investment in Huya Class A shares and Huya ADSs
The market price of the Huya ADSs may be affected by factors different from those affecting the price of DouYu ADSs.
If the Merger is successfully completed, DouYu ADS holders will become holders of Huya ADSs and DouYu shareholders will become holders of Huya Class A shares. The businesses of Huya, and its results of operations, as well as the trading price of Huya ADSs, may be affected by factors different from those affecting DouYu’ s results of operations and the trading price of the DouYu ADSs.
The Huya Class A shares and Huya ADSs to be received by DouYu shareholders and DouYu ADS holders, respectively, will have different rights from the DouYu shares and DouYu ADSs.
At the Effective Time, DouYu shareholders will no longer be DouYu shareholders, but will instead become Huya shareholders, and DouYu ADS holders will no longer be DouYu ADS holders, but will instead become Huya ADS holders. While both DouYu and Huya are incorporated in the Cayman Islands, there are certain differences between the rights of DouYu shareholders and Huya shareholders, as well as the rights of DouYu ADS holders and Huya ADS holders.
The rights of DouYu ADS holders are governed by a deposit agreement among DouYu, the DouYu depositary and all holders and beneficial owners of DouYu ADSs, and the rights of Huya ADS holders are
 
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governed by a deposit agreement among Huya, the Huya depositary and all holders and beneficial owners of Huya ADSs. Deutsche Bank Trust Company Americas is the depositary under the Huya Deposit Agreement, while JPMorgan Chase Bank, N.A. is the depositary under the DouYu Deposit Agreement, and there are certain differences between the rights of DouYu ADS holders and the rights of Huya ADS holders under the respective deposit agreements. For more details, please see “Comparison of Rights of Huya and DouYu ADS Holders” beginning on page 191.
For a summary of the differences between DouYu shareholders and Huya shareholders, please see “Comparison of Rights of Huya and DouYu Shareholders” beginning on page 182.
The report of Huya’s independent auditor included in the Huya 2019 20-F was prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board (“PCAOB”) and, as such, you are deprived of the benefits of such inspection. In addition, various legislative and regulatory developments related to
U.S.-listed
China-based companies due to lack of PCAOB inspection and other developments may have a material adverse impact on Huya’s listing and trading in the U.S. and the trading prices of Huya ADSs.
Huya’s auditor is registered with the PCAOB. Pursuant to laws in the United States, the PCAOB has authority to conduct regular inspections over independent registered public accounting firms registered with the PCAOB to assess their compliance with the applicable professional standards. Huya’s auditor is also located in China, a jurisdiction which does not allow the PCAOB to conduct inspections without the approval of the Chinese authorities. As a result, Huya understands that its auditor is not currently inspected by the PCAOB.
In May 2013, the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the China Securities Regulatory Commission (the “CSRC”) and the PRC Ministry of Finance, which established a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by the PCAOB, the CSRC or the PRC Ministry of Finance in the United States and the PRC. The PCAOB continued to discuss with the CSRC and the PRC Ministry of Finance on joint inspections in the PRC of PCAOB-registered audit firms that provide auditing services to Chinese companies that trade on U.S. stock exchanges. On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting the continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, the SEC and the PCAOB issued another joint statement reiterating the greater risks of insufficient disclosures from companies in many emerging markets, including China, compared to those from U.S. domestic companies. In discussing the specific issues related to these risks, the statement again highlighted the PCAOB’s inability to inspect audit work and practices of accounting firms in China with respect to U.S. reporting companies. On June 4, 2020, the U.S. President issued a memorandum ordering the President’s Working Group on Financial Markets, or the PWG, to submit a report to the President within 60 days of the memorandum that includes recommendations for actions that can be taken by the executive branch and by the SEC or the PCAOB on Chinese companies listed on U.S. stock exchanges and their audit firms. On August 6, 2020, the PWG released the report. In particular, with respect to jurisdictions that do not grant the PCAOB sufficient access to fulfill its statutory mandate, or NCJs, the PWG recommended that enhanced listing standards be applied to companies from NCJs for seeking initial listing and remaining listed on U.S. stock exchanges. Under the enhanced listing standards, if the PCAOB does not have access to work papers of the principal audit firm located in a NCJ for the audit of a U.S.-listed company as a result of governmental restrictions, the U.S.-listed company may satisfy this standard by providing a co-audit from an audit firm with comparable resources and experience where the PCAOB determines that it has sufficient access to the firm’s audit work papers and practices to inspect the co-audit. The report recommended a transition period until January 1, 2022 before the new listing standards apply to companies already listed on U.S. stock exchanges. Under the PWG recommendations, if Huya fails to meet the enhanced listing standards before January 1, 2022, it could face de-listing from the NYSE, deregistration from the SEC and/or other risks, which may materially and adversely affect, or effectively terminate, the Huya ADSs trading in the United States. There were recent media reports about the SEC’s proposed rulemaking in this regard. It is uncertain whether the PWG recommendations will be adopted, in whole or in part, and the impact of any new rule on Huya cannot be estimated at this time.
 
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This lack of the PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of Huya’s independent registered public accounting firm. As a result, Huya and investors in the Huya Class A shares 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 Huya’s 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 Huya ADSs to lose confidence in Huya’s audit procedures and reported financial information and the quality of Huya’s financial statements.
On December 18, 2020, the Holding Foreign Companies Accountable Act was enacted, which in essence requires the SEC to prohibit securities of any foreign companies from being listed on U.S. securities exchanges or traded “over-the-counter” if a company retains a foreign accounting firm that cannot be inspected by the PCAOB for three consecutive years, beginning in 2021. The enactment of the Holding Foreign Companies Accountable Act and any additional rulemaking efforts to increase U.S. regulatory access to audit information in China could cause investor uncertainty for affected SEC registrants, including Huya, the market price of Huya ADSs could be materially adversely affected, and Huya’s securities could be delisted or prohibited from being traded “over-the-counter” if Huya is unable to meet the PCAOB inspection requirement in time.
 
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FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the information incorporated by reference into this proxy statement/prospectus include certain forward-looking statements. In addition, in the future Huya, DouYu, and others on their behalf, may make statements that constitute forward-looking statements. Such forward-looking statements can be identified by the use of forward-looking terminology such as “will,” “believes,” “intends,” “plans,” or “expects,” or similar expressions, or by express or implied discussions regarding the Merger, the future financial results or business prospects of Huya, DouYu or any of their respective subsidiaries or consolidated affiliated entities or the potential growth opportunities or expected benefits from the Merger; or by discussions of strategies, plans, expectations or intentions. You should not place undue reliance on these statements.
Such forward-looking statements reflect the current views of Huya and/or DouYu regarding future events, and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. There can be no assurance that Huya, DouYu or any of their respective subsidiaries or consolidated affiliated entities will achieve any particular financial results, or that the Merger will be completed or the expected benefits of the Merger will be achieved in a timely manner or at all. In particular, management’s expectations could be affected by, among other things: the live streaming industry or the game industry in China may not grow as quickly as expected; the outbreak of
COVID-19;
failure to generate sufficient revenues to offset research and development expenses, bandwidth costs, and costs and expenses to retain and attract broadcasters grow user base and generally expand business operations; unexpected regulatory actions or delays or government regulation generally; uncertainties regarding future demand for the products and services of Huya or DouYu; unforeseen adverse consequences of the proposed Merger, such as making it more difficult to maintain relationships with key employees; and the impact that the foregoing factors could have on the values attributed to the assets and liabilities of Huya, DouYu and any of their respective subsidiaries or consolidated affiliated entities as recorded on their consolidated balance sheets. Some of these factors are discussed in more detail under “Risk Factors” in this proxy statement/prospectus and in the Huya 2019
20-F,
including under “Item 3.D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects” and in the DouYu 2019
20-F,
including under “Item 3.D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects.” Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this proxy statement/prospectus or in the documents incorporated herein by reference as anticipated, believed, estimated or expected.
Huya and DouYu do not as a matter of course make public forecasts as to their respective future earnings or other results other than previously providing estimated ranges of their expected financial results for as much as one quarter in advance in their respective regular earnings press releases. Both Huya and DouYu are very cautious of making financial forecasts for any extended period given the unpredictability of the underlying assumptions and estimates inherent in preparing financial forecasts. However, in connection with the negotiation of the Merger and as described in more detail in “Special Factors—Certain Financial Forecasts” in this proxy statement/prospectus, beginning on page 72, Huya and DouYu provided to each other, as well to the independent financial advisors of Huya Special Committee and DouYu Special Committee, certain
non-public,
internal financial forecasts that the managements of Huya and DouYu prepared regarding their respective company’s future operations. The internal financial forecasts were not prepared with a view toward public disclosure, nor were they prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to financial forecasts, but, in the view of the management of Huya and DouYu, were prepared on a reasonable basis, reflecting the best currently available estimates and judgments, and presenting, to the best of their respective knowledge and belief, the expected course of action and the expected future financial performance of Huya and DouYu, respectively. However, this information is not fact and should not be relied upon as being necessarily predictive of actual future results.
Neither the independent auditor of Huya and DouYu, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the financial forecasts of Huya and DouYu,
 
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nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the financial forecasts of Huya and DouYu. The unaudited condensed consolidated financial statements of Huya and DouYu included in this proxy statement/prospectus relate to Huya’s and DouYu’s historical financial information, respectively, and do not extend to the financial forecasts of Huya and DouYu and should not be read to do so.
Huya and DouYu caution against placing undue reliance on forward-looking statements, which reflect their current beliefs and are based on information currently available to them as of the date a forward-looking statement is made. Forward-looking statements set forth or incorporated by reference herein speak only as of the date of this proxy statement/prospectus or the date of the document incorporated by reference into this proxy statement/prospectus, as the case may be, and will only be updated in this proxy statement/prospectus or the document incorporated by reference into this proxy statement/prospectus, as the case may be, to the extent required by applicable federal securities law. Any corrections or revisions and other important assumptions and factors that could cause actual results to differ materially from forward-looking statements, including discussions of significant risk factors, may appear in Huya’s or DouYu’s public filings with the SEC, which are accessible at www.sec.gov, and which you are advised to consult. For additional information, please see the section titled “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference” beginning on page 199 and page 200, respectively.
 
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE EXTRAORDINARY GENERAL MEETING
The following are some questions that you may have regarding the Merger and the EGM and brief answers to those questions. Huya and DouYu urge you to read carefully the entire proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the Merger and the EGM. Additional important information is also contained in the documents incorporated by reference into this proxy statement/prospectus. Please see “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference” on page 199 and page 200, respectively.
 
Q:
What is this document and why did I receive the proxy card?
 
A:
You received a proxy card and were directed to this document because, as of the DouYu share record date or the DouYu ADS record date, you owned DouYu shares or DouYu ADSs, respectively. Merger Sub will be merged with and into DouYu, with DouYu continuing as the surviving company and as a wholly owned subsidiary of Huya, pursuant to the terms of a Merger Agreement and Plan of Merger that is described in this proxy statement/prospectus. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A, and a copy of the Plan of Merger is attached as Exhibit A to the Merger Agreement.
In order to complete the Merger, DouYu shareholders must vote to authorize, approve and adopt the Merger Agreement and Plan of Merger. DouYu is holding the EGM to obtain this shareholder approval.
This proxy statement/prospectus contains important information about DouYu, Huya, Merger Sub, the EGM and other background information so that you can make an informed investment decision, and you should read this information carefully. If you are a DouYu shareholder, the proxy card for the EGM of DouYu shareholders which was mailed to you and which was filed as exhibit 99.3 to Huya’s registration statement on Form
F-4,
of which this proxy statement/prospectus is a part, allows you to vote your DouYu shares without attending the EGM in person, and if you are a DouYu ADS holder, the ADS voting instruction card which was mailed to you and which was filed as exhibit 99.4 to Huya’s registration statement on Form
F-4,
of which this proxy statement/prospectus is a part, allows you to vote your DouYu ADSs without needing to convert your DouYu ADSs into DouYu shares and attending the EGM in person.
This proxy statement/prospectus constitutes both a proxy statement of DouYu and a prospectus of Huya. It is a proxy statement because the DouYu Board is soliciting proxies from its shareholders. It is a prospectus of Huya with respect to the Huya Class A shares to be issued to DouYu shareholders in the Merger pursuant to the Merger Agreement and the Huya ADSs to be issued to DouYu ADS holders in the Merger pursuant to the Merger Agreement.
 
