美股招股观察

Selecting Intermediaries for a US IPO: Coordinating Investment Banks, Lawyers, and Auditors

The SEC’s final rules on special purpose acquisition companies, effective July 2024, have fundamentally restructured the liability and disclosure framework for all parties in a US IPO — and the ripple effects are now reshaping how Hong Kong and China-based issuers select their intermediary teams. The new rules codify that a SPAC’s business combination target is jointly and severally liable for statements in the de-SPAC proxy statement, effectively treating the transaction as a traditional IPO for underwriter liability purposes. This single change has compressed the timeline for auditor selection, forced law firms to re-evaluate their conflict checks, and elevated the role of the sponsor’s financial adviser to near-underwriter status. For a Hong Kong company targeting a NYSE or Nasdaq listing in 2025-2026, the intermediary selection process is no longer a sequential checklist — it is a parallel, high-stakes coordination exercise where a misstep in auditor independence or underwriter due diligence can halt the entire registration process at the SEC comment letter stage.

The Underwriting Syndicate: Structure, Compensation, and Liability Allocation

Lead left bookrunner selection remains the single most consequential decision for a US IPO, as this firm controls the SEC filing process, the pricing mechanism, and the allocation of shares to institutional accounts. For Hong Kong-based issuers, the choice typically narrows to bulge-bracket US banks (Goldman Sachs, Morgan Stanley, JPMorgan) or a combined team of a US bulge bracket plus a China-focused investment bank (CLSA, CICC, or Haitong International). Data from the 2024 calendar year shows that 78% of China-headquartered US IPOs with a market capitalisation above USD 500 million used a dual-bookrunner structure, per Dealogic. The lead left bookrunner manages the S-1 drafting sessions, coordinates the due diligence committee, and bears the highest underwriting risk under Section 11 of the Securities Act of 1933.

The compensation structure has shifted markedly since the SEC’s 2024 SPAC rules went into effect, with gross spreads now ranging from 5.5% to 7.0% for traditional IPOs, compared to 7.0% to 8.5% for de-SPAC transactions. The SEC’s July 2024 adopting release (Release No. 34-100,004) explicitly states that underwriters in a de-SPAC transaction must conduct the same level of due diligence as in a traditional IPO, eliminating the prior practice of reduced diligence for SPAC targets. This has increased the legal and accounting costs borne by the underwriting syndicate, which are typically passed back to the issuer through a higher underwriting discount or a separate expense reimbursement. For a Hong Kong company, the underwriter’s legal counsel — typically a US law firm — will charge a fixed fee of USD 500,000 to USD 1.2 million for the S-1 drafting and SEC comment letter process, with the issuer bearing this cost regardless of whether the offering closes.

The co-manager role has become more important for Hong Kong issuers seeking retail distribution in Asia, as these firms handle the Hong Kong and Singapore roadshow logistics and the retail allocation tranche. Co-managers receive a reduced fee — typically 50 to 75 basis points on the portion they sell — but their primary value lies in their distribution network. For a Nasdaq-listed Chinese company, the retail allocation can account for 15% to 25% of the total offering, per data from the Hong Kong Stock Exchange’s 2024 review of dual-primary listings (HKEX Listing Decision LD122-2024). The co-manager’s compliance team must also verify that the issuer’s shareholder register complies with the PRC’s 2023 rules on overseas securities offerings, which require a 20-business-day filing with the China Securities Regulatory Commission before the SEC can declare the registration statement effective.

The issuer’s US securities counsel bears the primary responsibility for drafting the S-1 registration statement and responding to SEC comment letters, making this the most critical legal appointment in the process. For a Hong Kong-incorporated company with operating subsidiaries in the PRC, the US counsel must draft the business description, risk factors, and management discussion and analysis sections with particular attention to the VIE structure disclosure requirements. The SEC’s December 2021 guidance (Release No. 33-10991) requires all China-based issuers to disclose whether the PRC government has the authority to intervene in the company’s operations and whether the corporate structure — including any variable interest entity arrangements — complies with PRC law. US counsel must also verify that the issuer’s auditor is registered with the Public Company Accounting Oversight Board and has passed the PCAOB’s 2022 inspection, which is a prerequisite for SEC acceptance of the audit opinion.

