Reverse mergers were quite popular in China a couple of years ago, but a lot of Chinese entrepreneurs who went public on OTCBB market felt they were a bit cheated, because the power of raising capital on OTCBB was not as strong as they thought. The topic of Reverse Mergers and PIPEs issues were picked up again, what’s the reason for this?
1. What makes you to attend this conference in China, Shanghai?We have had business in China with Chinese companies that are publicly-traded in the US since July of 2007. Currently, we work with three US publicly-traded Chinese companies. The Dealflow PIPEs event in Shanghai is very well known in the US and in China and we consider it a great opportunity to meet Chinese entrepreneurs who have an interest in bringing their companies public in the US. We own public shell companies and we provide outsourced financial and accounting services to ensure a reverse merger is completed in a timely manner. We recently completed a two year audit and filed with the SEC to complete a reverse merger in three weeks. We believe we have superior abilities and experience which allow us to work through issues and avoid delays.
2. What is the current RM/PIPE situation in America?The PIPE market in the US is currently a situation of haves and have nots. What I mean is that there are investors who are actively funding PIPEs but the volume is down and the quality of the companies being funded is pushing many Chinese companies out of the market for financing from the US. We believe this makes the decision of who a Chinese company works with to complete a reverse merger or self registration more critical than ever. We have a contact base of over 200 private equity funds who have specifically told us they are interested in investing in Chinese reverse mergers.
3. What kind of opportunities and benefits are available for Chinese entrepreneurs to go IPO in America?We strongly believe that now is the time to go public in the US but we that Chinese companies should demand that the valuations placed on their companies to be fair and not decreased as a result of the current market conditions. If a fair deal can be done then the Chinese companies will already be public when the stock markets in the US rebound. Additionally, the Chinese companies that we want to work with will be able to raise capital. It's a question of timing and positioning the company in teh most favorable light. That is a perfect position to be in.
Also, we are experts with the self registration process. Self registration is a cost effective means to becoming a public company in the US. It involves communications and filing of paperwork with various securities regulators in the US, namely the Securities and Exchange Commission and Federal Industry Regulatory Authority. We suggest you visit our website at http://www.jcraneco.com/self-registration/self-registration.html to learn more about self registration.”
4. What kind of traps those Chinese entrepreneurs may encounter while they are going IPO through RM? What kind of advices you would like to give to them?We believe strongly in aligning our interests with Chinese companies. Therefore, we only complete transactions where we invest in Chinese companies. We request compensation in the form of stock and cash but we ensure that the stock portion of the compensation is more significant than the cash compensation. As a result, we are motivated to continue to build the business and prospects of the Chinese companies. We suggest Chinese companies avoid working with US individuals or companies who only want cash compensation.
5. At this moment, how do the downturn in the economy and the sloppy stock market affect RM business?It is an opportunity. The downturn in the economy and decreasing stock prices of companies that are public right now are insignificant to a potential reverse merger candidate. Significant sale of stock after a reverse merger is completed is generally not possible due to restrictions associated with all investors in the reverse merger candidate such that they can not sell their stock for at least six months. Additionally, the cost to acquire a public shell company is decreasing, which therefore offers a cheaper but still very fast method of going public in the US.
6. Have you studied Chinese RM business, what’s the difference from American RM?We have. The most significant difference is that Chinese companies completing reverse mergers to become US public companies generally have more mature businesses. Investors seem to be willing to take risks on US-based startup companies who want to complete a reverse merger but investors from the US have historically been unwilling to fund Chinese reverse mergers unless revenues for the Chinese companies are significant and they have or soon will have net income rather than losses.
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