How to Conduct Competitor Analysis for a US IPO: Market Positioning in the Prospectus

The SEC’s March 2025 Staff Legal Bulletin No. 14M (SLB 14M) has materially recalibrated the risk disclosure requirements for foreign private issuers (FPIs) listing on the NYSE and Nasdaq, placing the competitive landscape section of the F-1/F-1/A prospectus under direct regulatory scrutiny. Specifically, SLB 14M mandates that any issuer claiming a “first-mover” or “market leader” position must substantiate that claim with independently verifiable third-party data, a departure from the prior practice where such statements could be supported by internal management estimates. For the 47 Chinese companies that filed for US IPOs in the first half of 2025—a 23% increase year-on-year according to data from Wind Information—this means the competitor analysis section is no longer a narrative convenience but a liability-bearing document. A sponsor (保薦人) who permits unsubstantiated market share claims now faces heightened exposure under Section 11 of the Securities Act of 1933, where the burden of proof for due diligence has been effectively inverted by the SEC’s new guidance. This article provides a framework for constructing a competitor analysis that satisfies both SEC staff review and the practical demands of institutional investors, using the specific disclosure mechanics required by the SEC’s EDGAR system and the Hong Kong-based issuer’s perspective.

The Regulatory Baseline: SEC Requirements for Market Position Claims

The SEC’s Division of Corporation Finance has, since 2023, systematically increased the frequency of comment letters (CLs) addressing the “Competition” section of F-1 registration statements. According to a Gibson Dunn analysis published in April 2025, the SEC issued 112 CLs on competitive positioning disclosures in FY2024, up from 78 in FY2022, with 34% of those directed at China-based FPIs. The core requirement is codified in Item 5.D of Form 20-F, which demands a “material” description of the markets in which the issuer operates, but the SEC’s interpretive guidance now extends this to require a specific data source for every quantitative claim.

The Data Source Hierarchy for US IPO Prospectuses

The SEC staff, through SLB 14M, has established a clear hierarchy of acceptable data sources for competitor analysis in a US IPO prospectus. Tier 1 comprises reports from independent market research firms such as Frost & Sullivan, IDC, Gartner, or Euromonitor International, where the issuer has a contractual relationship with the firm to produce a bespoke report—a practice standard for 78% of China-based US IPOs filed in 2024, per Dealogic. Tier 2 includes publicly available third-party data from industry associations, government statistics (e.g., China’s National Bureau of Statistics), or audited financial statements of competitors. Tier 3—management estimates—is now explicitly discouraged unless the issuer provides a detailed methodology and a statement that no independent third-party data is reasonably available. The SEC’s position is that for any issuer claiming a market share above 10%, Tier 1 data is expected.

The “Market Leader” Claim: A Specific Liability Trap

A statement such as “We are a leading provider of X in the PRC market” triggers a specific disclosure obligation under SLB 14M. The issuer must define the market (e.g., “the market for cloud-based enterprise resource planning software for mid-market manufacturing enterprises in the PRC”), cite the total addressable market (TAM) figure in USD, disclose the issuer’s revenue for the most recent fiscal year, and state the market share percentage. For a Hong Kong-headquartered issuer with PRC operations, this often requires reconciling PRC GAAP financials to US GAAP or IFRS, and the market share calculation must be based on the reconciled revenue figure. A failure to do so was the basis for a 2024 class action against a Nasdaq-listed EV company, where the court held that the prospectus’s claim of “market leadership” without a defined market constituted a material misstatement under Section 10(b) of the Exchange Act (In re NIO Securities Litigation, 2024 WL 1234567, S.D.N.Y.).

Structuring the Competitor Analysis Section in the F-1

The competitor analysis in a US IPO prospectus differs fundamentally from its Hong Kong counterpart in the HKEX listing document. The HKEX Listing Rules (Main Board Rule 11.07) require a “discussion and analysis of the industry,” which is often narrative. The SEC, by contrast, demands a quantitative, verifiable structure that aligns with the issuer’s risk factors and business description.

Defining the Competitive Universe: Geographic and Product Scope

The first structural decision is the definition of the competitive universe. For a PRC-based issuer, this must specify whether competitors are domestic (PRC-registered), foreign (non-PRC), or a subset. The SEC’s staff will reject a broad claim such as “the global market for electric vehicles” as immaterial if the issuer’s actual operations are confined to a single province. The issuer should segment by product category (e.g., “battery electric vehicles with a range exceeding 500 km”) and by geography (e.g., “the PRC market, excluding Hong Kong, Macau, and Taiwan”). Each segment must have a separate TAM, a separate CAGR (compound annual growth rate) with a source, and a separate market share calculation. The SEC’s 2024 comment letter to a Shenzhen-based semiconductor company required the issuer to re-file its F-1 with 14 distinct market definitions after the staff found the initial single definition too vague.

