AKA on to the next one:

Intermediaries helped Chinese companies trick investors

Before the stock-trading trick came to light, the process of listing through reverse mergers was popular among Chinese companies with support from intermediaries as well as accounting firms, three-fourths of them U.S.-based. Some intermediaries and accountants apparently participated in, knowingly or unknowingly, cooking books and defrauding investors.

An SEC task force is now investigating companies that took the reverse-merger route to the stock market as well as certain intermediaries and accountants that may have manipulated financial reports.

I read the title as “Reverse mingers..” it sounded interesting.

three-fourths of them

🙄

the rest of it: ❓

So capitalism doesn’t work?

So lets adopt communism?

Ohh wait, this is a China poblems isn’t it?

Feudalism or Anarchy anyone?

I thought there were more than four options?

Not China’s problem, the investor’s problem.

This is a completely pish story. Reverse takeovers aren’t fraudulent – they’re as old as the hills and well understood by the market.

And this:

Once newly listed, a company can start to issue reports about mergers and acquisitions in China that boost investor confidence, which can push up the stock price. Later, the company’s executives and strategic investors cash out before the stock price falls.
“Usually you will see (a stock’s) price rise rapidly for a few days, which means institutions are preparing for an escape,” said the former CUSC employee.

Misleading public announcements could be made by any listed company, not just Chinese, newly listed or reverse merged companies.

And as for the actual, identified cases of fraud…

Studies of Chinese companies by short seller Muddy Waters Research and Citron Research, for example, allegedly uncovered fraudulent financial reporting by Chinese firms such as Dalian Rino International and China MediaExpress Holdings.
These independent reports have triggered sell-offs of so-called “China concept” stocks, and short sellers profited.

meh.

ernie to the forum, please, ernie to the forum

I love how STW, the fount of all knowledge, stumbles on how reverses can be used to get round the rgiors of an IPO (and so, rpesumably, take it that all reverses are fraudulent).

Double meh.

Sorry the thread title is a bit misleading wasn’t trying to give that impression. Don’t think the quote or the article does either.

I don’t know much about it (no ****) but what I was interested in was the role of the intermediaries in this, are they the same as the companies that bundled up the debts that played a part in the credit crunch, eg they knew they were misleading buyers/investors but damn it all for a quick buck?

are they the same as the companies that bundled up the debts that played a part in the credit crunch, eg they knew they were misleading buyers/investors but damn it all for a quick buck?

Good quesiton. I suspect not. What’s more likely is that they saw a gap to exploit the opportunity for Chinese corporates with (apparently) strong balance sheets being able to reverse into listed US companies in order to gain a US listing.

The fraud sits more in the “creative” valuation of the Chinese companies. though, of course, the intermediaries may have been complicit in this.

The fraud sits more in the “creative” valuation of the Chinese companies. though, of course, the intermediaries may have been complicit in this.

That’s what I think the implication is, otherwise it is a meh kinda story.

Also – where’s the detail?

To work the magic and avoid pitfalls, an intermediary often works quietly. Most are small Chinese firms without an office address and few names on the payroll. Aware of the risks involved in the reverse merger game, these companies regularly change names, especially when working with different clients.

Yeah? Like who?