Shell-making, reverse-purchasing, low-price listing, joint siting, additional issuance, high-end cash-out… These interlocking capital operation methods together constitute a routine game for the gray market value management of the Chinese stocks.

Editor’s note: This article is from WeChat public account “Alpha Workshop” (ID: alpworks), the author Sun Jiabao, authorized to reprint.

Buffett taught us very early: “If you have three patrols, you still don’t know who is a fool at the table, then you are the fool.” But the old man’s ignorance of the people is that many times, our fool role has been arranged clearly before the start of the game.

For example:

“What IPOs are looking for?” We have ready-made shells! Low listing costs and short time.”

“The stock price is looking for ‘hands’ to get up, the time is ripe and then make an additional issue, one fish and two.”

“Fund 55, no money can lend you, one-stop service.”

… …

As an investor, have you ever seen the above-mentioned “sensational” words?

This is not a bridge in a film and television drama, but a hidden rule in a special Chinese stock circle.

In this circle, shell-making, reverse-purchasing, low-price listing, joint siting, additional issuance, high-level cash-out… These interlocking capital operation methods together constitute the gray market value management of the Chinese stocks. Routine play.

01.From shelling to low price

The listing of Chinese stocks to the US is actually a “shortcut”.

People who are familiar with the operation path of US stock listings know that in addition to the conventional method of initial public offering (IPO) through investment banks, there are five other small-listed listing methods: American depositary shares listed According to the US Securities Act 144A, private equity funds QIB (qualified institutional investors) listed, reverse mergers, direct listings and SPAC listings.

Among them, SPAC (Special Purpose Acquisition Company) is listed in this way, the most telling story.

In general, listing through SPAC is not only easy and quick, but also raises $30 million to $100 million or more.

The gameplay is simple: set up a SPAC and make it a listed shell. It then “distributes it on demand” to a company with a listing intention, and a reverse takeover can achieve what it wants.

Because these SPACs are usually in the form of trust funds, they are first listed on the NASDAQ board; therefore, before the reverse backdoor, the accounts actuallyThere are 30 million to 100 million US dollars raised in the issuance of common stock.

This model originated from the Toronto Stock Exchange of Canada and was originally used for mergers and acquisitions by mining companies. In 1993, the US securities company GKN (EarlyBirdCapital – the predecessor of Early Bird Capital) introduced it to the domestic capital market. After the 2008 financial crisis, SPAC Shell can directly access the main board and is no longer restricted to OTC (over-the-counter market) for over-the-counter trading.

Why does the above game have a market? Because for some companies to be listed, the benefits are many:

(1) SPAC itself is already listed on the main board. After the reverse merger, the operating entity achieves the listing target, and the time is short and controllable;

(2) SPAC is a newly launched pure cash company with no business operations and fund custody, no contingent liability risk;

(3) There is no need to pay for the shell, and the cost is controllable. After the SPAC completes the listing, it usually needs to complete the reverse merger with the relevant operating entities within the period of 18-24 months. During this period, if the additional stocks are issued, it is much lower than the cost of finding some small investment banks to pay the funds. The investment bank has a 15% fee.

In the end, it’s a word: the threshold is low, and small fish and shrimp can also come together for fun.

In 2017, the famous stock company “Demon stock” stable financial (NASDAQ: WINS) is a typical case of SPAC gameplay: shell shell in March 2014, shell market in September 2014, anti-April 2015 To the backdoor, in October 2015, the shell officially changed its name to the financial stability.

Stable Finance is not a case.

The team that operates the stable financial SPAC listed in the same way, through the same way, made love fresh (Chinatown Supermarket; NASDAQ: IFMK) into the first Chinese supermarket group listed in the United States.

Another well-known case is Hunter Maritime (NASDAQ:HUNT), a key member of the Pioneer Group, which has recently incurred redemption issues. It was shelled in June 2016 and listed in October 2016, 2019. March reverse backdoor listing. However, due to compliance issues, the company entered a long suspension after a stir in the first two trading days after the listing.

02. Joint sitting and high cashing

After the backing of the motherboard, low-priced issue, renamed and other series of paving operations have been completed, the next step is to start speculating stock prices to achieve high cash.

The hype is mainly due to the opening of the speculation – either on the first day of listing or within a period of time after listing. Behind this, interest groups adopt a three-way cooperation approach, that is, operators, listed company bosses, and high-frequency market makers sit together in the speculation.