An IPO is a company’s first public stock issuance through the primary market. Launching an IPO enables a corporation to access equity capital and enhance its liquidity. After the IPO, the issued shares can be traded in the open market by both individual and institutional investors.
How long does the IPO process normally take?
The actual listing timetable depends on many factors, including the progress of due diligence, preparation of application materials, regulatory approval and conditions of the capital market.
The application preparation mainly involves engagement of professional working parties and due diligence works by licensed sponsors, legal advisers (for the applicant and the sponsors), auditors and other third parties (e.g. tax consultants, internal control advisers, etc.), drafting and preparation of the application materials. The length of preparation time depends on the readiness of the applicant’s track record and other conditions. It is required by the Listing Rules that an IPO applicant should appoint sponsor(s) at least 2 months before submission of its IPO application (A-1 filing). However, the preparation process may take longer as the professional intermediaries require more time to conduct due diligence depending on the circumstances of the applicant e.g. the industry it operates in, the size of its business operations may extent to many other jurisdictions, etc.
Regulatory vetting and approval
After performing adequate due diligence on the applicant by the sponsor, the applicant is required to submit the formal listing application (Form A1 for Main Board and Form 5A for GEM), an application proof of listing document and other related materials to the Listing Division of the Exchange for regulatory vetting. The vetting time for each applicant is subject to case-specific factors, including the complexity of the applicant’s business as well as whether there are any novel issues. The valid period for a listing application from the submission to the listing date is six month. A monthly Progress Report for new listing applications is published on HKEX news website.
Marketing and listing
After the Exchange’s Listing Committee approves the listing application, the applicant could commence the marketing of its securities which will ordinarily be approximately one month (for investors roadshows, public offering process and pricing etc.) before the securities can be listed and traded on the Exchange.