China IPO Research: Case Study

What is an IPO? An IPO is a short version of Initial Public Offering. It is the process that allows a company to sell stock to the general public by being listed on a stock exchange. In order to become listed, a company must secure the services of a corporate lawyer. The Public Offering process is complex. It involves multiple stages from structuring shares for sale to establishing a working relationship with an investment bank. This is necessary to ensure regulatory compliance. Quality due diligence is a must.
IPO Research Services for Lawyers
IPO Research Services for Lawyers

Pre IPO Research & Investigation Services for Lawyers

From 2010 onwards, there was a strong, upward trend for Chinese companies to list on non-domestic stock exchanges—be it in Hong Kong, UK or USA.  If you are an IPO lawyer needing quick and thorough pre-IPO research for Chinese companies, it is essential that you are comfortable:

  • Checking multiple name forms (traditional and simplified Chinese as well as English) 
  • Interpreting company data from the State Administration for Industry and Commerce (SAIC)
  • Understanding the relevance of company reporting anomalies and penalties
  • Identifying “red flag” issues within Chinese company networks
  • Charting relationships between significant entities

These are fundamental skills that we have developed on a daily basis since the foundation of Veriton Investigations.  We have assisted in numerous IPO research projects.  

If you are an IPO lawyer, we can help you too.  Contact us now for more information.

Pre IPO Research Sample Case Study

  • WHO: Hong Kong-based lawyer working for a Beijing company
  • WHAT: Investigative due diligence
  • WHY: Urgent company checks for IPO attempt
  • WHERE: Research in Hong Kong on mainland Chinese companies

Pre IPO Research

CASE STUDY: China Companies Research

Research Completed:

  • Comprehensive reports— adhering to client template—for 17 companies
  • Full identification of problematic entities
  • ‘Red Flag’ issues  highlighted including corruption

2-week TAT

IPO Research: General Client Brief

A Hong Kong law firm, and former Veriton client, needed additional resources to prepare an Initial Public Offering (IPO) for a Beijing engineering company that hoped to list on the Hong Kong Stock Exchange.

First, our client asked us to conduct non-financial, investigative due diligence on 17 companies within the Beijing transport manufacturing and engineering sector. The subjects were either customers or suppliers. 

Later, we received a spreadsheet with basic company data. This included management and shareholders for 14 of the larger entities. However, three were not fully identified. 

Our goal was to find and document negative news relating to the 17 companies and their key personnel.

Research Focus

Although full due diligence was not requested, our client asked us to include ‘red flag’ issues such as :

  • Reports of bribery and corruption
  • Litigation (criminal and civil)
  • Integrity issues
  • Links to other companies that might cause concern
  • Major negative news

The client also wanted us to document State-owned Enterprises (SOEs) for the record. In this particular case, SOE involvement was not a red flag. The Beijing company had been partly owned by an SOE. However, the lawyer wanted a clearer picture of the company network structure.

Methodolgy and TAT

The project followed our standard methodology. TAT was challenging at just under 2 weeks.  Several of the companies for the IPO research project were large companies with hundreds of employees and multiple branches.  Much of the research required proprietary databases.

If you would like us to assist with pre IPO checks, it’s helpful for both parties if you complete a short form outlining your research requirements. 

Day 1 - 2: Entity Verification and Reporting Format

The first day was spent verifying the identities of the three problematic companies. We also checked that the remaining 14 had been correctly documented. One had not been.   This is not unusual when dealing with Chinese companies as names tend to be long and name changes are subtle.

We discussed findings with client over the next 48hrs.  The client also had very specific requirements for reporting formats.  We developed these with the client and later ran a test report for confirmation.

Due Diligence Database

Over the following week,  our research team entered all English and Chinese data into an in-house database. We designed this several years ago for due diligence purposes.  It now functions well and is tweaked to reflect each project’s reporting requirements.

A supervisor constantly checked the database to both ensure integrity of data and spot any omissions.

Final Reporting

As we wrote reports, our team was working at full throttle fact-checking.  The translation from Chinese to English is never quick.  Understanding what seems like a simple newspaper snippet can eat into project time.

Red Flags

There were a few red flag issues that emerged from the IPO research. Notably,  a former director of several of the companies had recently been jailed for corruption and related offences.  

Another two of the companies had been fined repeatedly by local government for failing to comply with both health and safety regulations as well as annual company filings. 

Global Economic Databases: Can you rely on them?

Interestingly, not one of the 17 companies was mentioned in economic global propriety databases we checked.  This was despite four of the entities being large, national corporations.

Chris Wilson former Hong Kong police

Our Corporate Private Investigator Origins

Veriton Investigations was co-founded in 2014 by an ex-Hong Kong police officer and a research/ communications professional.  They recognized a need in the private investigator industry to combine high quality reporting and analysis with discreet, feet-on-the-ground investigations and surveillance.  

Veriton Investigations is a brand of the Veriton Asia Group.  We offer a comprehensive portfolio of research and investigations services from full reputational due diligence and surveillance to China company checks, executive screening and process serves. 

Client Services

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