Accounting quality and backdoor listing
I got an email alerting me to an interesting news item from Bloomberg. The story discusses how some Chinese firms become publicly traded in the U.S. but would not qualify to be listed in Hong Kong. The story mentions that 98 Chinese companies used “reverse-merger” to get listed in the U.S. “The MSCI China Index of 147 stocks available to foreign investors is down 10 percent since reaching a five-month high on April 21. That compares with a 28 percent plunge by Chinese companies that went public through U.S. reverse mergers, in which a closely held company buys a publicly traded shell and retains the U.S. listing.” By taking over a listed U.S. company, the Chinese company avoids the scrutiny they would get if they did an IPO.
Is anyone researching reverse mergers? The news article suggest like their accounting quality is low and corporate governance kind of scary.