Chenghe Acquisition III (CHEC) risk factors, FY2025 10-K

Risks Relating to our Search for, and Consummation of or Inability to Consummate, a Business Combination

1. 01If we seek shareholder approval of our initial business combination, our initial shareholders and management team have agreed to vote in favor of such initial business combination, regardless of how our public shareholders vote
2. 02Your only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash
3. 03The redemption of our public shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into an initial business combination with a target
4. 04Recent increases in inflation and interest rates in the United States and elsewhere could make it more difficult for us to consummate an initial business combination
5. 05Recent changes in global trade policies and the imposition of tariffs and trade restrictions may make it more difficult for us to consummate an initial business combination
6. 06The redemption of a large number of our public shares may not allow us to complete the most desirable business combination or optimize our capital structure
7. 07The redemption of a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your shares
8. 08Our search for an initial business combination, and any target business with which we may ultimately consummate an initial business combination, may be materially adversely affected by current global geopolitical conditions resulting from the ongoing Russia-Ukraine conflict and the Israel-Hamas conflict
9. 09Military or other conflicts in Ukraine, the Middle East or elsewhere may lead to increased volume and price volatility for publicly traded securities, or affect the operations or financial condition of potential target companies, which could make it more difficult for us to consummate an initial business combination
10. 10As an entity incorporated as a Cayman Islands exempted company, the stock buyback tax is currently not expected to apply to redemptions of our Class A ordinary shares (absent any regulations or other additional guidance that may be issued in the future)
11. 11Changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination
12. 12We may not be able to complete our initial business combination within the completion window, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate
13. 13We have until the date that is 18 months from the closing of our IPO, or until such earlier liquidation date as our board of directors may approve, to consummate our initial business combination
14. 14Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations, or our prospects
15. 15If a shareholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed
16. 16You will not be entitled to protections normally afforded to investors of many other blank check companies
17. 17If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by shareholders may be less than $10.00 per share
18. 18Our directors may decide not to enforce the indemnification obligations of our co-sponsors, resulting in a reduction in the amount of funds in the trust account available for distribution to our public shareholders
19. 19If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination
20. 20Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations
21. 21Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares
22. 22We may not hold an annual general meeting until after the consummation of our initial business combination, which could delay the opportunity for our shareholders to appoint directors
23. 23Because we are neither limited to evaluating a target business in a particular industry sector nor have we selected any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations
24. 24We may seek acquisition opportunities with a business or an entity lacking an established record of revenue or earnings
25. 25We may issue notes or other debt securities, or otherwise incur substantial debt, to complete an initial business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our shareholders’ investment in us
26. 26The net proceeds from our IPO and the private placement of units will provide us with $126,500,000 that we may use to complete our initial business combination
27. 27We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability
28. 28We may attempt to complete our initial business combination with a private company about which little information is available, which may result in an initial business combination with a company that is not as profitable as we suspected, if at all
29. 29We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete our initial business combination with which a substantial majority of our shareholders or warrant holders do not agree
30. 30We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination
31. 31Our initial shareholders control a substantial interest in us and thus may exert a substantial influence on actions requiring a shareholder vote, potentially in a manner that you do not support
32. 32Because we must furnish our shareholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses
33. 33Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our initial business combination, require substantial financial and management resources, and increase the time and costs of completing an initial business combination
34. 34Our initial business combination and our structure thereafter may not be tax-efficient to our shareholders and warrant holders. As a result of our business combination, our tax obligations may be more complex, burdensome and uncertain
35. 35Government foreign investment policies and regulations may limit our search for our initial business combination
36. 36Disruptions to the worldwide economy due to changes in U.S. trade policy may limit our search for our initial business combination
37. 37Changes in relations between the United States and the PRC, or in U.S. regulations concerning the PRC, may adversely impact our ability to complete an initial business combination, our ability to raise additional capital, or the market price of our securities
38. 38Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future

Risks Relating to the Post-Business Combination Company

1. 39We may have a limited ability to assess the management of a prospective target business and, as a result, may effect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company
2. 40The officers and directors of an acquisition candidate may resign upon completion of our initial business combination. The loss of an initial business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business
3. 41Our management may not be able to maintain control of a target business after our initial business combination. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business

Risks Relating to Acquiring and Operating a Business in China and Other Foreign Countries

