Also in this playlist...
This transcript is automatically generated
How is this for return year -- year of an online retailer called get shot.
Yes this is a Chinese company that went public over the past couple of years and we ask you question -- you excited when you see Chinese companies going public anything maybe I can get in on the ground floor will there are -- number.
Of Chinese companies reportedly considering US stock exchanges for initial public offerings soon it's all in the pipeline.
If approved will they receive a warm investor welcome should you get in or should you wait to see what this is really all about because there are some treacherous steps here.
David -- IPO financial dot com president joins me now on the Fox Business exclusive to really walk people through this.
Because why David.
Can you not trust -- a Chinese company comes public that it has all the right things that really need to be there when you see an American depositary receipt.
Or a foreign company going public here.
Well at first depends on whether or not you -- just looking for the flash in the pan approach to investing in this in the IPO market or whether you really wanna do the homework and understand what the companies about.
If you are the question -- -- person you are gonna completely bypass the financial disclosures.
And that is the biggest and most severe and most threatening problem to every IPO that comes out from China.
We just showed a list quick -- that back up their first second the list of the six in the pipeline.
And these names here you have could argue have montage technology.
Montage technology by the way is a semiconductor company that you've got three G.
Alibaba Group holding US light in the box this what worried me wedding dresses and fishing rods as a retailer.
Should not -- -- am -- being too cautious.
Not you -- -- too cautious at all and as you're reading list I really felt like going that I love love love up.
But this is not the new rebirth of the Chinese market it's important to understand.
That Chinese stocks are coming public in the US because they can't come public in China.
You -- it listed in the Shenzhen exchange -- the Shanghai exchange unless you've got three years of profit.
Wow that's tough that's very many companies that are public here who don't have that exactly and that is why we have all the financial fraud that's going on because if you know we need to profits.
Then all of a sudden.
The principals in the company in China maybe not all of them but many of them all of a sudden find a hundred million dollars more in revenue.
Couple of tens of millions of dollars and profit.
And the books are always -- troubling issue.
We are not saying that any of these names that have gone public or that are going public have any fraud but there are problems that make the issue of Chinese IPOs questionable.
Transparency things like that but also.
We wanted to educate people about something called reverse.
Mergers so how do they go public what they do is they find what a shell company here in the US that already existed -- is out of business.
And they almost.
In a zombie like -- take over that shell attacks and suddenly their public.
Perfect description -- things like the blob right -- -- zombie whatever it is.
In fact it doesn't have to be accompanied that so out of business and still has its shareholders there.
There are entities out there that are creating shell companies just for this purpose so they take the less than high quality firm shall we say from China and maybe other areas too and -- reverse merge into this existing company take it over change -- name.
And they don't have to go through the file.
-- process let's look at some of the best performing Chinese IPOs and we can put up the list and then when you look at some of the returns and absolutely stellar YYE ink is -- a 175%.
Since it went public there's a company called bureau site power.
-- -- -- 100%.
These are incredible returns.
Are -- -- to -- like any that you're not worried about well.
I I don't really follow the Chinese IPOs -- -- -- -- -- -- -- for that reason -- it really just doesn't have the depth and you really wanna be able put your head on the pillow and say.
And -- am I gonna have my money ignores is going to be sleeping on a hot skillet.
To that and let's show the worst performers level and there you start to see that this can be a little bit touching you gotta be careful what you see real losses here on some of these short.
Since 1911 there have been thirteen Chinese IPO sort of come out four of them are profitable and profitable but it should be are -- over there IPO prices by a lot.
But if you look at the nine that are not you're starting to talk about the first drop is down 30%.
But one thing if people are undaunted by what you and I've talked about.
What should they look for before diving into a Chinese IP.
They're gonna really have to work on market psychology that everybody thinks this is better than a three dollar bill at this point that it really makes sense there's a lot of sizzle.
Because once a sizzle is -- you're left with a real -- piece of beef that doesn't taste so good.
You're you're left with wedding dresses and fishing rods at the same company if you're lucky -- is that.
Right thank you David thank you very much David -- IPO financial dot com president.
Filter by section