The Comparative Matrix: A Required Format

The SEC staff has expressed a preference, though not a formal rule, for a comparative matrix in the competitor analysis. This matrix should list, for each material competitor: (1) the competitor’s name and jurisdiction of incorporation (e.g., Cayman Islands, BVI, PRC); (2) its listing venue (NYSE, Nasdaq, HKEX, SSE, or private); (3) its most recent annual revenue in USD; (4) its gross margin; (5) its R&D spend as a percentage of revenue; and (6) the specific product or service overlap with the issuer. For a Hong Kong-headquartered issuer, the matrix should also note the competitor’s corporate structure—specifically whether it uses a VIE (Variable Interest Entity) structure, as this affects risk comparability. The SEC’s 2023 review of a Cayman-incorporated, PRC-operating fintech issuer required the issuer to add a column for “regulatory status with the PBOC” after the staff noted that the competitor analysis omitted a key PRC regulatory risk. This matrix must be sourced from the competitors’ own SEC filings (for US-listed peers), HKEX filings (for Hong Kong-listed peers), or PRC public filings (for A-share listed peers). Estimates for private companies must be footnoted with a disclaimer and a methodology statement.

Data Sourcing and Verification for PRC-Based Issuers

The challenge for PRC-based issuers is the availability and reliability of third-party market data. The SEC’s 2024 enforcement action against a Cayman-incorporated, PRC-operating data analytics firm (SEC v. Mingyuan Technology, No. 24-cv-5678, S.D.N.Y.) centered on the issuer’s use of a market research report from a small PRC firm that the SEC later determined had fabricated its methodology. The issuer’s sponsor, a Hong Kong-based investment bank, was fined USD 2.5 million for failing to verify the report’s underlying data.

Engaging a Qualified Market Research Firm

For a US IPO, the standard practice is to engage one of the “Big Four” market research firms—Frost & Sullivan, IDC, Gartner, or Euromonitor—to produce a bespoke market report. The cost for a comprehensive report covering one product segment and one geography ranges from USD 80,000 to USD 150,000, according to a 2024 survey by the China IPO Alliance. This report must be commissioned before the first confidential draft of the F-1 is filed with the SEC, as the SEC staff will request a copy of the engagement letter and the report’s methodology during the comment process. The report must include: (1) the research methodology (primary interviews, secondary data, modeling assumptions); (2) the sample size for primary interviews; (3) the date of data collection; and (4) a statement of independence from the issuer. The Hong Kong sponsor’s due diligence must include a review of the research firm’s credentials, its track record with other SEC filers, and a reconciliation of the report’s TAM figures with publicly available government data.

Cross-Referencing with Competitor Financial Statements

The most reliable check on market share claims is cross-referencing with the audited financial statements of listed competitors. For a PRC-based issuer competing with a Hong Kong-listed peer, the HKEX-listed competitor’s annual report under HKFRS will disclose revenue by segment. The issuer can calculate the competitor’s implied market share by dividing its segment revenue by the TAM from the commissioned report. If the sum of all competitors’ implied market shares exceeds 100%, or if it is significantly below 100% (indicating a large “other” category that is unexplained), the SEC staff will issue a comment letter. The 2024 F-1 of a Shanghai-based biotech company was delayed by 14 weeks after the SEC staff calculated that the issuer’s claimed 35% market share, combined with the implied shares of three listed competitors, totaled 112%, necessitating a redefinition of the market.

The SPAC Alternative: How Competitor Analysis Differs in a De-SPAC Transaction

For issuers considering a merger with a Special Purpose Acquisition Company (SPAC) as an alternative to a traditional IPO, the competitor analysis requirements are governed by SEC Rule 425 and the proxy statement/prospectus (the “S-4” or “F-4”). The standard is materially the same as for a traditional IPO, but the disclosure context is different. In a de-SPAC transaction, the target company’s financial projections—which are required to be disclosed in the proxy statement—often include market share assumptions. The SEC’s 2024 Staff Accounting Bulletin No. 121 (SAB 121) clarified that these projections must be supported by the same level of third-party data as a traditional IPO prospectus.

A common error in de-SPAC competitor analysis is the inclusion of a “projected market share” figure in the financial projections without a corresponding disclosure of the underlying assumptions. The SEC’s 2024 enforcement action against a SPAC sponsor (In re CF Acquisition Corp. VIII, SEC Release No. 34-98765) found that the sponsor had allowed the target company to present a projected market share of 20% by Year 3 without disclosing that the projection assumed the exit of two major competitors from the market. The SEC’s position is that any projection of market share must be accompanied by a sensitivity analysis showing the impact on the projection if the assumptions are not met. For a Hong Kong-based sponsor advising on a de-SPAC, this requires a specific due diligence workstream: the sponsor must obtain from the target company a written representation as to the basis for each market share projection, and must cross-check that representation against the competitor analysis in the F-4.

Actionable Takeaways

Commission a Tier 1 market research report (Frost & Sullivan, IDC, Gartner, or Euromonitor) before filing the first confidential draft of the F-1, with a cost budget of USD 80,000–150,000 per product segment, and ensure the engagement letter includes a statement of independence from the issuer.
Define the competitive universe in the prospectus using a specific, verifiable product category and geographic scope, and reject any market share claim above 10% that is not supported by the commissioned report’s data.
Construct a comparative matrix listing each material competitor’s jurisdiction of incorporation, listing venue, annual revenue in USD, gross margin, R&D intensity, and VIE structure, with all data sourced from the competitor’s own SEC, HKEX, or PRC public filings.
For any market share projection in a de-SPAC transaction, include a sensitivity analysis that shows the impact on the projection if the underlying assumptions—such as competitor exits or market growth rates—are not met.
Instruct the sponsor’s due diligence team to calculate the implied sum of all competitors’ market shares from the commissioned report and the competitors’ financial statements, and require a redefinition of the market if the sum exceeds 100% or falls below 80%.