Who Is Mass‑Producing Low‑Quality Prospectuses In Hong Kong IPOs?

A surge in Hong Kong IPO filings has prompted regulators to intervene amid growing concerns about the quality of listing prospectuses. Hong Kong Securities and Futures Commission Chief Executive Leung Fung‑yee disclosed that, together with the Hong Kong Stock Exchange, the regulator has issued letters to 13 leading sponsors requiring a comprehensive review and submission of remediation plans within three months. The correspondence cited serious deficiencies in the preparation of listing documents, potential sponsor misconduct, and significant failures in resource management. By December 31, 2025, the SFC reported that 16 listing applications had been suspended, marking a rare instance of forceful regulatory action against sponsors in recent years.

Market participants and practitioners describe a widely observed practice in which prospectus drafting is outsourced to law firms while sponsors focus on coordination and distribution. Under this model, sponsors typically establish an investment narrative and delegate the detailed drafting to external counsel. When IPO volumes were moderate, this division of labor functioned adequately; however, the recent surge in deal flow has pushed law‑firm capacity to its limits, producing frequent drafting errors and other quality lapses. Wind data show that, measured by number of IPO projects at listing, the top three law firms in 2025 were Jingtian & Gongcheng, Commerce & Finance Law Offices, and Gowling WLG, which together handled 112 mandates—approximately 50% more than the combined total of the top three firms in 2024—illustrating the strain on external counsel resources.

Regulators have also flagged instances of excessive marketing language and selective framing in prospectuses. The SFC found that some sponsors relied heavily on external specialists without adequately assessing their competence, lacked sufficient personnel with Hong Kong IPO experience to supervise deal teams, and failed to manage critical regulatory processes during the offering stage. Because law firms are generally appointed by sponsors, the SFC’s findings underscore that sponsors remain the primary parties responsible for ensuring document quality. At the same time, market concentration among sponsors has intensified: in 2025, underwriting activity was dominated by CICC, CLSA, Huatai Financial, CMB International and Morgan Stanley, which together underwrote 122 deals, accounting for more than half of the market. The combination of heavy project loads and limited internal staffing has created a material quality‑control challenge for leading institutions.

A further concern is the practice of embellishing issuer narratives to enhance valuations. Regulators observed that some sponsors used technical jargon without a clear understanding of the issuer’s business model, or presented companies with limited market share as industry leaders by narrowing the competitive universe through selective qualifiers. One illustrative case involved Soul, sponsored by CLSA, whose business description evolved across listing attempts from “social metaverse” to “AI + immersive social platform,” with subscription fees reframed as “emotional value service fees,” despite the company’s core activity of interest‑based stranger matching remaining unchanged. Another example cited CMB International’s sponsorship of Grandpa’s Farm, which reported RMB 875 million in 2024 revenue—less than half that of peer Yingshi Holdings—yet the prospectus emphasized leadership claims in narrowly defined segments such as “organic baby food” and “baby food oils.” A similar approach was used for Tongshifu, where the issuer’s overall revenue lagged a competitor but the prospectus confined the market definition to “copper cultural creative craft products” to assert a leading position.

Hong Kong prospectuses often provide less transparent industry benchmarking than their A‑share counterparts. Rather than naming competitors explicitly, many Hong Kong filings refer to rivals as “Company A,” “Company B” and so on, creating a disclosure gap that makes independent verification of market‑position claims difficult. This information asymmetry has encouraged the use of qualifying adjectives and narrow segment definitions to claim top rankings in the absence of clear comparators, a practice regulators now view as misleading.

With the SFC intensifying scrutiny of sponsors’ capabilities and the Hong Kong Stock Exchange participating in the review process, the prevailing model—where sponsors set the framework and law firms produce prospectuses on a high‑volume, assembly‑line basis while exploiting disclosure gaps for concept packaging—is under unprecedented regulatory pressure. Sponsors will be expected to strengthen internal oversight, ensure adequate staffing with Hong Kong IPO expertise, and exercise greater diligence in selecting and supervising external counsel to restore confidence in the integrity of listing documents.