2011 117 Total 1,112 Table 2 IPO transactions with shares listing in the US – While Table 1 shows that reverse takeovers do in fact occur somewhat regularly, the process has long received somewhat of a stigma due to its association with fraudulent companies, particularly Chinese ones. Listing in the US became a popular option for Chinese companies that were unable to secure loans from Chinese banks, which have traditionally favored state-owned enterprises. Chinese companies listing in the US via the reverse takeover process typically quote their shares on the OTCBB Bulletin Board). While compliance costs are lower for the OTCBB than other US exchanges like NYSE or NASDAQ, all companies still must follow the rules of public companies as outlined by the Securities Exchange Act of 1934. Over the years there have been numerous Chinese RTO companies involved in questionable accounting practices and problematic corporate governance. Some of these Chinese RTO companies have used smaller American not have the resources to meet auditing firms, “which may auditing obligations when all or substantially all of the private operations are company’s in another 2011, p.2) As a result, the enforcement and country.” (SEC, finance divisions of the SEC have launched investigations into how accountants, lawyers, and bankers have helped Chinese companies list onto American stock markets through manipulations of data and filings. Despite the belief that reverse takeover transactions receive little notice from the media and general public, there have been several notable transactions in recent years, such as:
2011 117 Total 1,112 Table 2 – IPO transactions with shares listing in the US While Table 1 shows that reverse takeovers do in fact occur somewhat regularly, the process has long received somewhat of a stigma due to its association with fraudulent companies, particularly Chinese ones. Listing in the US became a popular option for Chinese companies that were unable to secure loans from Chinese banks, which have traditionally favored state-owned enterprises. Chinese companies listing in the US via the reverse takeover process typically quote their shares on the OTCBB Bulletin Board). While compliance costs are lower for the OTCBB than other US exchanges like NYSE or NASDAQ, all companies still must follow the rules of public companies as outlined by the Securities Exchange Act of 1934. Over the years there have been numerous Chinese RTO companies involved in questionable accounting practices and problematic corporate governance. Some of these Chinese RTO companies have used smaller American auditing firms, “which may not have the resources to meet auditing obligations when all or substantially all of the private company’s operations are in another country.” (SEC, 2011, p.2) As a result, the enforcement and divisions of the SEC have launched investigations into how accountants, lawyers, and bankers have helped Chinese companies list onto American stock markets through manipulations of data and filings. Despite the belief that reverse takeover transactions receive little notice from the media and general public, there have been several notable transactions in recent years, such as: finance