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From: Julius Wong7/26/2011 8:00:07 AM
   of 1992
 
China Advanced Construction Materials Group, Inc., Static Chart (7/25/11 EOD)





China Advanced Construction Materials Group, Inc., Dynamic Chart


 

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From: Glenn Petersen7/26/2011 10:01:01 PM
1 Recommendation   of 1992
 
Chinese Reverse-Merger Companies Draw Lawsuits

By Azam Ahmed
New York Times
DealBook
July 26, 2011

A few years back, Chinese reverse-merger companies were all the rage on Wall Street.

These days, they are experiencing a different kind of rage.

According to a new study, more than one-fourth of all federal securities class-action lawsuits filed so far this year come from investors in these China-based companies, which are listed on American exchanges through a backdoor method that circumvents the scrutiny of a conventional initial public offering. The companies do so by purchasing a defunct American-listed company, merging with it and then adopting its ticker symbol.

Stock prices in these companies have fallen more than 50 percent this year, thanks to a crackdown by American regulators in the wake of a number of financial scandals. Some Chinese companies have fired auditors, restated earnings and owned up to lying about assets, admissions that have decimated billions of dollars in market value and harmed other reverse-merger companies that have been accused of no wrongdoing.

This year has been particularly bad, with several high-profile implosions at companies whose investor base included members of the hedge fund elite. The Nasdaq Stock Market has delisted companies and the Securities and Exchange Commission has halted trading in the shares of a number of these companies.

For example, Sino Forest, a timber company in China, has experienced a sharp drop in its stock price following a report from Muddy Waters Research accusing the company of fraud. John A. Paulson, who heads the $38 billion hedge fund Paulson & Company, lost nearly half a billion dollars following the sell-off in shares of Sino Forest after the report. Others reverse-merger companies that have seen their stock prices tumble this year following accusations of fraud include China Media Express and Duoyuan Global Water.

As a result, shareholders are increasingly filing class-action lawsuits against the companies, auditors and even the investment banks that helped structure the deals that brought these companies to North American exchanges. There have been 24 lawsuits filed in the first half of this year, 17 of which were filed in the second quarter, according to the study, by the Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research in Boston. That compares with seven suits filed in all of 2010.

In the wake of the financial crisis, reverse-merger transactions became an alluring way for both banks and investors to make money outside of a flagging American market. For Chinese company executives, it allowed them to tap into American capital markets. For bankers, it was a way to supplement dwindling business. For investors, it promised access to the growth of China.

The process entailed a wide network of handlers for these Chinese companies, including bankers, lawyers and auditors. But over the last few years, as these companies have been subjected to withering criticism from an army of bloggers and investors betting against their stock prices, the entire process has come under scrutiny.

dealbook.nytimes.com 

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From: Izzy7/31/2011 9:45:11 PM
   of 1992
 
Does anyone see any hope for CDII? Thanks.

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From: Glenn Petersen11/30/2011 9:42:18 AM
1 Recommendation   of 1992
 
How a Chinese cave got listed on the U.S. stock market

By Melanie Lee
Bloomberg
YISHUI, China | Wed Nov 30, 2011 9:14am EST

YISHUI, China (Reuters) - A Chinese tourism company listed in the United States wants investors to pour their money down a dark hole. Literally.

China's "Underground Grand Canyon," about an hour's drive outside the smoggy city of Linyi in the eastern province of Shandong, promises visitors 3 km (2 miles) of grand stalactites, multicolored lights and an exciting luge ride.

Tracing the attraction's ticket receipts back to investors in the United States proves an even more complex labyrinth to navigate. Following the trail sheds light on the lengths some Chinese businesses have gone to secure overseas listings, which bring the companies funding and prestige back home.

"For entrepreneurs, going public gives them a sense of recognition. For employees, going public gives them a sense of achievement," Zhang Shanjiu, the chairman of the company, boasted to a tourism publication four years ago as he embarked on the odyssey to list it.

The owners of the Underground Grand Canyon attraction eventually used a dizzying array of holding companies to ultimately list in the United States through a reverse merger that accomplished the feat in 2010.