Q:
What is the Merger?
 
A:
The Merger is a
stock-for-stock
merger between DouYu and Huya. Once the closing conditions under the Merger Agreement have been satisfied or waived, and upon registration of the Plan of Merger with the Cayman Islands Registrar of Companies, Merger Sub will merge with and into DouYu, with DouYu continuing as the surviving company after the Merger. If the Merger is completed, DouYu will continue its operations as a privately held company owned solely by Huya, and as a result of the Merger, the DouYu ADSs will no longer be listed on NASDAQ, DouYu will cease to be a publicly traded company, the DouYu ADSs and the underlying DouYu shares will be deregistered under the Exchange Act, and the DouYu ADS program will terminate.
 
Q:
What will I receive in the Merger if I own DouYu shares or DouYu ADSs (that are not Excluded DouYu Shares)?
 
A:
As described in more detail under “The Merger Agreement and Plan of Merger and the Merger” below, at the Effective Time, (1) each outstanding DouYu share will be canceled in consideration of the right to
 
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  receive 7.30 Huya Class A shares, and (2) each outstanding DouYu ADS will be canceled in consideration of the right to receive 0.730 Huya ADS; provided that the Excluded DouYu Shares shall automatically be canceled and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor, and the Purported Dissenters Shares will be canceled for the Per Share Merger Consideration, without interest, or appraised value under the Cayman Companies Law.
 
Q:
Can the value of the Merger Consideration change between now and the time the Merger is completed?
 
A:
The value of Huya Class A shares and Huya ADSs to be delivered to DouYu shareholders and DouYu ADS holders, respectively, under the Merger Agreement will fluctuate based on the trading price for Huya ADSs on the NYSE. Regardless of the trading price of Huya’s ADSs on the NYSE on the effective date of the Merger, DouYu shareholders will receive 7.30 Huya Class A share for each DouYu share that they own (“Per Share Merger Consideration”) and DouYu ADS holders will receive 0.730 Huya ADS for each DouYu ADS that they own (“Per ADS Merger Consideration,” together with the Per Share Merger Consideration, the “Merger Consideration”). The market value of the Huya Class A shares and Huya ADSs that DouYu shareholders and DouYu ADS holders will respectively receive in the Merger will increase or decrease as the trading price of Huya ADSs increases or decreases, and may be different at the time the Merger is completed than it was at the time the Merger Agreement was signed or will be at the time of DouYu’s EGM to approve the Merger. The market price of Huya ADSs could be lower at any time prior to the completion of the Merger or at any time thereafter than it was at the date of the Merger Agreement. Please see the section titled “Risk Factors” beginning on page 18 for more information on the risks involved in investing in Huya Class A shares and ADSs.
As of November 9, 2020, the closing price of Huya ADSs on the NYSE was $21.02 per ADS. DouYu shareholders are urged to obtain current trading prices for Huya ADSs on the website of the New York Stock Exchange at http://www.nyse.com/ before you vote. This website is not incorporated by reference in this proxy statement/prospectus.
 
Q
What are the material tax consequences of the Merger to DouYu shareholders and DouYu ADS holders?
 
A:
Please see “Special Factors—Tax Consequences of the Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 97 for a summary of the U.S. federal income tax consequences of the Merger, “PRC Income Tax Consequences” beginning on page 99 for a summary of the PRC income tax consequences of the Merger, and “Cayman Islands Tax Consequences” on page 101 for a summary of the Cayman Islands tax consequences of the Merger. You should consult with your own tax advisor for a full understanding of how the Merger will affect your U.S. federal, state, local, foreign income and other taxes.
 
Q:
How will DouYu’s RSU awards be treated in the Merger?
 
A:
Each award of restricted share units (“DouYu RSU Award”) granted pursuant to the Amended and Restated Restricted Share Unit Scheme of DouYu (the “DouYu Restricted Share Unit Scheme”) that is outstanding and unvested and held directly by the applicable grantee immediately prior to the Effective Time shall be assumed by Huya and converted into a restricted share unit award (an “Assumed RSU Award”) with respect to a number of Huya Class A shares equal to the product obtained by multiplying (i) the applicable number of DouYu shares subject to such DouYu RSU Award immediately prior to the Effective Time by (ii) 7.30, rounded to the nearest whole share. Each Assumed RSU Award shall continue to have, and shall be subject to, the same terms and conditions as applied to the corresponding DouYu RSU Award immediately prior to the Effective Time (taking into account any changes thereto by reason of the Merger Agreement or the Merger), except for changes made as appropriate to effectuate the administration of the Assumed RSU Awards and certain other changes agreed by DouYu.
 
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Each DouYu RSU Award that is outstanding and vested and held directly by the applicable grantee immediately prior to the Effective Time shall be canceled in exchange for the right to receive a number of Huya Class A shares equal to the product obtained by multiplying (i) the applicable number of DouYu shares subject to such DouYu RSU Award immediately prior to the Effective Time by (ii) 7.30, rounded to the nearest whole share.
 
Q:
What is an American depositary share (ADS) and American depositary receipt (ADR)?
 
A:
An American depositary share (“ADS”) is an ownership interest in the securities of a
non-U.S.
company deposited at a custodian bank, as agent of the depositary. ADS holders hold their ADSs either directly or indirectly through a broker or other financial institution. If you hold ADSs directly, either represented by ADSs in book-entry form on the depositary’s direct registration system or represented by American depositary receipts (“ADRs”) that you hold in certificated form, you are an ADR holder. JPMorgan Chase Bank, N.A. is the depositary of DouYu’s ADS program and Deutsche Bank Trust Company Americas is the depositary of Huya’s ADS program.
Each Huya ADS represents one Huya Class A share and each DouYu ADS represents 1/10 DouYu share. For a comparison of the material differences between the rights of DouYu ADS holders and the rights of Huya ADS holders under the respective deposit agreement, please see “Comparison of Rights of Huya and DouYu ADS Holders” beginning on page 191.
 
Q:
If the Merger is completed, will the Huya ADSs to be delivered under the Merger Agreement be “listed” for trading?
 
A:
Yes. Huya ADSs are listed on the NYSE under the symbol “HUYA.” It is a condition to the completion of the Merger that the Huya ADSs to be delivered to DouYu ADS holders in connection with the Merger be approved for listing on the NYSE, subject to official notice of issuance.
 
Q:
After the Merger is completed, how will I receive the Merger Consideration for my DouYu shares?
 
A:
Within five business days after the Effective Time, an exchange agent appointed by Huya (subject to DouYu’s prior approval) will mail to each registered holder of the DouYu shares (other than holders of Excluded DouYu Shares or Purported Dissenters Shares) (1) a form of letter of transmittal specifying how the delivery of the Merger Consideration to registered holders of the DouYu shares will be effected and (2) instructions for effecting the surrender of share certificates in exchange for the applicable Merger Consideration for each DouYu share. DouYu shareholders will receive the Merger Consideration for their DouYu shares from the exchange agent after complying with these instructions. Do not send in your share certificates with your proxy card.
 
Q:
After the Merger is completed, how will I receive the Merger Consideration for my DouYu ADSs?
 
A:
Within five business days after the Effective Time, the surviving company and the exchange agent will mail to the DouYu depositary (1) a form of letter of transmittal specifying how the delivery of the Merger Consideration to the DouYu depositary will be effected and (2) instructions for effecting the surrender of all certificates representing DouYu ADSs. The DouYu depositary will be entitled to receive the Per ADS Merger Consideration, without interest, for each DouYu share held by the DouYu depositary in respect of which a DouYu ADS has been issued (the “Aggregate ADS Payment”), provided that the DouYu depositary will be required to surrender such certificates it holds to the exchange agent, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and the certificates so surrendered will forthwith be canceled.
Within five business days following the payment of the Aggregate ADS Payment, the surviving company and the exchange agent will cause the DouYu depositary to mail to each registered holder of DouYu ADSs
 
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(other than holders of Excluded DouYu Shares) (1) a form of letter of transmittal specifying how the delivery of the Merger Consideration to the registered holders of the DouYu ADSs will be effected and (2) instructions for effecting the surrender of ADRs evidencing DouYu ADSs. Each holder registered on DouYu’s ADR register shall be entitled to receive the Per ADS Merger Consideration, without interest, for each DouYu ADS canceled at the Effective Time multiplied by the number of DouYu ADSs held by such holder, provided that each holder of an ADR shall be required to surrender such ADR to the DouYu depositary together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and the ADRs so surrendered shall forthwith be canceled pursuant to the DouYu Deposit Agreement.
Each ADR in respect of such canceled DouYu ADS shall be deemed at any time after the Effective Time to represent only the right to receive the Per ADS Merger Consideration, without interest. DouYu ADS holders shall pay the DouYu ADS cancellation fee payable under the DouYu Deposit Agreement to the DouYu depositary and the Huya ADS issuance fee payable to the Huya depositary. The DouYu Deposit Agreement provides that in the event of the cancellation of DouYu ADSs, the holder thereof will pay to the DouYu depositary a US$0.05 cancellation fee for each canceled DouYu ADS. The Huya Deposit Agreement provides that in the event of the issuance of Huya ADSs, any person to whom such Huya ADSs are issued will pay to the Huya depositary a US$0.05 issuance fee for each Huya ADS issued, which equals to US$0.0365 per DouYu ADS, or US$36.50 for every 1,000 DouYu ADSs, surrendered to the DouYu depositary in exchange for Huya ADSs.
If your DouYu ADSs are held in “street name” with The Depositary Trust Company (the clearance and settlement system for the DouYu ADSs) by your broker, bank or other nominee, you will not be required to take any action to receive the Per ADS Merger Consideration to which you are entitled as the DouYu depositary will arrange for the surrender of the DouYu ADSs and the remittance of the Per ADS Merger Consideration with The Depository Trust Company for distribution to your broker, bank or nominee on your behalf. If you have any questions concerning the receipt of the Per ADS Merger Consideration, please contact your broker, bank or nominee.
 
Q:
When will I receive the Merger Consideration?
 
A:
Assuming the Merger is completed, registered holders of DouYu shares will receive the Per Share Merger Consideration as soon as practicable following their compliance with the instructions set forth in the letter of transmittal received from the exchange agent, including the surrender of share certificates.
Assuming the Merger is completed, registered holders of DouYu ADSs will receive the Per ADS Merger Consideration as soon as practicable following their compliance with the instructions set forth in the letter of transmittal received from the DouYu depositary, including the surrender by such DouYu ADS holder of any DouYu ADRs evidencing their DouYu ADSs.
If your DouYu ADSs are held in “street name” with The Depositary Trust Company by your broker, bank or other nominee, the DouYu depositary will arrange for the surrender of the DouYu ADSs and the remittance of the Per ADS Merger Consideration with The Depository Trust Company for distribution to your broker, bank or nominee on your behalf.
 
Q:
Will I receive fractional interests in Huya Class A shares or Huya ADSs?
 
A:
No fractional Huya Class A shares or Huya ADSs will be issued as Merger Consideration. The exchange agent will (1) receive all Huya ADSs not used for share exchange in the Merger because of the existence of fractional Huya Class A shares or Huya ADSs and (2) sell such Huya ADSs on behalf of the holders of fractional Huya Class A shares or Huya ADSs on the NYSE and pass on the proceeds to such holders of the DouYu shares and DouYu ADSs in cash.
If you are a beneficial owner of DouYu ADSs and your DouYu ADSs are held in “street name” with The Depositary Trust Company by a broker or custodian, you should consult with your broker or custodian as to whether or not you may receive fractional interests in Huya ADSs.
 
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Q:
Will I have to pay brokerage commissions or depositary fees?
 
