Following a blistering attack on Chinese reverse mergers at thestreet.com (I am getting a copy of the whole thing – they interviewed me extensively – and will be reporting on it soon, but it has received coverage by Yahoo Finance), Barron’s has followed up its August blast with another one this week. This time, the focus is not on fraud or corruption but rather the fact that many China stocks simply have not kept pace with the market in the last year or so.
The article focuses in on one particular firm that has been involved in many Chinese reverse mergers, many involving Pink Sheet shell companies. It suggests that one former senior person at the firm has been partners with several people in the past who have found regulatory problems. It seems to imply, without saying so, that another key person at the firm relocated to China in part to possibly avoid having the SEC assert jurisdiction over him. While I do not know the specifics of the issues with these individuals (although I do know them I have never been involved in a transaction with them), it seems to me that Barron’s is simply reaching for anything negative they can find. Much like their brother Forbes, they pretty much decide if they like or hate something and then that’s it.
Have they ever wondered if it is the very fact that they are trumpeting this relatively small group of negative players that is creating a self-fulfilling prophecy and sending stocks down merely because of the bad press? No, instead they seem to believe that the market has wisened up to the fact that virtually all Chinese reverse mergers are bad and should be avoided. If the next article were positive, stocks would head up. This is the awesome power of the press, and I implore those charged with this enormous responsibility to focus on getting the whole story and not just selling papers or online subscriptions.