Growth Companies or Empty Shells?

by Hiller Hardie 22. June 2012 11:00
    Two months after the JOBS Act was introduced, many “emerging growth companies” that benefit by reduced SEC and Sarbanes-Oxley compliance burdens, have practically zero employees. According to the Wall Street Journal, a large portion of the companies benefitting from reduced regulation are special-purpose acquisition companies, which are often used in mergers as a backdoor into U.S. stock listings. Watching this unfold is like witnessing a collision for the second time; it’s only been one year since the Chinese reverse-merger collapse, where several Chinese companies saw $18 billion of their capitalization vanish. Only adding to the mix, China announced a plan to gain local control over the Big Four accounting firms operating within its borders. This plan will amplify the problem, because the U.S. Securities and Exchange Commission needs to be able to ensure that listed companies accurately prepare their financial statements. This is difficult when the SEC cannot even gain access to Chinese-based auditors to ensure they are conducting quality audits. As a veteran Senator recently said, “Rather than growing our economy, we are courting the next accounting scandal, the next stock bubble, the next financial crisis.”    
Categories: Advisory