Do Chinese Companies Give the PRC Government Different Financials than to the SEC?

Well, kind of, but. The latest Reverse Merger Report talks about the fact that short sellers have been focusing on alleged differences between filings by public Chinese companies with their government as compared to what is filed in the US with the SEC and made available to the public.

Audit experts point to the fact that the Chinese filings being looked at are with the SAIC (State Administration for Industry and Commerce). These filings are not reviewed by the government and are for informational purposes. One expert indicated in the article that the SAIC is more like the US State Secretaries of State. All agreed that looking at tax filings would be more relevant than SAIC filings. Some companies do not want competitors to have their detailed information. Others intentionally want to appear smaller for various reasons. Also some may have different applicable fiscal years.  In addition, the article indicates that the SAIC filings are not intended to be an exhaustive review of a company's financial picture.

All that said, it looks bad to third parties wondering why filings are simply different, even if there may be reasonable explanations.  Clearly the lesson learned for all Chinese companies planning in the future to go public in the US - focus on all PRC filings with financial information to ensure that they are consistent with the financials being filed in the US.

For additional insights on reverse mergers, SPACs, other alternatives to traditional initial public offerings, the small and microcap markets and the economy, visit the Reverse Merger and SPAC Blog  by David N. Feldman, Esq., Partner of Richardson & Patel LLP.

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