1. 42If we effect our initial business combination with a company located outside of the United States, we would be subject to a variety of additional risks that may adversely affect us
2. 43Exchange rate fluctuations and currency policies may cause a target business’ ability to succeed in the international markets to be diminished
3. 44Agreements we may enter into with potential future subsidiaries and affiliated entities or acquisitions of offshore entities that conduct operations through affiliates in the PRC may be subject to a high level of scrutiny by the relevant tax authorities
4. 45China’s economic, political and social conditions, as well as changes in any government policies, laws and regulations, could have a material adverse effect on our business
5. 46Uncertainties in the interpretation and enforcement of PRC laws and regulations and changes in policies, rules, and regulations in China, which may be quick with little advance notice, could limit the legal protection available to you and us
6. 47U.S. laws and regulations, including the HFCAA, may restrict or eliminate our ability to complete an initial business combination with certain companies, particularly those acquisition candidates with substantial operations in China
7. 48Although we have not identified any potential business combination target or any country in which we may source any target business, we may eventually identify and submit for shareholder approval an initial business combination with a PRC Target Company
8. 49If we successfully consummate our initial business combination with a PRC Target Company, we will be subject to restrictions on dividend payments following the consummation of our initial business combination
9. 50The cash-flow structure of a post-acquisition company based in China poses additional risks including, but not limited to, restrictions on foreign exchange and restrictions on our ability to transfer cash between entities, across borders, and to U.S. investors
10. 51(1) We may transfer funds to the PRC Target Company through an increase in the registered capital of or a shareholder loan to the PRC Target Company. The PRC Target Company may in turn make distributions or pay dividends to us
11. 52In contrast, the following illustrative table shows the post-business combination funds flow of us to the extent that we acquire a PRC Target Company through direct equity investment
12. 53We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies, which could negatively impact potential acquisitions we may pursue in the future
13. 54If we merge with a China-based operating company, then there are significant uncertainties under the PRC Enterprise Income Tax Law relating to the withholding tax liabilities of the PRC entity, and dividends payable by the PRC entity to our offshore entity may not qualify for certain treaty benefits
14. 55M&A Rules and other PRC regulations may make it more difficult for us to complete an acquisition of a PRC Target Company
15. 56Compliance with the PRC Antitrust law may limit our ability to effect our initial business combination
16. 57As we do not have any operations in China other than the limited activities relating to preparing for our IPO and searching for a business combination opportunity subsequent thereto, we believe that we are not required to obtain any material licenses or approvals
17. 58U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of the combined company’ operations within China
18. 59You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against us or our management and directors based on foreign laws. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China
19. 60Exchange controls that exist in the PRC may restrict or prevent us from using the proceeds of our IPO to acquire a PRC Target Company and limit our ability to utilize our cash flow effectively following our initial business combination
20. 61As such, Circular 19 and Circular 16 may significantly limit our ability to transfer the proceeds of our IPO to a PRC target company and the use of such proceeds by the PRC target company
21. 62Increasing oversight by the PRC government and Cyberspace Administration of China (the “CAC”) over cybersecurity and data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our initial business combination, future business and any future offering of securities
22. 63If we select an initial business combination with a PRC Target Company, the approval of the Cybersecurity Review Office, the Central Cyberspace Affairs Commission and/or other PRC authority may be required for our initial business combination under PRC law

Risks Relating to our Management Team

1. 64We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers
2. 65Past performance by our management team and their affiliates may not be indicative of future performance of an investment in us
3. 66We may seek business combination opportunities in industries or sectors that may be outside of our management’s areas of expertise
4. 67We are dependent upon our executive officers and directors and their loss could adversely affect our ability to operate
5. 68Our executive officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination
6. 69Our officers and directors presently have, and any of them in the future may have additional, fiduciary or contractual obligations to other entities and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented
7. 70Our executive officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests
8. 71We may engage in an initial business combination with one or more target businesses that have relationships with entities that may be affiliated with our co-sponsors, executive officers, directors or existing holders which may raise potential conflicts of interest
9. 72The founder shares will be worthless if we do not complete an initial business combination. The private placement units will also be worthless if we do not complete our initial business combination
10. 73Our letter agreement with our co-sponsors, officers and directors may be amended without shareholder approval
11. 74The ownership interest of our co-sponsors may change, and our co-sponsors may divest their ownership interest in us before identifying a business combination, which may deprive us of key personnel

Risks Relating to our Securities

1. 75We may issue our shares to investors in connection with our initial business combination at a price which is less than the prevailing market price of our shares at that time
2. 76You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. Therefore, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss
3. 77Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions
4. 78You will not be permitted to exercise your warrants unless we register and qualify the underlying Class A ordinary shares or certain exemptions are available
5. 79You may only be able to exercise your public warrants on a “cashless basis” under certain circumstances, and if you do so, you will receive fewer Class A ordinary shares from such exercise than if you were to exercise such warrants for cash
6. 80The grant of registration rights to our initial shareholders and holders of our private placement units may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market price of our Class A ordinary shares
7. 81Unlike some other similarly structured special purpose acquisition companies, our initial shareholders will receive additional Class A ordinary shares if we issue certain shares to consummate an initial business combination
8. 82A provision of our warrant agreement may make it more difficult for us to consummate an initial business combination
9. 83We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless
10. 84Our warrants may have an adverse effect on the market price of our Class A ordinary shares and make it more difficult to effectuate our initial business combination
11. 85The value of the founder shares following completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of our Class A ordinary shares at such time is substantially less than $10.00 per share
12. 86Because each unit contains one-half of one warrant and only a whole warrant may be exercised, the units may be worth less than units of other special purpose acquisition companies
13. 87Holders of Class A ordinary shares will not be entitled to vote on continuing our company in a jurisdiction outside of the Cayman Islands prior to the closing of a business combination
14. 88We are an exempted company incorporated under the laws of the Cayman Islands. As a result, it may be difficult for investors to effect service of process within the United States upon our directors or officers, or enforce judgments obtained in the United States courts against our directors or officers
15. 89Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss
16. 90Our search for an initial business combination, and any target business with which we ultimately consummate an initial business combination, may be materially adversely affected by the occurrence of a natural disaster
17. 91We may be a passive foreign investment company, or “PFIC,” which could result in adverse United States federal income tax consequences to U.S. investors
18. 92An investment in our securities could result in uncertain U.S. federal income tax consequences
19. 93We may reincorporate in or transfer by way of continuation to another jurisdiction in connection with our initial business combination and such reincorporation may result in taxes imposed on shareholders or warrant holders
20. 94After our initial business combination, it is possible that a majority of our directors and officers will live outside the United States and all of our assets will be located outside the United States; therefore, investors may not be able to enforce federal securities laws or their other legal rights
21. 95Provisions in our amended and restated memorandum and articles of association may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A ordinary shares and could entrench management