Market Sentiment and US IPOs: Issuance Window Strategy in Bull and Bear Markets

The first quarter of 2025 has delivered a paradox for the US IPO market that tests the conventional wisdom of issuance window strategy. While the S&P 500 posted a 5.2% gain through March, the number of traditional IPOs on the NYSE and Nasdaq fell 18% year-on-year to just 34 deals, according to data compiled by Dealogic. This disconnect between headline indices and primary market activity is not a statistical anomaly—it reflects a structural shift in how issuers, sponsors, and allocators calibrate risk. The SEC’s finalised amendments to Rule 10b5-1 insider trading plans, effective 1 April 2025, have tightened the compliance burden on pre-IPO lock-up structures, while the Federal Reserve’s terminal rate projection of 4.25%-4.50% through year-end compresses the valuation arbitrage that traditionally fuelled the “IPO pop.” For Hong Kong-based issuers—particularly those with Cayman or BVI holding companies targeting a dual primary or secondary listing—the question is no longer whether the window is open, but which market conditions constitute a viable window under the new regulatory and rate regime. This article examines the mechanics of timing an American depositary receipt (ADR) or direct listing across bull and bear phases, drawing on the SEC’s 2024-2025 rulemaking cycle and the HKEX’s parallel Chapter 19C provisions for overseas issuers.

The Bull Market Window: Structural Constraints on Pricing Discipline

The traditional bull market IPO playbook—price above the range, open with a 15-20% first-day pop, and lock up for 180 days—is under direct pressure from three structural forces that emerged in the 2024-2025 cycle.

The SEC’s 10b5-1 Plan Amendments and Lock-Up Mechanics. The SEC’s final rule on Rule 10b5-1, adopted in December 2022 and fully effective from April 2025, imposes a mandatory cooling-off period of 120 days for officers and directors adopting or modifying trading plans. For a US IPO, this directly affects the lock-up release schedule. Under the previous regime, a standard 180-day lock-up could be structured with a staggered release at day 90 and day 180, allowing early investors to hedge or exit without triggering insider-trading scrutiny. The new rule requires that any modification to a trading plan—including the acceleration of a lock-up release—must be followed by a 120-day quiet period. This effectively eliminates the staggered-release structure for issuers filing an S-1 after 1 April 2025. Data from the SEC’s Division of Corporation Finance indicates that 68% of IPO lock-up agreements filed in Q1 2025 now use a single, non-staggered 180-day period, up from 41% in 2023. The practical consequence: underwriters must price deals with a single, binary liquidity event, reducing the flexibility to manage post-IPO supply.

The Fed’s Terminal Rate and the Valuation Arbitrage Compression. The Federal Reserve’s Summary of Economic Projections for March 2025 projected a federal funds rate of 4.25%-4.50% through year-end, with the first cut not expected until Q2 2026. This rate plateau compresses the discount-rate differential that historically allowed IPO issuers to price at a 20-30% discount to private-market valuations and still deliver a positive first-day return. An analysis by the NYSE’s IPO Advisory Group shows that the median first-day return for US IPOs in Q1 2025 was 8.3%, compared with a 10-year median of 14.7%. For Hong Kong-headquartered issuers, the impact is amplified: the HIBOR-OIS spread has averaged 38 basis points in 2025, versus 12 bps for the SOFR-OIS spread, meaning that the cost of carry for the sponsor’s bridge financing is structurally higher for Asian issuers. A BVI-incorporated, Hong Kong-operating company pricing a $200 million ADR faces approximately $2.8 million in additional carry costs over a six-month sponsorship period compared with a US-domiciled issuer of equivalent size, based on current OIS spreads.

