Company: CAAS
Filing Date: 2025-08-04
Form Type: 424B3
Source: 0001104659-25-073486
Chunk: 46

Company: China Automotive Systems, Inc.
Filing Date: 2025-08-04
Form: 424B3
Chunk 46
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 selling a stock short. These short attacks have, in the past, led to selling
of shares in the market.

In the recent past, many public companies that
have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative publicity
has centered around allegations of a lack of effective internal control over financial reporting resulting in financial and accounting
irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations
of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the
interim, are subject to shareholder lawsuits and/or SEC enforcement actions.

It is not clear what effect such negative publicity
would have on the Company, if any. If the Company were to become the subject of any unfavorable allegations, whether such allegations
are proven to be true or untrue, the Company could have to expend a significant amount of resources to investigate such allegations and/or
defend itself. While the Company would strongly defend against any such short seller attacks, the Company may be constrained in the manner
in which it can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial
confidentiality. Such a situation could be costly and time-consuming, and could distract the Company’s management from growing
the Company. Even if such allegations are ultimately proven to be groundless, allegations against the Company could severely impact its
business operations and stockholders’ equity, and any investment in the Company’s stock could be greatly reduced or rendered
worthless.

The Company’s secured credit facilities contain certain financial covenants that it may not satisfy, which, if not satisfied, could result in the acceleration of the amounts due under the Company’s secured credit facilities and the limitation of the Company’s ability to borrow additional funds in the future.

The agreements governing the Company’s secured
credit facilities subject it to various financial and other restrictive covenants with which the Company must comply on an ongoing or
periodic basis. These covenants include, but are not limited to, restrictions on the utilization of the funds and the maintenance of
certain financial ratios. If the Company violates any of these covenants, the Company’s outstanding debt under the Company’s
secured credit facilities could become immediately due and payable, the Company’s lenders could proceed against any collateral
securing such indebtedness and the Company’s ability to borrow additional funds in the future may be limited