China “fraudcaps”: how to profit(spotting fraudsters ahead of gullible sheep)

FT ^ | 05/25/11 | Alexandra Stevenson

[TigerLikesRooster]

China “fraudcaps”: how to profit

May 25, 2011 8:07 pm

by Alexandra Stevenson

Clerks work in the Eurodollar pit at the CME Group following news from the Federal Open Market Committee (FOMC) meeting concerning short-term interest rates January 27, 2010 Longtop this week became the latest in a recent wave of US-listed Chinese companies that have disclosed they are being investigated by the SEC. Investors in Chinese small stocks have taken fright and long-time China bear Jim Chanos on Wednesday expressed his regret at missing a chance to short these companies.

So what’s the deal – and if Chanos isn’t profiting from these controversial companies, who is?

Well, an investment fund called Kerrisdale Capital, for one, along with a handful of hedge funds who have entered the market to take profit by trying to spot companies which might become targets for investigation.

Those involved call such target companies fraudcaps – even though many companies are merely suspected by some investors of accounting irregularities and have not necessarily been investigated by the SEC or other supervisory bodies.

[TigerLikesRooster]

P!

[Vince Ferrer]

Zerohedge has reported on a lot of these companies, although they use publicly available reports so the stock will have already crashed before they post an article about it. This seems to be common. Just searching for Chinese reverse IPOs will lead to a lot of these.