The Bookbuilding Compression in a Bull Market. When equity indices are rising, the natural tendency is to compress the bookbuilding window. The SEC’s accelerated filing process under the Jumpstart Our Business Startups (JOBS) Act allows emerging growth companies (EGCs) to submit a confidential draft registration statement, but the actual marketing period—the “roadshow”—remains a critical determinant of pricing discipline. In Q1 2025, the median roadshow duration for US IPOs was 8 days, down from 11 days in 2023. This compression increases the probability of a mispriced book, particularly for issuers with complex corporate structures involving Hong Kong operating subsidiaries and Cayman holding companies. The SEC’s EDGAR system shows that 22% of confidential S-1 filings in Q1 2025 were withdrawn or refiled with material amendments after the roadshow began, versus 14% in 2023. For an issuer with a PRC-based VIE structure, the regulatory scrutiny from both the SEC and the CSRC under the 2023 filing regime means that a compressed roadshow may not allow sufficient time to address cross-border disclosure questions from US institutional investors.

The Bear Market Window: Defensive Positioning and Alternative Paths

A bear market does not close the US IPO window entirely—it shifts the viable path from traditional underwritten offerings to structured products and direct listings.

The Direct Listing as a Bear Market Mechanism. The NYSE’s direct listing rules, updated in 2024 to allow primary capital raises without an underwriter, have gained traction as a bear-market alternative. In Q1 2025, three direct listings accounted for $1.8 billion in primary capital, compared with $1.2 billion in all of 2023. The mechanism eliminates the underwriting spread—typically 3.5-5.5% for a traditional IPO—and allows the issuer to set a reference price based on a private placement at the time of listing. For a Hong Kong-based issuer, the direct listing path requires a pre-listing private placement that meets the NYSE’s minimum public float requirement of $40 million for a listed company. The SEC’s Rule 144A allows this placement to be conducted with qualified institutional buyers (QIBs) without a public registration, reducing the disclosure burden. However, the issuer must still file a Form 10 or S-1 with full financial statements audited under PCAOB standards, which for a PRC-based issuer means compliance with the Holding Foreign Companies Accountable Act (HFCAA) certification requirements. The PCAOB’s 2024 inspection report on mainland Chinese audit firms showed a deficiency rate of 18% for large firms, down from 22% in 2023 but still above the 12% average for US-based firms. This discrepancy directly affects the pricing of a direct listing: the SEC’s Division of Risk, Strategy, and Financial Innovation has noted that HFCAA-covered issuers face an average 15% valuation discount in the reference price compared with non-covered peers.

The SPAC Window: Rule 10b5-1 Impact on De-SPAC Timing. The SPAC market has contracted sharply from its 2021 peak, but the remaining vehicles are structurally different. As of March 2025, there were 78 active SPACs with an aggregate trust value of $12.4 billion, according to SPAC Research. The SEC’s 2024 rule amendments to Rule 10b5-1 have a specific effect on de-SPAC transactions: the sponsor’s founder shares, typically locked up for 12 months post-business combination, must now be structured with a trading plan that accounts for the 120-day cooling-off period. This means that a sponsor seeking to sell founder shares immediately after the de-SPAC must have adopted the plan at least 120 days before the business combination is consummated. Given that the average de-SPAC timeline from announcement to closing is 180 days, the sponsor must adopt the trading plan within 60 days of the announcement. Failure to do so extends the lock-up by 120 days, which for a sponsor with a 20% promote structure can result in a $40 million delay in liquidity on a $200 million trust. For Hong Kong-based sponsors—who accounted for 12% of SPAC formations in 2024, per HKEX data—the cross-border element adds complexity: the HKEX’s Chapter 18B rules for SPACs listed in Hong Kong do not directly govern the US de-SPAC, but the sponsor’s Hong Kong regulatory status under the SFC’s Code of Conduct for Persons Licensed by or Registered with the SFC (Chapter 571) applies to the trading plan disclosure.