A:
You will not have to pay brokerage commissions as a result of the exchange of your DouYu shares for Huya Class A shares in the Merger if your DouYu shares are registered in your name in the DouYu share register. The DouYu Deposit Agreement provides that in the event of the cancellation of the DouYu ADSs the holder thereof will pay to the DouYu depositary a US$0.05 cancellation fee, and the registered holders of DouYu ADSs shall pay such US$0.05 ADS cancellation fee for each DouYu ADS that Huya acquires from him or her in the Merger. In addition, each DouYu ADS holder will be required to pay to the Huya depositary an ADS issuance fee of US$0.05 per Huya ADS to be issued, which equals to US$0.0365 per DouYu ADS, or US$36.50 for every 1,000 DouYu ADSs, surrendered to the DouYu depositary in exchange for Huya ADSs. If your DouYu ADSs are held through a bank, broker or a custodian linked to a stock exchange, you should consult with them as to whether or not they charge any brokerage commissions, transaction fees or service charges in connection with the Merger.
 
Q:
When and where will the EGM be held?
 
A:
The EGM will take place on                , 2021, beginning at                local time at 7F, Building 2, Riverside International Plaza, 1062 Yangshupu Road, Yangpu District, Shanghai 200082, People’s Republic of China.
 
Q:
What matters will be voted on at the EGM?
 
A:
You will be asked to consider and vote on the following resolutions:
 
   
as a special resolution, to authorize, approve and adopt the Merger Agreement and the Plan of Merger and the transactions contemplated by the Merger Agreement and the Plan of Merger, including the Merger and upon the Merger becoming effective, the amendment and restatement of the fourth amended and restated memorandum and articles of association of DouYu (as the surviving company) in the form attached as Appendix II to the Plan of Merger and the amendment of the authorized share capital of DouYu (as the surviving company) from US$100,000 divided into 500,000,000 ordinary shares of a par value of US$0.0001 per share and 500,000,000 shares of a par value of US$0.0001 per share as the board of directors may determine, to US$100,000 divided into 1,000,000,000 ordinary shares of a par value of US$0.0001 each as set forth in the Plan of Merger; or
 
   
as an ordinary resolution, to instruct the chairman of the EGM to adjourn the EGM in order to allow DouYu to solicit additional proxies in favor of the approval of the Merger and the authorization, approval and adoption of the Merger Agreement and the Plan of Merger in the event that there are insufficient proxies received to authorize, approve and adopt the Merger Agreement and the Plan of Merger.
 
Q:
What vote of DouYu shareholders is required to approve the Merger Agreement and the Plan of Merger?
 
A:
In order for the Merger to be completed, the Merger Agreement must be approved by a special resolution of DouYu passed by an affirmative vote of shareholders representing
two-thirds
or more of the DouYu shares present and voting in person or by proxy as a single class at the EGM authorizing, approving and adopting the Merger Agreement and the Plan of Merger. If this vote is not obtained, the Merger will not be completed.
As of October 31, 2020, there were 32,152,393 DouYu shares issued and outstanding and entitled to vote. As of the same date, the Tencent Entities beneficially owned 12,068,104 DouYu shares, representing 37.5% of the issued and outstanding DouYu shares, and has advised the DouYu Board that it intends to vote all of its DouYu shares in favor of the authorization, approval and adoption of the Merger Agreement and the Plan of Merger.
 
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Huya, Nectarine and, solely for the limited purposes set forth therein, DouYu entered into voting agreements dated as of October 12, 2020, with each of Mr. Chen and Mr. Zhang, the chief executive officer and
co-chief
executive officer of DouYu, respectively, pursuant to which each of Mr. Chen and Mr. Zhang has agreed to vote 4,800,629 DouYu shares and 651,239 DouYu shares, respectively, beneficially owned by them, representing in total 17.0% of the issued and outstanding DouYu shares as of October 31, 2020, in favor of the authorization, approval and adoption of the Merger Agreement and the Plan of Merger.
 
Q:
What vote of DouYu shareholders is required to approve the proposal to adjourn the EGM, if necessary, to solicit additional proxies?
 
A:
The proposal to adjourn the EGM must be approved by an ordinary resolution of DouYu passed by a majority of the votes cast by such shareholders of DouYu as, being entitled to do so, vote in person or by proxy as a single class at the DouYu EGM. Each DouYu share is entitled to one vote.
 
Q:
Who is entitled to vote at the EGM?
 
A:
The DouYu share record date is                , 2021 (New York City time) and the DouYu ADS record date is the close of business on                , 2021 (New York City time). Holders of DouYu shares on the DouYu share record date are entitled to attend and vote at the EGM, and holders of DouYu ADSs on the DouYu ADS record date are entitled to instruct the DouYu depositary how to vote the DouYu shares underlying their DouYu ADSs at the EGM. Holders of DouYu shares may appoint a proxy holder to vote on their behalf, and holders of DouYu ADSs may instruct the DouYu depositary how to vote the DouYu shares underlying their ADSs or may appoint a proxy holder to instruct the DouYu depositary how to vote on their behalf. Shareholders entered in the register of members of DouYu at the close of business on                , 2021 (New York City time) will receive the proxy card directly from DouYu, and DouYu ADS holders of record at the close of business on                 , 2021 (New York City time) will receive the ADS voting instruction card from the DouYu depositary.
 
Q:
Who is entitled to participate in the EGM?
 
A:
Only DouYu shareholders registered in the register of members of DouYu as of the DouYu share record date or their proxy holders are entitled to participate in the EGM or any adjournment thereof, unless they sell their DouYu shares before                , 2021. DouYu ADS holders themselves may not participate in the EGM. DouYu ADS holders who wish to attend the EGM must cancel their DouYu ADSs and become registered as a DouYu shareholder in DouYu’s register of members prior to                , 2021, the DouYu share record date.
 
Q:
What constitutes a quorum for the EGM?
 
A:
The presence, in person or by proxy, of one or more shareholders holding shares which carry in aggregate not less than an aggregate of
one-third
of all votes attaching to all DouYu shares in issue and entitled to vote at the EGM, on the DouYu share record date, will constitute a quorum for the EGM.
 
Q:
When do you expect the Merger to be completed?
 
A:
We are working toward completing the Merger as quickly as possible and currently expect the Merger to close in the first half of 2021. In order to complete the Merger, we must obtain shareholder approval of the Merger at the EGM and the other closing conditions under the Merger Agreement must be satisfied or waived in accordance with the Merger Agreement.
 
Q:
What happens if the Merger is not completed?
 
A:
If the DouYu shareholders do not authorize, approve and adopt the Merger Agreement and the Plan of approve the transactions contemplated by the Merger Agreement and the Plan of Merger, including the
 
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  Merger, or if the Merger is not completed for any other reason, the DouYu shareholders and DouYu ADS holders will not receive any payment for their respective DouYu shares and DouYu ADSs pursuant to the Merger Agreement and the holders of any DouYu RSU Awards will not receive any Huya restricted share units pursuant to the Merger Agreement. In addition, DouYu will remain a publicly traded company. The DouYu ADSs will continue to be listed and traded on NASDAQ, provided that DouYu continues to meet NASDAQ’s listing requirements. In addition, DouYu will remain subject to SEC reporting obligations. Therefore, DouYu shareholders and DouYu ADS holders will continue to be subject to similar risks and opportunities as they currently are with respect to their ownership of DouYu shares and DouYu ADSs.
Under specified circumstances in which the Merger Agreement is terminated, DouYu may be required to pay Huya a termination fee of $44 million or $177 million, which is the sole and exclusive remedy of Huya against DouYu for any loss or damage incurred as a result of any matters forming the basis for termination of the Merger Agreement. For more information, see “The Merger Agreement and Plan of Merger—Termination Fee” beginning on page 156.
 
Q:
Are there any risks in the Merger that I should consider?
 
A:
Yes. There are risks associated with all business combinations, including the Merger. These risks are discussed in more detail in the section titled “Risk Factors” beginning on page 18.
 
Q:
How do I vote if my DouYu shares are registered in my name?
 
A:
If DouYu shares are registered in your name (that is, you do not hold ADSs) as of the DouYu share record date, you should simply indicate on your proxy card how you want to vote, sign and date the proxy card, and mail the proxy card in the return envelope as soon as possible but in any event at least 48 hours before the time of the EGM so that your DouYu shares will be represented and may be voted at the EGM.
Alternatively, you can attend the EGM and vote in person. If you decide to sign and send in your proxy card, and do not indicate how you want to vote, the DouYu shares represented by your proxy will be voted FOR the proposal to authorize, approve and adopt the Merger Agreement and the Plan of Merger and the transactions contemplated by the Merger Agreement and the Plan of Merger, including the Merger, and FOR the proposal to instruct the chairman of the EGM to adjourn the EGM in order to allow DouYu to solicit additional proxies in favor of the authorization, approval and adoption of the Merger Agreement and the Plan of Merger in the event that there are insufficient proxies received to authorize, approve and adopt the Merger Agreement and Plan of Merger, unless you appoint a person other than the chairman of the meeting as proxy, in which case the DouYu shares represented by your proxy card will be voted (or not submitted for voting) as your proxy determines. If your DouYu shares are held by your broker, bank or other nominee, please see below for additional information.
 
Q:
How do I vote if I hold DouYu ADSs?
 
A:
If you own DouYu ADSs as of the close of business on                , 2021 (New York City time) and have not cancelled your DouYu ADSs by the time and date as described in the paragraph below and elsewhere herein, you cannot attend or vote at the EGM directly because the DouYu shares underlying the DouYu ADSs are registered in the name of JPMorgan Chase Bank, N.A., as depositary for the benefit of holder of ADRs and not in your name, but you may instruct the DouYu depositary as depositary under the DouYu Deposit Agreement how to vote the shares underlying your ADSs by completing and signing the ADS voting instruction card and returning it in accordance with the instructions printed on it as soon as possible but, in any event, so as to be received by the DouYu depositary no later than 12:00 p.m. New York City time on                , 2021. The DouYu depositary shall endeavor, insofar as practicable, to vote or cause to be voted the shares represented by your DouYu ADSs in accordance with your voting instructions. If the DouYu depositary timely receives voting instructions from an ADS holder which fails to specify the manner in which the DouYu depositary is to vote the shares represented by DouYu ADSs held by such ADS holder,
 
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  no vote with respect to such ADS holder will be counted, unless such DouYu ADS holder indicates in their voting instructions that they are appointing a person designated by DouYu as his or her proxy, in which case the DouYu shares underlying the DouYu ADS represented by that DouYu ADS voting instruction card will be voted by the DouYu proxy FOR the authorization, approval and adoption of the Merger Agreement and the Plan of Merger and the other transactions contemplated thereby, including the Merger, and FOR the approval of the proposal to instruct the chairman of the EGM to adjourn the EGM in order to allow DouYu to solicit additional proxies in favor of the authorization, approval and adoption of the Merger Agreement and the Plan of Merger in the event that there are insufficient proxies received to authorize, approve and adopt the Merger Agreement and the Plan of Merger.
Alternatively, you may vote at the EGM if you cancel your DouYu ADSs and become a holder of the DouYu shares underlying such cancelled DouYu ADSs by the close of business on                , 2021 (New York City time), the DouYu share record date. If you hold your DouYu ADSs through a financial intermediary such as a broker, you must contact and rely on the procedures of the financial intermediary through which you hold your ADSs if you wish to vote. If your DouYu ADSs are held by your broker, bank or other nominee, see below. If you wish to cancel your DouYu ADSs, you need to make arrangements with the DouYu depositary, provide the DouYu depositary with delivery instructions for the DouYu shares underlying your cancelled ADSs (name and address of person who will be the registered holder of DouYu shares), pay the fees and expenses required to be paid under the DouYu Deposit Agreement to the DouYu depositary for such surrender and cancellation (US$0.05 per DouYu ADS to be canceled) and related expenses and taxes (such as stamp taxes and stock transfer taxes) and follow the other procedures required pursuant to the DouYu Deposit Agreement and described herein, sufficiently in advance to become a registered holder of the DouYu shares underlying your cancelled DouYu ADSs by the close of business on the DouYu share record dated on                 , 2021 (New York City time). If you hold your DouYu ADSs in a brokerage, bank or nominee account, please contact your broker, bank or nominee to find out what actions you need to take to instruct the broker, bank or nominee to cancel the ADSs on your behalf. Upon cancellation of the DouYu ADSs, the depositary bank will arrange for JPMorgan Chase Bank, N.A., Hong Kong Branch, the custodian holding the DouYu shares, to transfer the DouYu shares to DouYu’s share register. If you cancel your DouYu ADSs and vote your DouYu shares at the EGM, any instruction to the DouYu depositary on how to vote those DouYu ADSs will be disregarded.
Each holder of DouYu ADSs is solely responsible for the forwarding of voting notices and the ADS voting instruction card to the beneficial owner of the DouYu ADSs registered in such DouYu ADS holder’s name. There is no guarantee that holders and beneficial owners of DouYu ADSs generally or any holder or beneficial owner of DouYu ADSs in particular will receive the notices and ADS voting instruction card described above with sufficient time to enable such holder or beneficial owner of DouYu ADSs to return any voting instructions to the DouYu depositary in a timely manner. Under the DouYu Deposit Agreement, the DouYu depositary and its agents are not responsible for any failure to carry out any instructions to vote any of the DouYu shares underlying the DouYu ADSs, for the manner in which any voting instructions are given, including instructions to give a discretionary proxy to a person designated by DouYu, for the manner in which any vote is case, including, without limitation, any vote cast by a person to whom the DouYu depositary is instructed to grant a discretionary proxy, or for the effect of any such vote.
 
