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Strategies & Market Trends : Value Investing
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To: Spekulatius who wrote (41594)3/6/2011 12:19:37 PM
From: Spekulatius  Read Replies (2) of 78900
 
Barrons interview with the Muddy Waters guy
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online.barrons.com

For completeness - he believes that some reverse merger companies are real, but many are not. Also for the record, to pull the SEC equivalent records from the Chinese operating subsidies you need to go through and Chinese law firm - you can't pull them yourself (That is why my lengthy google searches where fruitless).

One of the key parts from the interviews:
What role do auditors play generally in reverse mergers?

In many cases, the U.S.-listed company and its subsidiary in China don't have ownership of the operating company in China. They just have a contractual arrangement that mandates that the operating company in China transfer profits in the form of regular payments to the China subsidiary of the U.S.-listed company. If payments don't occur, the consequence is that cumulative profits have not been transferred into the corporate structure that encompasses the U.S. shareholders. That should raise red flags with the auditor. It could be a signal that management intends to drain money from the company. But the U.S. Public Company Accounting Oversight Board doesn't appear to be ensuring that auditors are verifying these payments. That is a major problem that hasn't even come to light yet.
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