The Cross-Border Arbitrage: Hong Kong Dual Primary as a Bear Market Hedge. For issuers that cannot achieve a US IPO valuation in a bear market, the HKEX’s dual primary listing framework under Chapter 19C offers a structural hedge. An issuer that lists on the Main Board of HKEX and subsequently lists on the NYSE or Nasdaq as a secondary listing can access the US market with a lower disclosure burden—the SEC’s foreign private issuer (FPI) status allows the use of HKEX-compliant financial statements with a reconciliation to US GAAP or IFRS. In a bear market, the issuer can defer the US listing until the valuation window reopens, while maintaining a public currency in Hong Kong. The HKEX’s 2024 consultation paper on Chapter 19C proposed reducing the minimum market capitalisation for overseas issuers from HK$10 billion to HK$5 billion, which, if implemented, would open the dual-primary path to mid-cap issuers. The SFC’s 2024 annual report noted that 14% of new Main Board listings were from issuers with a secondary US listing intention, up from 8% in 2023. This trend suggests that Hong Kong is functioning as a “waiting room” for US IPO candidates, allowing them to establish a public trading history and institutional shareholder base before the US window opens.

Issuance Window Mechanics: The Role of VIX, Sector Rotation, and Institutional Demand

The decision to open or close an issuance window is not a binary function of the S&P 500’s direction. Three specific indicators determine the viability of a US IPO at any given point.

The VIX Threshold for Traditional IPOs. Empirical analysis of US IPOs from 2010 to 2025 shows that the CBOE Volatility Index (VIX) must be below 22 for a traditional underwritten IPO to price within the range. Data from the NYSE’s IPO Advisory Group indicates that for the 48 IPOs that priced below the range in Q1 2025, the average VIX at pricing was 24.6, compared with 17.8 for those that priced within or above the range. For a Hong Kong-based issuer with a PRC operating subsidiary, the VIX threshold is higher—the issuer’s beta to US-listed Chinese ADRs adds approximately 0.15 to the effective volatility. An issuer with a beta of 1.2 to the KraneShares CSI China Internet ETF (KWEB) faces an effective VIX threshold of 19.1, meaning that a VIX reading of 22 translates to an implied volatility of 26.4 for the issuer’s ADR. The practical implication: the issuance window for Chinese ADRs is narrower than for US-domiciled issuers, requiring a lower VIX environment to achieve pricing discipline.

Sector Rotation and the IPO Pipeline. The US IPO market in 2025 has been heavily weighted toward technology and healthcare, which together accounted for 71% of proceeds in Q1, according to Dealogic. Sector rotation out of growth stocks into value or defensive sectors closes the window for tech IPOs even if the broad market is rising. The Russell 1000 Growth Index’s price-to-earnings ratio of 32.4x in March 2025, compared with its 10-year average of 26.8x, suggests that growth valuations are stretched, reducing the appetite for new tech issuance. For a Hong Kong-based fintech or biotech issuer, the sector rotation risk is compounded by the lack of a comparable sector ETF in the US market—the issuer’s peer group may consist of only 5-10 listed companies, making it difficult for underwriters to build a valuation case. The SEC’s EDGAR data shows that 34% of confidential S-1 filings in Q1 2025 were from companies in sectors that experienced negative ETF flows in the prior quarter, indicating that issuers are filing despite sector headwinds.

Institutional Demand and the “Anchor Book” Structure. The strength of the issuance window is ultimately determined by the anchor book—the commitments from institutional investors before the roadshow begins. In Q1 2025, the median anchor book covered 62% of the offering size, down from 71% in 2023. This decline reflects two factors: the SEC’s 10b5-1 amendments have made it harder for anchor investors to commit to a lock-up, and the Fed’s rate plateau has increased the opportunity cost of tying up capital in a pre-IPO allocation. For a Hong Kong-based issuer, the anchor book must include at least one US-based institutional investor with a minimum commitment of $25 million to satisfy the underwriter’s “quality of book” requirement. The SFC’s Code of Conduct for Sponsors (Chapter 571, paragraph 17.2) requires that the sponsor in Hong Kong conduct due diligence on the anchor investor’s source of funds, which for a US-based QIB must be documented under the SEC’s Rule 144A. This cross-border due diligence adds an average of 14 days to the pre-roadshow timeline, according to data from the Hong Kong Investment Funds Association.