Q:
If my DouYu ADSs are held in a brokerage account, will my broker vote my DouYu ADSs on my behalf?
 
A:
Your broker, bank or other nominee will only instruct the DouYu depositary to vote the DouYu shares underlying your DouYu ADSs on your behalf if you instruct it to do so. Therefore, it is important that you promptly follow the directions provided by your broker, bank or nominee regarding how to instruct it to instruct the Depositary to vote the DouYu shares underlying your DouYu ADSs. If you do not instruct your broker, bank or other nominee to instruct the Depositary how to vote the DouYu shares underlying your DouYu ADSs that it holds, those DouYu ADSs and the underlying DouYu shares may not be voted.
 
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Q:
What will happen if I abstain from voting or fail to vote on the proposal to authorize and approve the Merger Agreement?
 
A:
DouYu ADS holders and DouYu shareholders who abstain from voting will not have their votes counted, and DouYu shareholders who fail to cast their vote in person or by proxy will not have their votes counted.
 
Q:
May I change my vote?
 
A:
If your DouYu shares are registered in your name, you may change your vote in one of three ways:
first, you may revoke a proxy by written notice of revocation given to the chairman of the EGM before the EGM commences. Any written notice revoking a proxy should be sent to 7F, Building 2, Riverside International Plaza, 1062 Yangshupu Road, Yangpu District, Shanghai 200082, People’s Republic of China;
second, you may complete, date and submit a new proxy card bearing a later date than the proxy card sought to be revoked to DouYu no less than 48 hours prior to the EGM; or
third, you may attend the EGM and vote in person. Attendance, by itself, will not revoke a proxy. It will only be revoked if the shareholder actually votes at the EGM.
Holders of DouYu ADSs may revoke their voting instructions by notification to the DouYu depositary in writing at any time prior to 12:00 p.m. New York City time on                , 2021. A holder of DouYu ADSs can do this in one of two ways:
first, a holder of DouYu ADSs can revoke its voting instructions by written notice of revocation timely delivered to the DouYu depositary; or
second, a holder of DouYu ADSs can complete, date and submit a new ADS voting instruction card to the DouYu depositary bearing a later date than the ADS voting instruction card sought to be revoked.
If you hold your DouYu ADSs through a broker, bank or nominee and you have instructed your broker, bank or nominee to give ADS voting instructions to the DouYu depositary, you must follow the directions and procedures of your broker, bank or nominee to change those instructions.
 
Q:
What should I do if I receive more than one set of voting materials?
 
A:
You may receive more than one set of voting materials, including multiple proxy cards or ADS voting instruction cards. For example, if you hold your DouYu ADSs in more than one brokerage account, you will receive a separate ADS voting instruction card for each brokerage account in which you hold DouYu ADSs. If you are a DouYu shareholder of record and/or a DouYu ADS holder and your DouYu shares and/or DouYu ADSs, respectively, are registered in more than one name, you will receive more than one proxy card. Please submit each proxy card that you receive.
 
Q:
If I hold certificated DouYu shares, should I send in my share certificates now?
 
A:
No. Promptly after the Merger is completed, each DouYu shareholder of record as of the time of the Merger will be sent written instructions for exchanging their share certificates for the Per Share Merger Consideration. Please do not send your share certificates now.
All holders of uncertificated DouYu shares and DouYu ADSs will automatically receive the Per Share Merger Consideration or Per ADS Merger Consideration to which they are entitled as soon as practicable after the Merger is completed without any further action required on the part of such holders.
 
Q:
What happens if I sell my Shares or ADSs before the EGM?
 
A:
The record date for the EGM is earlier than the date of the EGM and the Effective Time. If you transfer your shares or ADSs after the applicable record date, but before the date of the EGM, unless the transferee
 
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  requests a proxy, you will retain your right to vote at such EGM, but will have transferred the right to receive the Merger Consideration in the Merger. In order to receive the Merger Consideration you must hold your shares through completion of the Merger.
 
Q:
Am I entitled to dissenters’ rights?
 
A:
You will not be entitled to exercise dissenters’ rights under the Cayman Companies Law. Although dissenters’ rights are sometimes available in respect of statutory mergers effected under the Cayman Companies Law, such dissenters’ rights are specifically excluded (by the terms of Section 239 of the Cayman Companies Law) in respect of shares of any class where the following conditions are satisfied:
 
  (a)
an open market for such class of shares exists on a recognised stock exchange or recognised interdealer quotation system at the expiry date of the period allowed for written notice of an election to dissent under section 238(5) of the Cayman Companies Law; and
 
  (b)
the relevant shareholders are not required by the terms of the Plan of Merger to accept for such shares anything except:
 
  i.
shares of the surviving company, or depository receipts in respect thereof;
 
  ii.
shares of any other company, or depository receipts in respect thereof, which shares or depository receipts at the effective date of the merger, are either listed on a national securities exchange or designated as a national market system security on a recognised interdealer quotation system or held of record by more than two thousand holders;
 
  iii.
cash in lieu of fractional shares or fractional depository receipts described in
sub-paragraphs
(i) and (ii) above; or
 
  iv.
any combination of the shares, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in
sub-paragraphs
(i), (ii) and (iii) above.
A copy of the complete text of Section 239 of the Cayman Companies Law is attached as Annex G to this proxy statement/prospectus.
Under the terms of the Merger, both of the above conditions as required by Section 239 of the Cayman Companies Law will be satisfied:
 
  1.
an open market for the DouYu shares will continue to exist on a recognized stock exchange (namely NASDAQ) at the expiry of the period specified in
sub-paragraph
(a) above. That period is a maximum of 40 days following the date of the EGM, at which the vote of the DouYu shareholders giving authorization for the Merger is made. The DouYu ADSs will continue to be listed on NASDAQ until after the expiration of that period; and
 
  2.
under the terms of the Plan of Merger, each DouYu shareholder who holds DouYu shares will receive only Huya Class A shares, as the Per Share Merger Consideration, which at the Effective Time are listed on a national securities exchange (namely the NYSE). DouYu shareholders will not be required to accept anything other than Huya Class A shares.
On the basis of the foregoing, the exception in Section 239 of the Cayman Companies Law will apply, so that dissenters’ rights will not be available under the Cayman Companies Law, and you will not be entitled to seek payment of the fair value of your DouYu shares by means of appraisal by the Cayman Islands court.
If you attempt to exercise dissenters’ rights under the Cayman Companies Law, DouYu, as the surviving company intends to seek a declaration that dissenter rights under the Cayman Companies Law do not apply, because the exception in Section 239 of the Cayman Companies Law is applicable, and also to apply for a stay or dismissal of your claim.
The terms of the Merger Agreement provide that if the Cayman Islands court holds that dissenters’ rights are available under the Cayman Companies Law, then the surviving company will comply with such
 
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determination and pay the fair value of the dissenter’s shares as determined by the Cayman Islands court to the relevant dissenting DouYu shareholder. However, if the Cayman Islands court finds that the exception in Section 239 of the Cayman Companies Law is applicable, then the relevant dissenting DouYu shareholder will receive only the Per Share Merger Consideration, in accordance with the terms of the Merger Agreement.
 
Q:
Will any proxy solicitor be used in connection with the EGM?
 
A:
No, DouYu has not retained a proxy solicitor. DouYu will ask banks, brokers and other custodians, nominees and fiduciaries to forward DouYu’s proxy solicitation materials to the beneficial owners of DouYu shares or DouYu ADSs held of record by such nominee holders. DouYu will reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners and in obtaining voting instructions from those owners. In addition, proxies may be solicited by mail, in person, by telephone, by internet or by facsimile by certain of DouYu’s officers, directors and employees. These persons will receive no additional compensation for solicitation of proxies but may be reimbursed for reasonable
out-of-pocket
expenses. DouYu will pay any and all expenses of filing, printing and mailing the proxy solicitation materials.
 
Q:
Do any of DouYu’s directors or executive officers have interests in the Merger that may differ from those of other shareholders?
 
A:
Yes. Some of DouYu’s directors or executive officers have interests in the Merger that may differ from those of other shareholders, including: (1) the beneficial ownership of equity interests in, and other relationships with, Tencent Holdings by Mr. Haiyang Yu and Ms. Song Zhou; (2) the potential grants of Huya share based awards to DouYu senior management and other employees after completion of the Merger; (3) treatment of DouYu RSU Awards and acceleration of vesting of DouYu RSU Awards held by certain senior management of DouYu; (4) continued indemnification rights and directors and officers liability insurance to be provided by DouYu to former directors and officers of DouYu; (5) the compensation of members of the DouYu Special Committee of the DouYu Board in exchange for their services in such capacity (the payment of which is not contingent upon the completion of the Merger or the DouYu Special Committee’s or the DouYu Board’s recommendation of the Merger); and (6) the continuation of service of the executive officers of DouYu in positions that are substantially similar to their current positions. Please see “Special Factors—Interests of DouYu’s Directors and Executive Officers in the Merger” beginning on page 93 for a more detailed discussion of how some of DouYu’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of our shareholders generally.
 
Q:
How will DouYu’s directors and executive officers vote at the EGM on the proposal to adopt the Merger Agreement?
 
A:
Each of Mr. Chen and Mr. Zhang has entered into the Voting Agreement with Huya, Nectarine and, solely for the limited purposes set forth therein, DouYu, pursuant to which each of Mr. Chen and Mr. Zhang has agreed to vote 4,800,629 DouYu shares and 651,239 DouYu shares, respectively, beneficially owned by them, representing in total 17.0% of the issued and outstanding DouYu shares, in favor of the adoption of the Merger Agreement and the transactions contemplated thereby, including the Merger. DouYu expects that all of the other directors and executive officers who beneficially own DouYu shares will vote all of their DouYu shares in favor of approval of the Merger and the authorization, approval and adoption of the Merger Agreement and the Plan of Merger.
 
Q:
How does the DouYu Board recommend that I vote on the proposals?
 