That practice has come under scrutiny over the past year, as short-sellers including Muddy Waters have targeted some firms listed in the United States and Canada, publishing research reports accusing them of fraud that caused their stock prices to plummet, from which the short-sellers profited.

Some companies that listed through reverse mergers, including Chinese clean-tech firm Rino International, were eventually delisted following investigations prompted by short-sellers' accusations of accounting flaws.

The company controlling the Underground Grand Canyon in Shandong has not been accused of accounting problems and has not been implicated in any wrongdoing. However, its road to a U.S. listing presents a detailed portrait of the practice of reverse mergers.

LISTING FOR RECOGNITION

The tourist attraction, located off a small road exiting the millet- and corn-growing village of Yishui in the plains of Shandong, is the brainchild of Zhang, the local magnate who in 2004 leased the cave from Linyi officials for nearly 60 years.

With its rock-shaped ticket booths and brightly lit caverns, the cave tourism business attracted more than 670,000 visitors last year, the company says. By comparison, more than 3.6 million visitors visited Yellowstone National Park, the oldest national park in the United States, that year. (Yellowstone is not listed, nor is the U.S. Grand Canyon in Arizona).

Linyi's Underground Grand Canyon generates revenue from ticket sales, selling luge rides and entrance passes to other attractions in the cave. The firm also keeps stacks of Chinese wine in round earthen jars in the cave, which they sell to visitors.

Zhang made his ambition of listing the caves clear as early as 2007, when he said in an interview with a local tourism website that he wanted to see the company, Shandong Longkong Travel Development Co Ltd, go public as a marker for him and his employees and to make it easier to get bank loans.

"An IPO means going public and it could enormously enhance Longkong's brand reputation. Media gives far more attention to public companies than private companies. The company could leverage this intangible asset to help it get credit more easily and attract more talent in the future," Zhang said.

Listings by tourist attractions and related companies in China are hardly new -- Huangshan Tourism provides hotel and cable car services for the scenic mountain in Anhui province, while Lijiang YuLong Tourism Co Ltd offers cable car services in the southwestern province of Yunnan.

What makes Shandong Longkong Travel and its caverns unique among such companies is its prestigious U.S. listing that came through one of the controversial reverse mergers which allowed it to skirt the IPO process. The listed unit, BTHC XV Inc, is not yet traded on the OTC Bulletin Board.

LABYRINTHS

The link between Longkong and the U.S. stock market is as labyrinthine as the caves themselves.

Longkong is controlled by a shell company in Hong Kong, with little more than a mailing address. That company is owned by another holding company in the British Virgin Islands, which in turn is owned by Long Fortune Valley Tourism Intl Ltd.

Zhang was ultimately helped by Dallas-based Halter Financial Group to obtain a U.S. listing in October 2010 by merging Long Fortune into BTHC XV, a Delaware holding company born in 2003 when Halter bought out a bankrupt nursing home chain.

Long Fortune thus gained access to BTHC'S stock exchange listing and still effectively controls the complex chain of companies that eventually leads back to the caves of Shandong.

It was unclear why the company had so many holding companies between the cave business and its listing, but the journey allowed it to avoid going through the more arduous process of an initial public offering.

Halter Financial was founded by Texas businessman Timothy Halter, who made a name for himself as a guru specializing in Chinese backdoor listings, but who has been distancing himself from the industry in the recent months that the U.S. Securities and Exchange Commission has started taking a closer look at some of the backdoor mergers.

Longkong declined to comment for this article or provide executives to speak with. A Longkong spokesman told Reuters in mid-November that Zhang was in the United States and it was unclear when he was due to return.

Back in the caves, some staff members were unaware of the company's financial foothold in the United States.

One guide, who gave only her surname, Qian, led a group of five tourists around the caves one recent November afternoon, describing to them how the garishly lit stalactites looked like scenes from the famous Chinese folk legend "Journey to the West."

A woman in her group complained to Qian that she could not see what the guide was pointing to.

"If you can imagine it, you can see it," Qian replied.