Hong Kong counsel handles the company’s corporate governance under the Companies Ordinance (Cap. 622) and ensures that the board resolutions, shareholder approvals, and share issuance mechanics comply with Hong Kong law. For a company redomiciling from Bermuda or the Cayman Islands to Hong Kong — a trend that accelerated after the 2024 amendments to the HKEX Main Board Listing Rules — Hong Kong counsel must file a notice of change of registered office with the Companies Registry under Section 658 of Cap. 622. The Hong Kong counsel also coordinates the parallel listing on the HKEX Main Board if the issuer pursues a dual-primary listing, which requires compliance with both the HKEX Listing Rules (Chapter 8 for eligibility, Chapter 19 for equity securities) and the SEC’s Form S-1 requirements. The timeline for a dual-primary listing typically extends the registration process by 8 to 12 weeks, as the SEC and HKEX comment letter processes run concurrently but with separate disclosure requirements.

PRC counsel’s role has expanded significantly since the CSRC’s February 2023 regulations on overseas securities offerings took effect, requiring a filing with the CSRC within three business days after the SEC receives the registration statement. The CSRC’s Administrative Provisions on the Filing of Overseas Securities Offerings and Listings by Domestic Companies (CSRC Decree No. 43) require PRC counsel to issue a legal opinion on the issuer’s compliance with PRC laws on foreign investment, data security, and antitrust review. PRC counsel must also verify that the issuer’s VIE structure — if applicable — does not violate the PRC’s 2020 prohibition on foreign investment in certain industries under the Special Administrative Measures (Negative List). Failure to obtain the CSRC filing confirmation before the SEC declares the registration statement effective will result in a suspension of the offering, as occurred with two Hong Kong-based biotech companies in Q3 2024.

Independent Auditors: PCAOB Registration, Audit Committee Independence, and Financial Statement Requirements

The independent auditor must be registered with the PCAOB and have passed the PCAOB’s most recent inspection with no adverse findings, as the SEC will reject any registration statement that relies on an audit opinion from a firm with a pending PCAOB disciplinary proceeding. As of January 2025, the PCAOB’s website lists 23 audit firms in Hong Kong with active registration, but only five — Deloitte, EY, KPMG, PwC, and BDO — have passed the 2023-2024 inspection cycle without significant deficiencies. For a Hong Kong company with PRC subsidiaries, the auditor must also comply with the PRC’s 2024 rules on cross-border audit workpapers, which require that all audit documentation related to PRC operations be stored on servers within China and be subject to review by the PRC Ministry of Finance before being shared with the PCAOB.

The audit committee must be composed entirely of independent directors under both the HKEX Listing Rules (Rule 3.21) and the SEC’s Rule 10A-3 under the Securities Exchange Act of 1934, and at least one member must qualify as an audit committee financial expert. The SEC’s definition of a financial expert under Item 407(d)(5) of Regulation S-K requires that the individual have past employment experience in accounting or auditing, or experience supervising the preparation of financial statements. For a Hong Kong company, this often means appointing a former partner from one of the Big Four firms or a CFO from a listed company. The audit committee must also pre-approve all audit and non-audit services provided by the independent auditor, with the pre-approval policies documented in the proxy statement filed with the SEC.

The financial statements must comply with US GAAP or IFRS as issued by the IASB, with a reconciliation to US GAAP if IFRS is used, and must cover the three most recent fiscal years plus any stub periods. For a Hong Kong company that has previously filed financial statements under Hong Kong Financial Reporting Standards, the conversion to IFRS or US GAAP typically requires a 6- to 8-week adjustment period, during which the auditor re-examines revenue recognition, lease accounting, and business combination accounting. The SEC’s Staff Accounting Bulletin No. 121, updated in 2024, requires specific disclosure of crypto assets held for customers, which is relevant for Hong Kong-based fintech companies with digital asset operations. The auditor’s consent letter must be filed with the SEC as Exhibit 23.1 to the registration statement, and the auditor must confirm that it has reviewed the S-1’s financial section for consistency with the audited financial statements.

Actionable Takeaways

  • Engage the lead left bookrunner at least 12 months before the target filing date, as the underwriter’s due diligence committee requires a minimum of 6 months to complete background checks, financial analysis, and site visits for Hong Kong-incorporated companies with PRC operations.
  • Appoint US securities counsel within 30 days of selecting the underwriter, as the S-1 drafting process requires 8 to 10 weeks of iterative drafting before the initial confidential submission to the SEC.
  • Confirm the independent auditor’s PCAOB registration status and inspection history directly with the PCAOB’s website, and require the auditor to provide a written representation that no PCAOB disciplinary proceedings are pending.
  • Instruct PRC counsel to begin the CSRC filing preparation immediately upon the SEC’s receipt of the registration statement, as the 20-business-day filing window runs concurrently with the SEC’s 30-day review period.
  • Structure the audit committee’s financial expert appointment at least 6 months before the S-1 filing, as the SEC’s comment letters frequently probe the expert’s qualifications and independence, particularly for first-time US filers from Hong Kong.