A:
Based in part on the unanimous recommendation of the DouYu Special Committee, the DouYu Board determined that the Merger is fair (both substantively and procedurally) to, and in the best interests of,
 
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  DouYu and the Unaffiliated Security Holders, and approved and adopted the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger. Accordingly, the DouYu Board recommends that you vote:
 
   
FOR the special resolution to authorize, approve and adopt the Merger Agreement and the Plan of Merger and the transactions contemplated by the Merger Agreement and the Plan of Merger, including the Merger and upon the Merger becoming effective, the amendment and restatement of the fourth amended and restated memorandum and articles of association of DouYu (as the surviving company) in the form attached as Appendix II to the Plan of Merger and the amendment of the authorized share capital of DouYu (as the surviving company) from US$100,000 divided into 500,000,000 ordinary shares of a par value of US$0.0001 per share and 500,000,000 shares of a par value of US$0.0001 per share as the board of directors may determine, to US$100,000 divided into 1,000,000,000 ordinary shares of a par value of US$0.0001 each as set forth in the Plan of Merger; and
 
   
FOR the ordinary resolution to instruct the chairman of the EGM to adjourn the EGM in order to allow DouYu to solicit additional proxies in favor of the authorization, approval and adoption of the Merger Agreement and the Plan of Merger in the event that there are insufficient proxies received to authorize, approve and adopt the Merger Agreement and the Plan of Merger.
For additional information regarding the factors and reasons considered by the DouYu Board in approving the Merger, the manner in which the DouYu Board made their decision, including the decision of certain members of the DouYu Board to abstain from voting and the interest of certain directors and their affiliates in the Merger, please see “Special Factors—Background of the Merger” beginning on page 44 and “Special Factors—DouYu Reasons for the Merger and Recommendation of the DouYu Board and DouYu Special Committee” beginning on page 57.
 
Q:
What do I need to do now?
 
A:
VOTING: You are urged to carefully read this proxy statement/prospectus, including its annexes, exhibits, attachments and the other documents referred to or incorporated by reference into this proxy statement/prospectus and to consider how the Merger affects you as a DouYu shareholder or ADS holder. You may also want to review the documents referenced under “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference” on page 199 and page 200, respectively, and consult with your accounting, legal and tax advisors. Once you have considered all relevant information, you are encouraged to vote by proxy so that your DouYu shares and/or the DouYu shares underlying your ADSs are represented at the EGM of DouYu shareholders. You can vote your DouYu shares and/or the DouYu shares underlying your ADSs by marking your choices on the proxy card or the ADS voting instruction card, respectively, and then signing, dating and mailing it in the envelope which was included in the proxy solicitation materials which were mailed to you.
 
Q:
Who can help answer my questions?
 
A:
If you have any further questions about the Merger or if you need additional copies of this proxy statement/prospectus, you may also contact the investor relation departments of Huya and DouYu as follows.
Investor Relations
HUYA Inc.
Building A3,
E-Park
280 Hanxi Road
Panyu District, Guangzhou 511446
People’s Republic of China
Phone: +86 20 2290-7829
E-mail:
ir@huya.com
 
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Investor Relations
DouYu International Holdings Limited
7F, Building 2, Riverside International Plaza
1062 Yangshupu Road
Yangpu District, Shanghai 200082
People’s Republic of China
Phone: +86 21 5882-2595
E-mail:
ir@douyu.tv
 
Q:
Where can I find more information about the companies involved in the Merger?
 
A:
You can find more information about Huya, Merger Sub, DouYu and Nectarine in “Summary—The Parties Involved in the Merger” beginning on page 1 of this proxy statement/prospectus, and in the documents described under “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference” on page 199 and page 200, respectively.
 
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SPECIAL FACTORS
Background of the Merger
The following is a summary of the meetings, negotiations, material contacts and discussions by and among Tencent Holdings, Huya and DouYu that preceded the execution of the Merger Agreement. These events occurred in China and Hong Kong and, as a result, China Standard Time is used for all dates and times given.
As an existing shareholder of Huya and DouYu, Tencent Holdings has continuously evaluated the business, prospects and financial conditions, market conditions and other developments and factors that Tencent Holdings deems relevant to the management of its investment in Huya and DouYu. As part of its ongoing relationship with Huya and DouYu, representatives of Tencent Holdings regularly had discussions with representatives of each of Huya and DouYu regarding Huya’s and DouYu’s respective business prospects and financial conditions as well as ways in which their existing relationships with Tencent Holdings could be expanded.
Between June 2020 and early August 2020, Tencent Holdings had various discussions with its U.S. legal counsel, Latham & Watkins LLP (“Latham”), and its financial advisor, Goldman Sachs Asia L.L.C. (“Goldman Sachs”), on the desirability and potential transaction structure and timeline of a proposed combination of Huya and DouYu. Representatives of Latham and Goldman Sachs reviewed certain publicly available information about Huya and DouYu in order to assist Tencent Holdings in its evaluation of the possible transaction.
In early June 2020, representatives of Tencent Holdings met with Mr. Shaojie Chen (“Mr. Chen”) and Mr. Wenming Zhang (“Mr. Zhang”), the chief executive officer and
co-chief
executive officer of DouYu, respectively, and discussed the competitive landscape in which DouYu operates and the desirability of a potential combination of Huya and DouYu as a strategy to assist Huya and DouYu in meeting their respective competitive challenges. Furthermore, in early June 2020, representatives of Tencent Holdings had discussions with Mr. Rongjie Dong (“Mr. Dong”), the chief executive officer of Huya, about recent business developments of Huya and the competitive landscape in which Huya operates. Specifically, Mr. Dong, Mr. Chen and Mr. Zhang determined that the optimal corporate structure would be one that manages all business lines under one corporate umbrella.
In June 2020, representatives of Tencent Holdings also met with representatives of JOYY Inc. (“JOYY”), a significant shareholder of Huya, and discussed the desirability of a potential combination between Huya and DouYu and whether Tencent Holdings and JOYY would be willing to support such a transaction.
In July 2020, representatives of Tencent Holdings, Huya and DouYu had several preliminary discussions about the proposed combination of Huya and DouYu, including potential synergies that could result from the proposed transaction and possible ways for Huya, DouYu and Tencent Holdings to enhance their business cooperation following completion of the proposed transaction. Also, during that same month, Mr. Chen, Mr. Zhang and Mr. Dong considered the possibility of merging Huya with DouYu, or vice versa. After thorough discussions, they determined that the proposed merger would be the best approach compared to the other strategic alternatives because Mr. Chen, Mr. Zhang and Mr. Dong believed that merging Huya with DouYu would deepen the integration of the management and professional teams of the two companies, facilitate closer coordination of their marketing efforts across all business segments, and improve their operating efficiency, thereby enhancing their live-streaming platforms and the ability of both companies to continue to enlarge their user base and enhancing user engagement and monetization.
Between late July 2020 and early August 2020, representatives of Tencent Holdings and representatives of JOYY discussed a possible transfer by JOYY of a portion of its Huya Class B Shares to Tencent Holdings, so that Tencent Holdings could further increase its stake in Huya, offering stronger incentive for Tencent Holdings to expand its business cooperation with Huya.
On August 8, 2020, Latham circulated to JOYY an initial draft of a share transfer agreement between Linen Investment and JOYY (the “JOYY SPA”), pursuant to which Linen Investment proposed to purchase from JOYY
 
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30,000,000 Huya Class B Shares subject to the satisfaction of customary closing conditions. Between August 8 and August 10, 2020, Latham and JOYY’s counsel negotiated, among other things, the closing conditions for the share purchase, JOYY’s undertaking to support a potential strategic transaction between Huya and DouYu and representations and warranties to be given by JOYY in connection with the share transfer. The JOYY SPA was executed on August 10, 2020.
On August 9, 2020, Latham circulated to Mr. Dong an initial draft of a share transfer agreement between Linen Investment and Mr. Dong (the “First Huya CEO SPA”), pursuant to which Linen Investment proposed to purchase from Mr. Dong 1,000,000 Huya Class B Shares subject to the satisfaction of customary closing conditions. Representatives of Latham had a telephonic discussion with Mr. Dong on the material terms of the First Huya CEO SPA on August 10, and the First Huya CEO SPA was executed on the same day.
Also on August 9, 2020, Latham circulated to Mr. Chen’s counsel an initial draft of a share transfer agreement between Nectarine and Mr. Chen (the “DouYu CEO SPA”), pursuant to which Nectarine proposed to, immediately after the closing of the Merger, purchase from affiliates of Mr. Chen that hold DouYu Shares, or certain assignees as may be designated by Mr. Chen, 3,703,704 DouYu Shares subject to the satisfaction of customary closing conditions. Between August 9 and August 13, 2020, Latham and Mr. Chen’s counsel negotiated, among other things, Mr. Chen’s indemnification obligations under the DouYu CEO SPA and the assignability of Mr. Chen’s rights and obligations under the DouYu SPA. The DouYu CEO SPA was executed on August 13, 2020.
On August 10, 2020, each of the Huya Board and DouYu Board received a preliminary
non-binding
proposal letter from Tencent Holdings, which proposed that Huya and DouYu enter into a
stock-for-stock
merger, as a result of which Huya or its subsidiary would acquire each outstanding ordinary share of DouYu, including DouYu shares represented by DouYu ADSs, in exchange for a
to-be-agreed
number of newly issued Huya shares, including Huya shares represented by Huya ADSs (the “Non-Binding Proposal”). According to the Non-Binding Proposal, Tencent Holdings would support the proposed transaction as a shareholder of each of Huya and DouYu, and would be willing to participate in such transaction in such manner and on such terms and conditions as to be further discussed and mutually agreed upon. At a meeting of the Huya Board on the same day, the Huya Board discussed and considered the content of the Non-Binding Proposal, and determined that, in view of the significant shareholding and voting power in Huya held by Tencent Holdings, it was advisable for the independent and disinterested members of the Huya Board to carefully consider and evaluate the
Non-Binding
Proposal.
On August 10, 2020, each of Huya and DouYu issued a press release regarding its receipt of the
Non-Binding
Proposal.
On August 13, 2020, Tencent Holdings contacted Huya and DouYu and proposed several terms related to the stock-for-stock merger contemplated in the Non-Binding Proposal in order to facilitate discussions among the parties (collectively, the “Proposed Terms”). Among those terms, Tencent proposed that it would be willing to consider transferring the Penguin Business to DouYu for a total consideration of US$500 million, with closing of the transfer to occur substantially concurrently with closing of the Merger. Tencent Holdings believes that the integration of the Penguin Business into DouYu’s existing business would allow DouYu to compete more effectively and potentially realize significant operational efficiencies and revenue and cost synergies. In view of such efficiencies and synergies, and based on its internal review of the business, prospects and financial conditions of Huya and DouYu, Tencent Holdings also proposed, as an initial position to be considered by Huya and DouYu, that the exchange ratio for the stock-for-stock merger be determined such that (i) the total number of issued and outstanding Huya Class A shares (calculated on a fully diluted and as converted basis) of Huya immediately before closing of the Merger shall be equal to (ii) the total number of Huya Class A shares to be issued by Huya as the merger consideration to DouYu’s shareholders and the holders of DouYu’s outstanding RSUs to be assumed by Huya. Furthermore, Tencent proposed that, substantially concurrently with the closing of the Merger, Huya and Douyu each distribute dividends to their respective existing shareholders in a total amount of US$200 million and US$90 million, respectively. Tencent Holdings also indicated its intention that Huya and Tencent will continue their business cooperation after the transfer of the Penguin Business and closing of the Merger.
 
