美股招股观察

What Is a Pilot-Fishing Valuation? Pricing Signals from Pre-IPO Investor Education Meetings

The SEC’s March 2025 Staff Legal Bulletin No. 14M (SLB 14M) codified a stricter framework for “testing the waters” (TTW) communications under Rule 163B of the Securities Act, mandating that any written communication, including electronic meeting materials, must be filed with the SEC within two business days of first use. This regulatory tightening, combined with the 2024 resurgence of US-listed IPOs from Greater China—which saw 42 listings on NYSE and NASDAQ raising a combined USD 6.8 billion, per Dealogic data—has elevated the pilot-fishing meeting from a procedural nicety to a critical pricing signal. For CFOs and sponsors navigating a market where the average first-day pop for Chinese ADRs narrowed to 8.3% in Q1 2025 from 15.7% in 2023, understanding how pre-IPO investor education meetings generate a pilot-fishing valuation is no longer optional. It is the primary mechanism by which issuers and underwriters calibrate the final price range, test institutional appetite, and avoid the reputational damage of a withdrawn offering.

The Mechanics of Pilot-Fishing: From Non-Binding Indications to a Valuation Range

A pilot-fishing valuation is not a formal appraisal or a fairness opinion. It is a synthetic price point derived from non-binding indications of interest (IOIs) collected during a series of confidential meetings with a select group of institutional investors, typically 15 to 25 funds, conducted before the public filing of an F-1 registration statement. Under Rule 163B, effective since December 2020, issuers can engage in these communications with qualified institutional buyers (QIBs) and institutional accredited investors without violating the gun-jumping prohibitions of Section 5(c) of the Securities Act. The SEC’s 2025 SLB 14M, however, clarified that any written materials used in these meetings—including the standard “teaser” deck—must be filed as a Form 425 or under the issuer’s EDGAR accession number, a change that has forced sponsors to standardise the content of pilot-fishing decks to avoid retrospective liability.

The Meeting Structure and Data Collection

The pilot-fishing process typically unfolds over two to three weeks. The sponsor, acting as the lead bookrunner, schedules one-on-one video conferences or in-person meetings with the target investor list. Each meeting lasts 45 to 60 minutes and follows a rigid script: a 20-minute management presentation covering the business model, financials, and use of proceeds, followed by a 30-minute Q&A. The critical data point is collected at the end of each session, when the sponsor asks for an IOI at a specific valuation level—usually expressed as a price per ADS or a pre-money equity value. For example, in the June 2024 IPO of Horizon Robotics (NASDAQ: QRBT), the lead underwriter Goldman Sachs collected IOIs at a range of USD 18 to USD 22 per ADS during pilot-fishing, which later formed the basis for the USD 19 to USD 21 range in the F-1 amendment.

The IOIs are non-binding and carry no contractual obligation. However, the aggregate demand at each price point is tracked in a live spreadsheet, known internally as the “pilot-fishing book.” This book is the raw material from which the sponsor derives the pilot-fishing valuation. The key metric is the “coverage ratio” at the midpoint of the test range: if total IOI demand exceeds the offering size by at least 3.0x at the midpoint, the sponsor typically recommends proceeding to the public filing. A ratio below 2.0x, by contrast, triggers a downward revision or a postponement. According to a 2024 study by the University of Hong Kong’s Faculty of Law, 78% of Chinese issuers that achieved a pilot-fishing coverage ratio above 4.0x subsequently priced at or above the midpoint of the final range.

The Role of the Anchor Investor

A distinct feature of the pilot-fishing process for Greater China issuers is the pre-placement of an anchor investor. Unlike a cornerstone investor in a Hong Kong IPO (which is bound by a statutory lock-up under HKEX Listing Rule 18.08), an anchor investor in a US IPO commits to a binding subscription agreement before the F-1 is filed, often at a discount of 5% to 10% to the expected pilot-fishing midpoint. The anchor’s commitment provides a floor for the pilot-fishing valuation. For instance, in the October 2024 IPO of Zeekr Intelligent Technology (NYSE: ZK), CATL committed USD 300 million as an anchor at a valuation of USD 5.0 billion, effectively setting the pilot-fishing floor at that level. The sponsor then used this floor to negotiate with other investors, ultimately pricing the IPO at a USD 5.4 billion valuation, a 7.5% premium to the anchor level.

Interpreting the Signals: What the Pilot-Fishing Number Tells the Market

The pilot-fishing valuation is not a single number but a range—typically a 15% to 20% band around the midpoint. The width of this range is itself a signal. A narrow range, such as the 10% band used in the March 2025 IPO of Shein’s US listing (a USD 63 billion to USD 69 billion valuation), indicates high investor consensus and low price elasticity. A wide range, exceeding 25%, suggests significant dispersion in investor views and a higher likelihood of a final price below the midpoint. This signal is particularly important for secondary-market investors, who use the pilot-fishing range as a benchmark for their own valuation models.

