RM Crowd Heads North – Part II

While a large chunk of the RM Conference in Toronto focused on Canadian stuff, there was a good panel updating everyone on China. There continues to be a “flood” of financings for Chinese companies that look to be or already are trading in the US. Valuations have been compressing and slowing things a bit, with more registered direct offerings (which are immediately liquid) in 2009, which are not suitable for reverse merger financings. Some issuers are waiting for the market to correct, deals are smaller, etc. But valuations are beginning to improve as some major hedge funds like Fidelity have begun having interest in RM and post-RM investment opportunities. That said there were a few sizable restatements of some Chinese issuers that have had an impact on market value for many Chinese companies.

The panel noted that Form 10 shells have become much more popular with the WRASP/Lihua type “two-step” process to a trading stock on the NYSE AMEX or Nasdaq. This process depends on there being active underwriters in the space, which currently exist but are limited.

There was also a brief discussion about the fact that the Chinese regulators have passed a series of decrees and notices that initially seem to suggest an end to these transactions, but Chinese lawyers have found legitimate ways to continue to move forward with proper transactions. OK that’s it on China, more to come!

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