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On August 14, 2020, at a meeting of the Huya Board, a special committee was formed, consisting of Mr. Hongqiang Zhao and Mr. Tsang Wah Kwong, the two independent directors who are not affiliated with Tencent Holdings or JOYY Inc. (the “Huya Special Committee”). The Huya Special Committee was given the authority and responsibility to, among other things, (1) participate, directly or indirectly, in the negotiation on Huya’s behalf of proposed terms of the Non-Binding Proposal and the Proposed Terms and have exclusive authority to agree to such proposed terms on behalf of Huya, (2) consult with Huya’s full board and/or management with respect to the proposed terms of the Non-Binding Proposal and the Proposed Terms and have exclusive authority to review, evaluate and establish the procedures to be followed with respect to the negotiation, (3) retain legal counsels, (4) retain one or more financial advisors, (5) enter into contracts providing for the retention, compensation, reimbursement of expenses and indemnification of legal counsel and financial advisors, (6) be given full access to all books, records and other information and documents of or in the possession of Huya or available to Huya, (7) consider alternative transactions for Huya, and reject the terms of the Non-Binding Proposal if the Huya Special Committee determines that the terms of the Non-Binding Proposal and the Proposed Terms are not fair to and in the best interests of Huya or if the Huya Special Committee determines that an alternative transaction is more desirable, and (8) take all such other actions and exercise any other power that may be otherwise exercised by the Huya Board that the Huya Special Committee determines is necessary or advisable to carry out and fulfill such duties and responsibilities.
Also on August 14, 2020, at a meeting of the DouYu Board, the DouYu Board discussed and considered the content of the Non-Binding Proposal, and determined that, in view of the significant shareholding and voting power in DouYu held by Tencent Holdings, it was advisable for the independent and disinterested members of the DouYu Board to carefully consider and evaluate the Non-Binding Proposal and a special committee was formed, consisting of Mr. Zhaoming Chen, Mr. Xi Cao, Mr. Xuehai Wang and Mr. Zhi Yan, the four independent directors who are not related to Tencent Holdings (the “DouYu Special Committee”). The DouYu Special Committee was given the authority and responsibility to, among other things, (1) review, consider and negotiate on DouYu’s behalf of proposed terms of the Non-Binding Proposal and the Proposed Terms and have exclusive authority to agree to such proposed terms on behalf of DouYu, (2) establish, approve, modify, monitor and direct the process and procedures related to the review and evaluation of the Non-Binding Proposal and the Proposed Terms, any related transaction and any alternative transaction, (3) respond to any communications, inquiries or proposals regarding the Non-Binding Proposal, any related transaction or any alternative transaction, (4) review, evaluate, investigate, pursue and negotiate the terms and conditions of the Non-Binding Proposal and the Proposed Terms, any related transaction or any alternative transaction, (5) solicit expressions of interest or other proposals for alternative transactions to the extent the DouYu Special Committee deems appropriate, (6) recommend to the DouYu Board whether the Non-Binding Proposal, any related transaction or any alternative transaction is advisable and is fair to, and in the best interests of, DouYu and its shareholders (or any subset of the shareholders of DouYu that the DouYu Special Committee determines to be appropriate), (7) recommend rejection or approval of the Non-Binding Proposal, any related transaction or any alternative transaction to the DouYu Board or what action, if any, should be taken by DouYu with respect to the Non-Binding Proposal, any related transaction or any alternative transaction, (8) effect or recommend to the DouYu Board the consummation of the Non-Binding Proposal, any related transaction or any alternative transaction, (9) review, analyze, evaluate and monitor all proceedings and activities of DouYu related to the Non-Binding Proposal, any related transaction or any alternative transaction, (10) take such actions as the DouYu Special Committee may deem to be necessary or appropriate in connection with anti-takeover provisions, including, without limitation, actions with respect to the adoption, amendment, redemption or termination of, the exercise of any rights or the performance of any obligations under a shareholder rights plan, (11) take such actions as the DouYu Special Committee may deem to be necessary or appropriate in connection with any shareholders agreement with any shareholder of DouYu, including, without limitation, actions with respect to the entry into, amendment or termination of, the exercise of any rights or the performance of any obligations under, any shareholders agreement, (12) investigate DouYu and any prospective acquirers, the Non-Binding Proposal, any related transaction or alternative transaction and matters related thereto as it deems appropriate, (13) review and evaluate any employee benefit plan, severance plan or share incentive plan of DouYu in view of the
Non-Binding
Proposal, any related transaction or any alternative transaction, (14) review and comment upon any and all
 
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documents and other instruments used in connection with the Non-Binding Proposal, any related transaction or any alternative transaction, including any and all materials to be filed with the Securities and Exchange Commission, NASDAQ Stock Market and other governmental and
non-governmental
persons and entities, (15) authorize the issuance of press releases and other public statements, including filings with the Securities and Exchange Commission, NASDAQ Stock Market and other governmental and
non-governmental
persons and entities as the DouYu Special Committee considers appropriate regarding the Non-Binding Proposal, any related transaction or any alternative transaction, and (16) take such other actions as the DouYu Special Committee may deem to be necessary or appropriate for the DouYu Special Committee to discharge its duties.
On August 14, 2020, the Huya Special Committee retained Citigroup Global Markets Inc. (“Citigroup”) as its independent financial advisor after interviewing a number of investment banks, and retained Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”) as its U.S. legal counsel. On August 15, 2020, the Huya Special Committee retained Maples and Calder (Hong Kong) LLP (“Maples”) as its Cayman Islands legal advisor. Before retaining these advisors, the Huya Special Committee evaluated their credentials, experience and independence to serve as legal and financial advisors, respectively, to the Huya Special Committee and negotiated the fees to be paid to the financial advisor. On August 14, 2020, the DouYu Special Committee retained Morgan Stanley Asia Limited (“Morgan Stanley”) as its independent financial advisor after interviewing a number of investment banks, and retained Davis Polk & Wardwell LLP (“Davis Polk”) as its U.S. legal counsel.
On August 15, 2020, Latham circulated an initial draft of mutual nondisclosure agreement to be entered into by and among Tencent Holdings, Huya and DouYu. Between August 15, 2020 and August 28, 2020, Skadden, Davis Polk and Latham negotiated the terms of the mutual nondisclosure agreement, which was executed on August 28, 2020 and contained customary provisions restricting each of Tencent Holdings, Huya and DouYu’s disclosure and use of confidential information relating to the other parties or the proposed transaction, a
12-month
“standstill” provision restricting Tencent Holdings and Huya from acquiring securities or assets of DouYu or undertaking certain other related actions (in each case other than the proposed transaction) and a
12-month
“standstill” provision restricting DouYu from acquiring securities or assets of Tencent Holdings or Huya, as applicable, or undertaking certain other related actions (in each case other than the proposed transaction).
On August 17, 2020, Huya issued a press release announcing the formation of the Huya Special Committee to consider the Non-Binding Proposal, and the engagement of Citigroup as Huya’s independent financial advisor and Skadden as Huya’s U.S. legal counsel. On the same day, DouYu issued a press release announcing the formation of the DouYu Special Committee to consider the Non-Binding Proposal, and the engagement of Morgan Stanley as DouYu’s independent financial advisor and Davis Polk as DouYu’s U.S. legal counsel.
On August 20, 2020, Huya retained Haiwen & Partners (“Haiwen”) as its PRC legal advisor in connection with the proposed Merger.
On August 21, 2020, August 24, 2020, and August 28, 2020, representatives of Citigroup and Huya management held telephonic meetings to review the business and finances of Huya and Huya’s business plan and strategic initiatives, the market environment, and other matters related to the financial analysis which the Huya Special Committee instructed Citi to conduct, including Huya management’s financial forecasts.
On August 28, 2020, the DouYu Special Committee held a telephonic meeting with Morgan Stanley and Davis Polk, during which Morgan Stanley provided the DouYu Special Committee with an analysis of the key transaction terms and an update on its valuation work plan. In addition, the DouYu Special Committee retained Ogier (“Ogier”) as its Cayman Islands legal advisor and Han Kun Law Offices (“Han Kun”) as its PRC legal advisor in connection with the proposed Merger.
During the period from August 2020 to October 2020, representatives of financial, tax and legal advisors of Huya and DouYu conducted due diligence on DouYu and Huya, respectively, and also on Penguin.
On August 31, 2020, the Huya Special Committee held a telephonic meeting with Citigroup and Skadden, during which Citigroup provided the Huya Special Committee with an update of the status of the due diligence
 
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process and key next steps, and Skadden provided the Huya Special Committee with an update of the status of the transaction documents.
Over the course of September and October, representatives of Citigroup participated in multiple
follow-up
calls with Huya and DouYu’s respective senior management to discuss further details regarding Huya and DouYu’s respective business plans, strategic initiatives, the market environment, financial forecasts and other matters related to Citi’s financial analysis.
On September 1, 2020, representatives of Huya, DouYu, Tencent Holdings, Citigroup, Morgan Stanley, Goldman Sachs, Skadden, Davis Polk, and Hankun held a telephonic meeting to conduct business and operating due diligence on DouYu.
On September 2, 2020, representatives of Huya, DouYu, Tencent Holdings, Citigroup, Morgan Stanley, Goldman Sachs, Skadden, Davis Polk, and Hankun held a telephonic meeting to conduct business and operating due diligence on Huya.
Also on September 2, 2020, Latham circulated an initial draft of the Merger Agreement to Skadden and Davis Polk, which contains customary conditions to closing of the Merger, including receipt of the Required DouYu Vote, the Form F-4 having become effective under the Securities Act, no government injunction or prohibition of the transaction, the representations and warranties in the Merger Agreement remaining true and correct as of the closing date subject to certain exceptions, performance of pre-closing covenants in all material respects and absence of any Huya Material Adverse Effect and DouYu Material Adverse Effect. Although Tencent Holdings believes that Nectarine’s reassignment of the Penguin Business to DouYu will introduce additional operational and financial synergies to DouYu and, post closing of the Merger, the combined company of Huya and DouYu, Tencent Holdings did not propose to include closing of the reassignment of the Penguin Business as a condtion to closing of the Merger in this initial draft of the Merger Agreement because Tencent Holdings believed that, even in the absence of the reassignment of the Penguin Business, the proposed merger will benefit Huya, DouYu and their respective shareholders.
On September 3, 2020, the DouYu Special Committee held a telephonic meeting with Morgan Stanley and Davis Polk, during which Morgan Stanley provided the DouYu Special Committee with a status update of the due diligence process, overall transaction process, and developments in the financial forecasts work streams.
From September 3, 2020 to September 10, 2020, Davis Polk, Morgan Stanley and the DouYu management discussed the comments and issues relating to the Merger Agreement including, among others, corporate governance of Huya and DouYu after the closing, treatment of DouYu RSU Awards, employee compensation and severance arrangement, the amount of termination fee, the identities of shareholders who are expected to enter into voting agreements, the no shop provision, and the amount of the DouYu Closing Dividend.
On September 4, 2020, the transactions contemplated under the JOYY SPA and the First Huya CEO SPA closed.
On September 5, 2020, Latham circulated an initial draft of the Reassignment Agreement (the “Reassignment Agreement”) to Davis Polk and Skadden with respect to Nectarine’s proposed reassignment of the Penguin Business to DouYu.
From September 5, 2020 to September 10, 2020, Davis Polk, Morgan Stanley, DouYu’s PRC counsel and the DouYu management discussed the comments and issues relating to the Reassignment Agreement, including, among others, the restructuring plan in connection with the reassignment of the Penguin Business to DouYu, the time frame for such restructuring, the timing of the closing of the reassignment transaction and the transition services to be provided by Tencent Holdings after the closing.
On September 7, 2020, the Huya Special Committee held a telephonic meeting with Citigroup and Skadden. At that meeting, Citigroup provided an update of its financial due diligence on Huya which would inform Citigroup’s valuation and fairness analysis. The Huya Special Committee raised several questions regarding the contemplated valuation methodologies, discussed key next steps, and instructed Citigroup to carry out its
 