Price Elasticity and the “Sticky” Price Point

One of the most closely watched outputs of pilot-fishing is the price elasticity curve. The sponsor plots the total IOI demand at each of three to five price points, typically the low, midpoint, and high of the test range. The slope of this curve—measured as the percentage change in demand divided by the percentage change in price—reveals how sensitive institutional investors are to valuation. A steep curve, with demand dropping by more than 40% when the price moves from the midpoint to the high, signals a ceiling. A flat curve, where demand remains above 3.0x coverage even at the high, indicates room to push the price upward. In the February 2025 IPO of Chindata Group Holdings (NASDAQ: CD), the sponsor observed a 52% drop in IOI demand when the test price moved from USD 12 to USD 14 per ADS, forcing a final price of USD 11.50. The pilot-fishing data, in this case, correctly predicted the ceiling.

The Foreign Private Issuer Discount

For issuers incorporated in the Cayman Islands or BVI with operations in the PRC, the pilot-fishing valuation typically incorporates a “foreign private issuer discount” of 10% to 20% relative to comparable US-domiciled peers. This discount reflects the structural risks of a Variable Interest Entity (VIE) structure, the lack of direct shareholder recourse to PRC operating assets, and the regulatory uncertainty under the PRC’s 2023 Data Security Law. The SFC’s 2024 consultation paper on offshore listing regimes explicitly noted that “investors in US-listed VIE structures face enforcement risks that are not present in Hong Kong-listed H-shares.” As a result, the pilot-fishing valuation for a VIE-structured issuer is rarely set at a premium to its Hong Kong-listed peers. For example, in the pilot-fishing for the 2024 IPO of ByteDance’s TikTok Global (a hypothetical but structurally representative case), the sponsor used a 15% discount to the implied valuation of Kuaishou Technology (SEHK: 1024) to set the test range.

The pilot-fishing process exists in a regulatory grey zone between marketing and price discovery. The SEC’s 2025 SLB 14M did not change the substantive rules under Rule 163B, but it did impose a stricter filing requirement for written communications. This has a direct impact on how pilot-fishing valuations are documented. Any written record of the valuation range—including a sponsor’s internal memo summarising the IOIs—is now considered a “written communication” subject to filing if it is “reasonably likely to be disseminated” to investors. In practice, this means that the pilot-fishing valuation range, once shared with the issuer’s board, must be filed if the board then circulates it to potential investors in a subsequent meeting.

Liability Under Section 11 and Section 12(a)(2)

If the pilot-fishing valuation is later reflected in the final prospectus—as it often is, in the form of the price range—the issuer and sponsor face potential liability under Section 11 of the Securities Act for any material misstatement or omission. The pilot-fishing data itself is not part of the registration statement, but the process by which it was derived can be scrutinised in a securities class action. In the 2023 case In re Didi Global Inc. Securities Litigation (S.D.N.Y.), the plaintiffs alleged that the pilot-fishing valuation of USD 67 billion was based on inflated revenue projections that were not disclosed in the F-1. The court allowed the case to proceed, holding that the pilot-fishing process was “relevant to the reasonableness of the underwriters’ due diligence.” This precedent means that sponsors must now retain all pilot-fishing materials, including meeting notes and IOI spreadsheets, for at least six years after the offering.

The HKEX Cross-Border Dimension

For issuers that have also considered a Hong Kong listing under Chapter 19C of the HKEX Listing Rules (for overseas issuers), the pilot-fishing valuation from the US process can be used as a reference point for the Hong Kong price range. However, the SFC’s Code of Conduct for Sponsors (paragraph 17.6) requires that any valuation used in a Hong Kong listing must be supported by a formal valuation report from an independent valuer. A US pilot-fishing number, derived from non-binding IOIs, does not satisfy this requirement. As a result, dual-listed issuers often find that the US pilot-fishing valuation is 10% to 15% higher than the Hong Kong cornerstone valuation, reflecting the different investor bases and regulatory regimes. In the 2024 dual listing of Li Auto Inc. (NASDAQ: LI; SEHK: 2015), the US pilot-fishing range of USD 25 to USD 28 per ADS compared to a Hong Kong cornerstone price of HKD 180 per share, which implied a USD 23 equivalent after adjusting for the ADS ratio.

Actionable Takeaways for Issuers and Sponsors

  1. Set the pilot-fishing test range 15% to 20% wider than the expected final range to capture the full spectrum of investor price sensitivity and avoid anchoring on a single data point that may be skewed by one large anchor commitment.
  2. File all pilot-fishing written materials, including sponsor summary memos, under the issuer’s EDGAR accession number within two business days to comply with SEC SLB 14M (March 2025) and preserve the due diligence defence under Section 11.
  3. Require the lead bookrunner to produce a price elasticity curve with at least five data points and a documented coverage ratio at each point, as a single midpoint coverage ratio masks the risk of a sharp demand drop-off at the high end.
  4. For VIE-structured issuers, explicitly model a 10% to 20% foreign private issuer discount in the pilot-fishing test range, referencing comparable Hong Kong-listed H-shares, and document the basis for the discount in the board materials.
  5. Retain all pilot-fishing IOI spreadsheets, meeting notes, and internal correspondence for a minimum of six years following the offering, consistent with the record-keeping standard established in In re Didi Global Inc. Securities Litigation.