(Additional reporting by Brian Gow in New York; Editing by Jason Subler and Brian Rhoads)

reuters.com 

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From: Glenn Petersen1/28/2012 9:55:51 AM
   of 1992
 
F.B.I. Looks Into Adviser on Chinese Reverse Mergers

By DAVID BARBOZA
DealBook
New York Times
January 27, 2012, 3:56 pm
8:41 p.m. | Updated


The Federal Bureau of Investigation on Wednesday searched the offices of a New York-based corporate advisory firm that specializes in helping Chinese companies sell shares in the United States.

The firm, the New York Global Group, is known for helping take midsize Chinese companies public in the United States through reverse mergers, or by buying the shell of defunct American companies that had been publicly listed — a controversial practice that has come under regulatory scrutiny in recent months. The F.B.I. search is the strongest indication yet that federal investigators may be going after the advisers and promoters who helped create a thriving business in so-called backdoor listings of Chinese companies.

Executives at the New York Global Group did not return a phone call requesting comment. J. Peter Donald, a spokesman for the F.B.I. in New York, confirmed on Friday that agents searched the New York offices of the firm, but declined to offer more details.

“We conducted a search in conjunction with an ongoing F.B.I. investigation,” he said. The F.B.I. agents also searched the home of Benjamin Wey, the company’s president.

Investors have lost billions of dollars over the last year on Chinese reverse mergers, after some of the companies were accused of accounting fraud and exaggerating the quality and size of their assets. Shares of other Chinese companies that went public in the United States through the conventional initial public stock offering process have also been punished out of fear that the problem could be more widespread.

American officials are now pressing China to step up its enforcement of securities laws and to improve accounting standards. Analysts say Chinese regulators are also investigating whether consultants in China were helping companies exaggerate or fabricate their assets and accounts to win over global investors. In recent months, a wave of class-action lawsuits have targeted not just the Chinese companies that went public through backdoor listings in the United States, but also some of the lawyers, accountants and corporate advisers who counseled them or helped structure the deals.

Using a reverse merger has been a popular way to list in the United States over the last five years; some major law firms and midsize investment banks have taken part in the process. Because the shell of a defunct company is used, the listing is less expensive and less rigorous than a conventional I.P.O. Many Chinese companies simply acquired a shell company, inserted their China operations into it, and then reported strong earnings growth, which often drove up the value of their shares. With questions about whether those profits were as rosy as reported, shares of Chinese companies listed in the United States have dropped.

The New York Global Group is partly controlled by Mr. Wey, who also spells his last name Wei. He helped some large Chinese companies list in the United States and promoted himself as an expert in American-Chinese relations and “on how to best invest in China-based American-listed companies.”

Mr. Wey could not be reached for comment.

One of the companies he advised, Bodisen Biotech, was delisted by the American Stock Exchange in 2007 after the company admitted “filing incomplete, misleading and/or inaccurate information in its public filings.” Also, in 2005, without admitting or denying fraud, Mr. Wey agreed to be censured for misleading investors in the state of Oklahoma and failing to disclose important information.

dealbook.nytimes.com 

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To: Glenn Petersen who wrote (1979)1/29/2012 7:28:28 AM
From: Julius Wong
   of 1992
 
Most reverse merged companies are not listed in China.

THe reversed merge companies employ US accounting firms.

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From: Julius Wong1/29/2012 1:08:16 PM
   of 1992
 
Watch list:

AMAP, BIDU, CDII, CJJD, CNAM, CTEL,

CYOU, DATE, HMIN, IMOS, JOBS, JRJC,

KUN, QIHU, RENN, SINA, TAOM, YOKU

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To: Julius Wong who wrote (1980)2/2/2012 11:56:15 AM
From: Glenn Petersen
   of 1992
 
I understand that. Unfortunately, the reverse merger debacle impacts the U.S. perception of the Chinese markets.

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From: Julius Wong2/14/2012 8:15:25 AM
   of 1992
 
China North East Petroleum Holdings Limited, Static Chart (2/13/12 EOD)




China North East Petroleum Holdings Limited, Dynamic Chart



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To: Julius Wong who wrote (1981)2/19/2012 4:29:12 PM
From: Izzy
   of 1992
 
Julius, do you have an opinion on MERU and PWER? Thanks. GT

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