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valuation analysis as it deems appropriate. Skadden then discussed certain key legal issues with respect to the draft Merger Agreement with the Huya Special Committee, together with the Huya management team present at the meeting. The Huya Special Committee posed questions on certain key issues, including (i) limiting Nectarine’s rights under the Merger Agreement, in particular, Nectarine’s rights to waive certain closing conditions and terminate the Merger Agreement, given Tencent Holdings’ interests in both Huya and DouYu; (ii) whether completion of the reassignment of the Penguin Business to DouYu could be added as a closing condition to the Merger Agreement in view of (x) Tencent Holdings’ proposal to transfer the Penguin Business to DouYu, and (y) the additional synergies that could arise from the acquisition and integration of the Penguin Business; (iii) whether Nectarine could provide indemnity to DouYu after the closing of the Reassignment Agreement based on issues identified in the due diligence; (iv) treatment of employee incentive awards of both Huya and DouYu; (v) closing conditions; and (vi) amount of termination fees. Skadden also responded to inquiries from the Huya management with respect to the pending securities litigation matters of DouYu. The Huya Special Committee instructed Skadden to conduct additional due diligence on such litigation matters, and revise the draft Merger Agreement based on the discussions and also taking into consideration comments from Huya management.
On September 8, 2020, representatives of Huya, DouYu, Tencent Holdings, and each party’s financial and legal advisors held a telephonic meeting to conduct business, operating, financial, tax and legal due diligence on Penguin.
On September 10, 2020, the DouYu Special Committee held another telephonic meeting with Morgan Stanley and Davis Polk. At the meeting, Morgan Stanley and Davis Polk provided the DouYu Special Committee with the key commercial and legal issues with respect to the Merger Agreement and the Reassignment Agreement.
Also on September 10, 2020, Davis Polk circulated a summary of key issues with respect to the Merger Agreement and the Reassignment Agreement to Latham. On the same day, Skadden received from Latham the summary of key issues with respect to the Merger Agreement and the Reassignment Agreement prepared by Davis Polk.
On September 11, 2020, Skadden provided its initial comments to the draft Merger Agreement to Latham, reflecting comments received from the Huya Special Committee and the Huya management.
On September 14, 2020, the Huya Special Committee held another telephonic meeting with Citigroup and Skadden. At the meeting, Citigroup provided the Huya Special Committee with an update on the Huya standalone financial forecasts that Huya management had prepared. The Huya Special Committee raised several questions regarding Huya’s financial forecasts, including the market capitalization of Huya and how it interplayed with Huya’s valuation. Citigroup also updated the Huya Special Committee of the status of legal, financial and tax due diligence on Huya, DouYu and the Penguin Business, respectively. Skadden provided the Huya Special Committee an update on the status of the transaction documents.
Also on September 14, 2020, the DouYu Special Committee held another telephonic meeting with Morgan Stanley and Davis Polk, during which, the management of DouYu reviewed with the DouYu Special Committee the components and key items of the financial forecasts including the revenues, costs and expenses, working capital and cash flows. The DouYu Special Committee posed questions, including (i) specific factors influencing the forecasts, such as the consequences of breach of contract by the broadcasters, (ii) the deviation from the forecasts conducted by the counterparties, (iii) the synergies among the parties resulting from the assets reassignment transaction and the merger transaction, and (iv) the next steps and timeline to finalize the financial forecasts. The management of DouYu and Morgan Stanley responded to these questions, and Davis Polk discussed with the DouYu Special Committee the key legal issues of the Merger Agreement, including among other things, (i) the scope of representations, warranties and covenants of DouYu and Huya, which Davis Polk
 
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suggested the scope thereof should be reciprocal and the DouYu Special Committee agreed, (ii) Huya’s preliminary suggestion towards the treatment and grant of DouYu RSU Awards, and (iii) removal of closing conditions and termination rights of Nectarine. The DouYu Special Committee then instructed Morgan Stanley and Davis Polk to further negotiate the merger agreement with Nectarine and Huya.
On September 14, 2020, representatives of Morgan Stanley shared DouYu’s financial forecasts and the combined financial forecasts of DouYu and the Penguin Business that DouYu management had prepared with representatives of Citigroup.
On September 15, 2020, the Huya Special Committee instructed Citigroup to share Huya’s financial forecasts that Huya Management had prepared with DouYu and Morgan Stanley.
From September 10, 2020 to September 15, 2020, Skadden and the Huya Special Committee and the Huya management discussed comments to Davis Polk’s summary of key issues and circulated a revised draft of the summary of key issues reflecting Huya’s comments.
From September 14, 2020 to September 18, 2020, Davis Polk, the DouYu Special Committee and the DouYu management discussed the key issues with respect to the Merger Agreement and the Reassignment Agreement.
On September 17, 2020, Skadden and Latham had a telephonic meeting to discuss the key issues under the draft Merger Agreement and the draft Reassignment Agreement. Those issues included, among other things, (i) the narrowing down of the scope of Nectarine’s rights under the Merger Agreement; (ii) the inclusion of the closing of the Reassignment as a condition to the closing of the Merger; (iii) the circumstances under which the No Vote Termination Fee is payable; and (iv) whether the representations and warranties made by Huya and DouYu, as well as covenants of Huya and DouYu with respect to conduct of business prior to closing, should be substantially identical.
Also on September 17, 2020, the DouYu Special Committee held another telephonic meeting with Morgan Stanley and Davis Polk, during which Morgan Stanley reported updates on the timeline of the Merger, the due diligence progress, the status of negotiations of the transaction documents, and the developments in the financial forecasts work streams.
On September 18, 2020, Davis Polk provided its initial comments to the draft Merger Agreement to Latham, reflecting comments received from the DouYu Special Committee.
On September 21, 2020, Latham circulated a revised draft of the Merger Agreement to Skadden and Davis Polk, which included certain of Davis Polk’s comments to the Merger Agreement dated September 18, 2020. The revisions included, among other things, (1) adding the closing of the Reassignment as a condition to closing of the Merger, (2) inserting a provision on Nectarine’s indemnification obligation under certain circumstances, with the maximum amount of such indemnification obligation left blank, and (3) requesting DouYu to provide additional details with respect to the DouYu RSU Trust. On September 21, 2020 and September 22, 2020, Davis Polk had discussions with the DouYu management and Morgan Stanley regarding the issues in the Merger Agreement including, among others, the treatment of DouYu RSU Awards, indemnification obligations of Nectarine and the closing conditions. Skadden circulated a key issues list to Latham later on the same day and received a revised key issues list from Latham on September 22, 2020 with Davis Polk’s comments included.
Also on September 21, 2020, representatives of Huya, DouYu, Citigroup, and Morgan Stanley held telephonic meetings to conduct due diligence on Huya’s financial forecasts and DouYu’s financial forecasts (after taking into account of the effects from the Reassignment).
From late September 2020 to early October 2020, Citigroup, Morgan Stanley and Goldman Sachs, on behalf of their respective clients, engaged in various discussions over the methodology for calculation of the Share Exchange Ratio and the ADS Exchange Ratio, including how to account for the outstanding employee share incentive awards of Huya and DouYu and the cut-off date to use to determine the share count of Huya and DouYu. Representatives of Tencent Holdings, Huya and DouYu also discussed the amount of dividends to be distributed by DouYu to its shareholders on or around the Closing Date.
 
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On September 22, 2020, the Huya Special Committee held another telephonic meeting with Citigroup and Skadden, during which Citigroup discussed with the Huya Special Committee DouYu’s financial forecasts prepared by DouYu’s management, and Skadden updated the Huya Special Committee on the progress of the transaction documents and certain key legal issues, including the inclusion of the closing of the Reassignment as a condition to closing of the Merger, and the requirement to obtain a written consent from JOYY based on Huya’s currently effective memorandum and articles of association. On the same day, the DouYu Special Committee held another telephonic meeting with Morgan Stanley and Davis Polk, during which Davis Polk reported to the DouYu Special Committee the key findings of offshore legal due diligence on Huya, and Han Kun reported to the DouYu Special Committee the key findings of onshore legal due diligence on Huya and Penguin.
Also on September 22, 2020, Latham circulated a revised draft of the Reassignment Agreement to Skadden and Davis Polk. Later that day, an
all-party
call was held among the respective management of Huya, DouYu and Tencent Holdings and each party’s financial and legal advisors to discuss key outstanding issues, including, among other things, (i) the amount of No Vote Termination Fee and Termination Fee; (ii) the indemnity cap with respect to Nectarine’s indemnification obligations contemplated by the draft Merger Agreement; (iii) change of nominee shareholders for each of the DouYu VIEs; (iv) treatment of DouYu shares held by the DouYu RSU Trust; and (v) acceleration of the vesting of share-based awards for both Huya and DouYu. Following such discussions, the parties agreed that the No Vote Termination Fee shall be equal to approximately 1% of DouYu’s implied equity value, the Termination Fee shall be equal to approximately 4% of DouYu’s implied equity value and Nectarine’s indemnity cap shall be equal to US$1,000,000. Latham, Skadden, Davis Polk and the management of Huya and DouYu then walked through the current draft of the Merger Agreement in detail.
Later on September 22, 2020, Latham circulated to Skadden and Davis Polk an initial draft of the form of a voting agreement proposed to be entered into by Nectarine, Huya and DouYu with each of Mr. Shaojie Chen (“Mr. Chen”), the chief executive officer of DouYu, and Mr. Wenming Zhang (“Mr. Zhang”), the
co-chief
executive officer of DouYu (the “Voting Agreements”).
On September 23, 2020, Davis Polk discussed with Morgan Stanley and the DouYu management on the comments and issues relating to the Voting Agreement and the revised draft of the Reassignment Agreement. Later that day, Davis Polk provided comments on the draft of the Reassignment Agreement to Latham, reflecting comments received from the DouYu Special Committee. On the same day, Latham received comments on the draft form voting agreement from each of Skadden and Davis Polk and circulated the revised draft form voting agreement to Mr. Chen and Mr. Zhang’s counsel.
On September 24, 2020, Skadden circulated a revised draft of the Merger Agreement to Latham and Davis Polk, reflecting the discussions among all parties on September 22, 2020.
During the period from September 24, 2020 to September 28, 2020, Latham, Skadden and Davis Polk continued to exchange comments to the Merger Agreement.
On September 26, 2020, the DouYu Special Committee held another telephonic meeting with Morgan Stanley and Davis Polk, during which the management of DouYu reported a revised set of financial forecasts of DouYu. The DouYu Special Committee and the management of DouYu discussed the rationale and impacts of such revised financial forecasts. The management team of DouYu revisited financial forecasts and produced a further refined set of projections primarily due to the fact that the revenues generated from certain major fans events in the third quarter of 2020 were below expectation. DouYu revised down the net project projections in short-term due to increased revenue sharing fees and content costs. While such investments affected DouYu’s profitability in the short-term, the management team of DouYu believes they will help cement DouYu’s market leading position in the long run. Revisions were made primarily to revenue and operating expenses forecasts in 2020 and 2021, and the 2022 to 2024 forecasts are not impacted.
On September 26, 2020, representatives of Morgan Stanley shared a revised set of financial forecasts of DouYu with representatives of Citigroup.
 
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On September 27, 2020, representatives of DouYu, Citigroup and Morgan Stanley held a telephonic meeting to discuss the rationale behind the revised financial forecasts of DouYu.
Also on September 27, 2020, representatives of Huya, DouYu, Nectarine and each party’s financial advisors held a telephonic meeting to further understand the rationale of the revised financial forecasts of DouYu.
On September 28, 2020, representatives of Citigroup shared a revised set of financial forecasts of Huya with representatives of Morgan Stanley.
On September 28, 2020, Latham circulated a revised draft of the Reassignment Agreement to Skadden and Davis Polk, reflecting the discussions among all parties on September 22, 2020.
Also on September 28, 2020, the Huya Special Committee held another telephonic meeting with Citigroup and Skadden. At that meeting, Citigroup provided a summary to the Huya Special Committee on DouYu’s revised financial forecasts for the third and fourth quarters of 2020, and discussed impact of such revised financial forecasts on the valuation of DouYu and Penguin as a whole. The Huya Special Committee instructed Citigroup to conduct additional due diligence to ascertain whether the reasons behind DouYu’s less optimistic financial forecasts for the third and fourth quarters of 2020 would have a long-term impact on DouYu’s business prospects, and in particular, DouYu and Penguin’s combined valuation in the proposed Merger. Over the course of the following week, Citigroup continued to work with DouYu management and Morgan Stanley to further evaluate the causes of the decline in DouYu’s financial forecasts and their potential impact on DouYu’s long-term business prospects and DouYu and Penguin’s valuation in the proposed Merger.
On September 29, 2020, representatives of Citigroup and Morgan Stanley held a telephonic meeting to discuss the rationale behind the revised financial forecasts of Huya.
On September 29, 2020, Latham circulated to Mr. Dong an initial draft of a share transfer agreement between Linen Investment and affiliates of Mr. Dong (the “Second Huya CEO SPA”), pursuant to which Linen Investment will, immediately before closing of the Merger, purchase from such affiliates of Mr. Dong 1,970,804 Huya Class B Shares, subject to the satisfaction of customary closing conditions. The Second Huya CEO SPA was executed on October 12, 2020.
On September 30, 2020, the Huya Special Committee held another telephonic meeting with Citigroup and Skadden, during which Citigroup and Skadden discussed key next steps.
During the period from September 29, 2020 to October 12, 2020, Latham, Skadden, Davis Polk, Zhonglun, Haiwen and Hankun continued to exchange comments to the Reassignment Agreement and the exhibits thereto, including the restructuring schedule, and agreed on the final draft of the Reassignment Agreement on October 9, 2020 and final version of all exhibits to the Reassignment Agreement on October 12, 2020.
Also on October 8, 2020, Latham circulated a revised draft of the Merger Agreement to Skadden and Davis Polk that included, among other things, provisions allowing certain senior management of DouYu to accelerate the vesting of their DouYu RSU Awards prior to the closing of the Merger, subject to the execution by such individuals of a lockup undertaking and a securities accounting monitoring agreement reflecting certain principles as set forth in an exhibit to the Merger Agreement. During the period from October 8, 2020 to October 11, 2020, Latham and Davis Polk continued to exchange comments to such principles and agreed on the final version of the principles of the lockup undertaking and securities monitoring agreement on October 11, 2020.
Between October 9, 2020 and October 11, 2020, Latham and Mr. Chen and Mr. Zhang’s counsel finalized the Voting Agreements.
On October 10, 2020, Davis Polk and Latham had a discussion regarding the treatment of DouYu RSU Awards.
 