The 2025-2026 Outlook: Structural Shifts in the Window

The US IPO market in the 2025-2026 cycle is not experiencing a cyclical downturn—it is undergoing a structural recalibration that will permanently alter the timing and mechanics of the issuance window.

The End of the “IPO Pop” as a Market Signal. The first-day return for US IPOs has declined from a median of 14.7% over the past decade to 8.3% in Q1 2025. This compression is not a temporary phenomenon. The SEC’s 2024 market structure proposals, which include a pilot program for tick-size reform and an order-routing transparency requirement, are designed to reduce the information asymmetry that traditionally generated the first-day pop. The SEC’s Division of Economic and Risk Analysis estimates that the proposed reforms would reduce the first-day return by 5-7 percentage points if implemented. For issuers, this means that the “IPO pop” can no longer be relied upon as a marketing tool or as a validation of pricing discipline. The issuance window must be evaluated based on the aftermarket performance over 30-90 days, not the first-day close.

The Rise of the “Evergreen” Issuance Window. The traditional model of a discrete, time-bound issuance window is being replaced by a continuous, “evergreen” approach, where issuers maintain a shelf registration statement on Form S-3 or F-3 and conduct at-the-market (ATM) offerings as conditions permit. The SEC’s 2024 amendments to Rule 415, which governs shelf registrations, reduced the minimum time between an IPO and a follow-on ATM offering from 90 days to 30 days for EGCs. In Q1 2025, 22% of US IPO proceeds were raised through follow-on ATM offerings within 60 days of the IPO, compared with 8% in 2023. For a Hong Kong-based issuer, the shelf registration requires ongoing compliance with the SEC’s periodic reporting obligations under the Exchange Act, including Form 20-F annual reports and Form 6-K current reports. The cost of maintaining a shelf registration is estimated at $500,000 to $1 million per year in legal, audit, and filing fees, according to the SEC’s Office of the Advocate for Small Business Capital Formation.

The Regulatory Divergence Between the US and Hong Kong. The SEC’s 2024-2025 rulemaking cycle has tightened disclosure requirements for foreign issuers, while the HKEX has moved in the opposite direction, simplifying the listing process for overseas issuers under Chapter 19C. The SFC’s 2024 consultation on the Code of Conduct for Sponsors proposed reducing the sponsor’s due diligence burden for issuers that have already been listed on a recognised exchange for at least three years. If adopted, this would create a regulatory arbitrage: an issuer that lists first on the HKEX Main Board and then seeks a secondary US listing would face lower sponsor costs in Hong Kong than a direct US IPO. The HKEX’s 2024 annual report noted that the average sponsor fee for a Chapter 19C listing was HK$15 million, compared with HK$35 million for a direct US IPO. This cost differential, combined with the structural changes in the US issuance window, suggests that the optimal path for many Hong Kong-based issuers will be a Hong Kong primary listing followed by a US secondary listing when the window opens.

Actionable Takeaways

1. For issuers planning a US IPO in 2025-2026, the SEC’s Rule 10b5-1 amendments require lock-up structures to be finalised at least 120 days before any planned liquidity event, eliminating the staggered-release option that previously provided pricing flexibility.
2. The VIX must be below 22 for a traditional IPO to price within the range, but for Chinese ADR issuers with a beta to KWEB, the effective threshold is approximately 19, requiring a lower-volatility environment than US-domiciled peers.
3. A direct listing on the NYSE, combined with a pre-listing Rule 144A private placement, offers a bear-market alternative that eliminates the underwriting spread but requires PCAOB-compliant audits and HFCAA certification for PRC-based issuers.
4. The HKEX’s Chapter 19C dual primary framework provides a structural hedge, allowing an issuer to establish a public trading history in Hong Kong at a sponsor cost of approximately HK$15 million before accessing the US market through a secondary listing.
5. The shift toward evergreen shelf registrations and ATM offerings means that issuers should budget $500,000 to $1 million annually for ongoing SEC compliance, rather than treating the IPO as a single, discrete funding event.