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On October 10, 2020, following continued discussions by and among Tencent Holdings, Huya and DouYu, with the assistance of Goldman Sachs, Citigroup and Morgan Stanley, with respect to the exchange ratio, Tencent Holdings, Huya and DouYu agreed that the Share Exchange Ratio shall be equal to 7.30 and the ADS Exchange Ration shall be equal to 0.730. The DouYu Special Committee agreed to such exchange ratio because in their view, the exchange ratio has reflected the fair value of DouYu, taking into account the past and current operations and financial condition, the strategic views and the business prospects of DouYu. Based on the Share Exchange Ratio of 7.30, the Merger Consideration represents an implied value of $18.83 per DouYu ADS ($188.30 per DouYu share) based on the Huya ADS closing trading price on the NYSE of $25.79 per Huya ADS ($25.79 per Huya Class A share) on October 9, 2020, which amounts to a premium of 34.5% over the closing trading price of DouYu ADSs on NASDAQ on October 9, 2020. As a result, the implied equity value of Huya and DouYu is substantially the same and DouYu shareholders before the Merger will own, in the aggregate, approximately 50% of the Huya shares outstanding immediately after the Merger on a fully diluted basis. Also on October 10, 2020, following continued discussions by and among Tencent Holdings, Huya and DouYu, it is agreed that the amount of dividends to be distributed by DouYu to its shareholders on or around the Closing Date will be reduced from US$90 million as preliminarily proposed to US$60 million. Later on the same day, Skadden circulated a revised draft of the Merger Agreement to Davis Polk and Latham reflecting the Share Exchange Ratio, ADS Exchange Ratio and the DouYu Closing Dividend in the amount of $60 million that Tencent Holdings, Huya and DouYu had agreed upon.
On October 11, 2020, Skadden, Davis Polk and Latham further discussed the outstanding issues of the draft Merger Agreement. In the evening of October 11, 2020, Skadden, Davis Polk and Latham agreed substantially on all the terms and conditions of the Merger Agreement.
In the morning of October 12, 2020, Huya received a written consent from JOYY Inc. consenting to the execution, delivery and performance of the Merger Agreement by Huya and Merger Sub and the consummation of the transactions contemplated under the Merger Agreement pursuant to Huya’s currently effective memorandum and articles of association.
Also in the morning of October 12, 2020, the Huya Special Committee held a telephonic meeting, together with representatives of Citigroup and Skadden. At that meeting, representatives of Citigroup reviewed and discussed its financial analysis with respect to Huya and DouYu and Penguin on a pro forma basis and the Merger. Thereafter, at the request of the Huya Special Committee, representatives then provided the oral opinion of Citigroup, subsequently confirmed in writing and attached hereto as Annex E, to the Huya Special Committee to the effect that, as of October 12, 2020, and based on and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi as set forth in such written opinion, the 7.30x Share Exchange Ratio was fair, from a financial point of view, to Huya. Representatives of Skadden then summarized for the Huya Special Committee the key terms and final resolution of the issues that had been negotiated in the Merger Agreement. After considering the proposed terms of the Merger Agreement and the other transaction agreements and the various presentations of Citigroup and Skadden, including receipt of Citi’s oral opinion, the Huya Special Committee then unanimously (a) determined that the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, is in the best interests of Huya, (b) approved and declared it advisable for Huya to enter into the Merger Agreement, the Plan of Merger, other transaction documents, and consummate the transactions contemplated thereby, including the Merger, and (c) recommended that the Huya Board approve and authorize the Merger Agreement, the Plan of Merger and other transaction documents, and the transactions, including the Merger.
Following the meeting of the Huya Special Committee, the Huya Board held a meeting in the afternoon of October 12, 2020, together with representatives of Citigroup and Skadden. At this meeting, the Huya Special Committee presented its recommendation, described above, to the Huya Board. After considering the proposed terms of the Merger Agreement and the other transaction agreements and the various presentations of Citigroup and Skadden, including Citi’s oral opinion provided to the Huya Special Committee. The Huya Board (other than Mr. Lingdong Huang, Mr. Zhi Cheng, Mr. Hai Tao Pu, Mr. Guang Xu and Mr. Lei Zheng, who abstained from voting due to affiliation with Tencent Holdings, and Mr. Rongjie Dong who abstained
 
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from voting due to his participation in a separate share transfer agreement with affiliates of Tencent Holdings), acting upon the unanimous recommendation of the Huya Special Committee, (a) determined that the execution by Huya of the Merger Agreement and the Plan of Merger and consummation of the transactions contemplated thereby, including the Merger, are fair to and in the best interests of Huya and (b) approved and declared advisable the Merger Agreement, the Plan of Merger and the transactions contemplated thereby, including the Merger.
In the afternoon of October 12, 2020, the DouYu Special Committee held a telephonic meeting, together with representatives of Morgan Stanley and Davis Polk. At the request of the DouYu Special Committee, representatives of Morgan Stanley then proceeded to provide the oral fairness opinion of Morgan Stanley, subsequently confirmed in writing and attached hereto as Annex F, to the DouYu Special Committee to the effect that, as of October 12, 2020, and based on and subject to the assumptions, qualifications, limitations and other matters set forth therein, the 7.30x Share Exchange Ratio was fair, from a financial point of view, to DouYu. Representatives of Davis Polk then summarized for the DouYu Special Committee the key terms and final resolution of the issues that had been negotiated in the Merger Agreement. After considering the proposed terms of the Merger Agreement and the other transaction agreements and the various presentations of Morgan Stanley and Davis Polk, including receipt of Morgan Stanley’s oral fairness opinion, the DouYu Special Committee then unanimously (a) determined that the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, is in the best interests of DouYu and fair to its shareholders, (b) approved and declared it advisable for DouYu to enter into the Merger Agreement, the Plan of Merger, other transaction documents, and consummate the transactions contemplated thereby, including the Merger, and (c) recommended that the DouYu Board approve and authorize the Merger Agreement, the Plan of Merger and other transaction documents, and the transactions, including the Merger.
Following the meeting of the DouYu Special Committee, the DouYu Board held a meeting in the afternoon of October 12, 2020, together with representatives of Morgan Stanley and Davis Polk. At this meeting, the DouYu Special Committee presented its recommendation, described above, to the DouYu Board. After considering the proposed terms of the Merger Agreement and the other transaction agreements and the various presentations of Morgan Stanley and Davis Polk, including Morgan Stanley’s opinion provided to the DouYu Special Committee that the 7.30x Share Exchange Ratio was fair, from a financial point of view, to DouYu, the DouYu Board (other than Mr. Shaojie Chen and Mr. Wenming Zhang, who abstained from voting due to their participation on a separate share transfer agreement with affiliates of Tencent Holdings, Mr. Haiyang Yu and Ms. Song Zhou, who abstained from voting due to affiliation with Tencent Holdings), acting upon the unanimous recommendation of the DouYu Special Committee, (a) determined that the execution by DouYu of the Merger Agreement and the Plan of Merger and consummation of the transactions contemplated thereby, including the Merger, are fair to and in the best interests of DouYu and its shareholders and (b) approved and declared advisable the Merger Agreement, the Plan of Merger and the transactions contemplated thereby, including the Merger.
In the evening of October 12, 2020, Huya and DouYu announced the execution of the Merger Agreement.
Huya Reasons for the Merger and Recommendation of the Huya Special Committee
Following receipt of the Non-Binding Proposal from Tencent Holdings on August 10, 2020, the Huya Board determined that, in view of the related party transaction nature of the Non-Binding Proposal, and the significant shareholding and voting power in Huya held by Tencent Holdings, it was advisable for the independent and disinterested members of the Huya Board to carefully consider and evaluate the Non-Binding Proposal, and the Huya Special Committee was formed on August 14, 2020, consisting of two independent directors, Mr. Hongqiang Zhao and Mr. Tsang Wah Kwong.
In addition to those discussions described in “—Background of the Merger,” the Huya Special Committee considered a variety of factors in evaluating the transactions contemplated by the Merger Agreement, including the following factors. The discussion of the factors considered by the Huya Special Committee in this
sub-section
is not intended to be exhaustive and only includes the material factors considered by the Huya Special Committee. In view of the large number of factors considered by the Huya Special Committee in connection with
 
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the evaluation of the Merger Agreement and the Merger and the complexity of these matters, the Huya Special Committee did not consider it practicable to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors considered in reaching its determination, nor did the Huya Special Committee evaluate whether these factors were of equal importance. This explanation of the Huya Special Committee’s reasons for the Merger and all other information presented in this
sub-section
is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Forward-Looking Statements.”
 
   
belief that the combined company (which includes the Penguin Business) will have the reach and scale to bring its users high quality live streaming content;
 
   
belief that trends in the live streaming industry favor consolidation, and, following the proposed Merger, the combined company would strengthen its market position in the industry;
 
   
belief that the combined company would be in a better position to respond to competitive pressure from other online video services including short video platforms;
 
   
the advice of Huya’s management, who carefully evaluated the transactions contemplated by the Merger Agreement and the Reassignment Agreement in several dimensions, such as strategic complementarity, value creation potential and synergy opportunities, among others;
 
   
significant operational and financial synergies across a number of areas including leveraging live streaming content over a larger user base, and improving operation efficiency;
 
   
belief that the Merger would deepen the integration of the management and professional team of Huya and DouYu, better coordinate its efforts to grow user base and cooperate with talent agencies to recruit, manage, train and support broadcasters;
 
   
the financial presentation and opinion, dated October 12, 2020, of Citigroup to the Huya Special Committee that the 7.30x Share Exchange Ratio was fair, from a financial point of view, to Huya, as more fully described below under the heading “—Opinion of Citigroup Global Markets Inc. as Independent Financial Advisor to the Huya Special Committee”;
 
   
belief that the terms of the Merger Agreement and other documents to be executed in connection with the consummation of the Merger were reasonable, including, among other things:
 
   
the limited conditions to the parties’ obligations to complete the Merger and the probability that such conditions would be satisfied;
 
   
the fact that the termination date under the Merger Agreement allows for time that is expected to be sufficient to complete the Merger;
 
   
the ability of Huya to obtain a termination fee of US$44,000,000 or US$177,000,000, as applicable, from DouYu if the Merger is not consummated for certain reasons; and
 
   
the fact that DouYu’s founders have agreed to enter into a
lock-up
undertaking and securities account monitoring agreement with respect to the Huya ADSs they receive upon completion of the Merger.
 
   
the likelihood that the Merger would be completed based on, among other things:
 
   
the voting support from Nectarine and DouYu founders;
 
   
Huya’s ability to seek specific performance to prevent breaches of the Merger Agreement and to enforce specifically the terms of the Merger Agreement; and
 
   
the business reputation and capabilities of DouYu and its management, which the Huya Special Committee believed supported the conclusion that a transaction with DouYu could be completed in an orderly manner.
 
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the information and advice previously provided to and reviewed by the Huya Special Committee.
The Huya Special Committee also considered the following potentially negative factors associated with the Merger: