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Peter Fuhrman
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Chairman, Founder and Chief Executive Officer at China First Capital (www.chinafirstcapital.com) , a China-based international investment bank and advisory firm for capital markets and M&A transactions. China First Capital was established in 2007 and has its headquarters in Shenzhen, China.... More
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China Private Equity, by China First Capital
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  • Chinese Language Article on Huge Risks of OTCBB IPO for Chinese Companies
    This is Chinese-language article I wrote on the rampant dangers for Chinese companies to list themselves in US through a reverse merger or OTCBB listing. 

    美国政府整顿危害中国企业的OTCBB上市和反向收购以我的经验看来,一个成功的中国民营企业面临的最大风险不是经济通胀或是市场竞争,而是在美国市场糟糕的资本运作,特别是反向收购交易和OTCBB上市。

    这些失败的交易给越来越多的民营企业带来了致命的伤害。据最新的统计,超过七百家中国企业已经完成了反向收购或者OTCBB上市。其中,超过80%的交易都未能成功让企业筹集到足够的资本来实现企业发展的初衷,而且股票的流动性也不充沛。在OTCBB上市的企业都会得到一个有可能登陆纳斯达克的承诺,但是对于超过80%的企业来说这只是一句空话。大部分美国的投资者都认为OTCBB里的企业资质相比是低劣的,投资风险很大。OTCBB是一个不受监管的股票交易市场,大部分机构投资者都被禁止购买这个板块的股票。

    一般来说,在OCTBB上市和反向收购的最大赢家是财务顾问,律师和会计师。他们从中获得的中介费和服务费就超过一百万美元。除了现金收入以外,他们还会在交易中获得大量的认股权证,给公司上市后的股票价格造成极大的下行压力。

    从我以往的经验看来,大部分中国中小民营企业在OTCBB 上市或者反向收购都不是一个明智的选择。这些交易已经给许多优秀的中小企业带来非常大的危害。作为一个美国人,我对OTCBB成为无数中国优秀民营企业的葬身之地深感惭愧。其实,我成立中国首创投资的初衷是要帮助一位江西老板募集股权资金去扩张企业,并非是在OTCBB上市。我们为老板筹集的资金使企业的规模翻了两番,企业老板现在正和一家知名的国际投资银行合作,计划明年在香港上市,获得比OTCBB上市十倍以上的估值。

    通常,在OTCBB上市的企业都是那些没收入没利润的企业。即使一个优秀的中国企业在OTCBB上市,美国投资者也会对这家企业持怀疑的态度。虽然这不完全对也不公平,但在美国,企业老板选择在OTCBB上市就意味着企业有欺骗投资者的嫌疑。这就是为什么中国企业在OTCBB上市获得的估值那么低,有时候甚至还不及比企业今年的利润总额。

    尽管如此,2010年还是有超过一百家中国企业在OTCBB上市或者是进行了反向收购。这些交易使很多人成为了富翁,但很可惜,企业老板和投资者并不在此列。因为OTCBB上市和反向交易可以避开美国的监管赚取大量的服务费,中国的财务顾问和律师一直在恿这些交易,他们才是这里面的大赢家。

    但是这种看起来简单赚钱的交易方式可能会逐渐修正。美国政府现在已经开始评估OTCBB和反向收购给中国中小企业带来的危害。

    华尔街日报最新发表了一篇关于美国证券交易委员会SEC关于整顿中国企业反向收购交易的文章。美国SEC已经对协助中国企业进行反向收购的会计师和师律师介入全面的调查。

    此外,为了保护美国投资者,美国国会也正在考虑对反向收购和OTCBB上市程序举行听证会,他们发现几家OTCBB上市的中国企业都存在财务欺诈行为。

    倘若美国SEC行动起来,最大的受益者是中国民营企业家。只有美国政府使中国企业在OTCBB上市和反向收购变得愈发困难,这些企业家才会开始考虑通过更正规和成功的途径上市,例如在国内得到证监会的批准上市。

    推崇OTCBB上市和反向收购的财务顾问经常会说这是最快捷最简单的上市途径。他们是正确的,但是这也是因为缺乏监管才能更快更简单。换个角度来说,这也是使一个优秀的企业成为一个失败的上市公司最快最简单的的方法。

    事实上,无论在美国中国还是香港股票交易市场,都不存在一条让中国企业成为成功上市公司的捷径。

     

     

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    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 04 7:59 AM | Link | 1 Comment
  • Is This The Greenest and Maybe Cleanest Vehicle on the Road

    Is this the zero-emissions green vehicle of the future? For the masses, possibly not.  For me personally, maybe so. It’s a battery-powered electric scooter, with solar panels for recharging during daylight hours.

    I’ve become a big fan, and a minor authority, on battery-powered electric scooters. I’ve owned a few. A Chinese-made electric scooter was my primary form of urban transportation while living and working in Los Angeles until moving to China last year.

    Though I never saw another one on the road in LA, I’m a passionate believer in this mode of transport. In China, electric scooters are almost as common as passenger cars, with upwards of five million sold every year. The streets and sidewalks are crowded with them. They run on lead acid batteries, the same kind used in car batteries.

    The electric scooters sold now in China rely on plug-in battery rechargers. That’s the biggest drawback of driving one. Lead acid batteries can take up to eight hours to recharge. This new solar-powered recharger should solve that problem. The battery recharges automatically as you ride around, as long as there’s sunlight. Assuming the solar recharger works, this electric scooter becomes a street-legal perpetual motion machine, never needing, at least during daytime, to stop for a recharge.

    I met the inventor, Zhao Weiping, at a trade exhibition. I could barely contain my excitement. We discussed the science, the capacity of the solar panels, and the potential to upgrade the batteries to lighter, longer-lasting lithium batteries. He’s only built prototypes so far. He expects the cost, for a base model, to be around Rmb3,000 ($440).

    With lithium batteries, the price goes up to around $750. Lithium batteries take half the time to recharge.

    Another benefit of lithium: the batteries weigh less than half lead acid ones. Less weight means less drag and so farther range on a full battery and faster top speeds.  Engineer Zhao guesses top speed should be about 50kph (30mph) compared to 30kph (18mph) for lead acid models.

    To me, it sounds like the ideal form urban transport: zero emissions, reliable, fast enough to keep up with traffic, and will rarely, if ever, require mains electricity to recharge. In other words, zero cost per kilometer traveled.

    It gets better: in much of the US, including California, you don’t need a driver’s license or insurance to drive an electric scooter, and you can drive it legally in bicycle lanes. Of course, few traffic cops know any of these facts. I was pulled over routinely in California, while riding my electric scooter. Eventually, I created a plastic-coated car card with all the relevant clauses of the state traffic code. I’d present it to traffic police, and they’d usually let me head off after a few minutes.

    In LA, I drove a Chinese electric scooter upgraded with lithium. Top speed was about 24 mph. Recharging time: four to five hours. As commutes go, my 9-mile trip to work was about as pleasant and relaxing as any could be. Most of my route was along the Pacific Ocean, and then through some of the hipper areas of Santa Monica and Venice. When the roads were crowded at rush hour, I’d switch into the bicycle lane. You can park anywhere on the sidewalk, just like a bicycle.

    The biggest hazard is pedestrians. The scooters are so quiet that people don’t hear it coming. I had a few near misses.

    I never understood why so few in California rides electric scooters. California is certainly one of the most environmentally-conscious places on earth. Motorized transport doesn’t get any greener than electric scooters. Zero emissions, zero fossil fuels, zero direct carbon footprint.

    Those green credentials were never my main reasons for riding an electric scooter. I liked the convenience, the tranquility, the absence of traffic and the sheer exhilaration of riding it.

    Exhilaration, however, is instantly transformed into despair when your battery runs out of juice.  It happened to me a few times, when I miscalculated the range. Open throttle riding, going uphill, lots of stops and starts can all drain the battery rather quickly. The meter showing battery life is, at best, unreliable. When the battery is empty, the scooter will shudder once, then conk out completely.

    Run out of fuel with an internal combustion engine, you call the AAA or find a gas station. Run out of electricity with an electric scooter and your only real choice is to push the vehicle home for recharge. I’ve had to do it more than once. It sucks.

    Engineer Zhao’s solar-powered recharger should make that problem less common, if not eliminate it altogether. At worst, if the battery empties, you park it and in daytime, come back in a few hours and drive it away. Limitless range should make for limitless enjoyment.

    Yes, but will Engineer Zhao’s machine work? Talking with him, it’s hard not to be confident it will. The solar panels are powerful enough to keep the batteries recharged and light enough not to create a lot of extra drag. The only way to find out, of course, is to get one. I’m thinking now of commissioning Engineer Zhao to build me one, with lithium batteries.

    If it works, I’ll help Engineer Zhao get venture capital funding to build his company. My gut tells me I’m not the only one who’d ride around on one, and that there could be a very big market in the US, Europe and China for this solar-charged scooter.

    I don’t particularly relish the idea of driving any sort of vehicle on Shenzhen’s streets. Driving is chaotic. Accidents common. Pollution awful. There are no bicycle lanes. But, I’m prepared to put my money – and perhaps my health – on the line to prove this is a vehicle with a future and perhaps even a mass market.

    Wish me luck.



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Dec 28 6:35 AM | Link | Comment!
  • Good News About China’s Food Price Inflation: Chinese Peasants’ Time of Unprecedented Plenty
     Food prices in China, as everyone inside and outside the country now knows, are rising fast, in some cases by over 30% during 2010. The Chinese government puts some of the blame on speculators who are said to be buying large quantities of fresh food, holding it off the market and then profiting from price increases. There seems to be some evidence of this.

    There’s no short-term fix for these price increases. The Chinese government has released for sale some of its food stocks. It is also urging peasants, and local cadres who govern rural China, to make sure more food is grown next year to increase supplies. The peasants probably won’t need any such encouragement.

    The increases this year in food prices have done more, in a shorter time, to lift income levels for many of China’s 600 million peasants than any other single measure taken over the last 30 years.

    There has never been a  better time, in China’s long agrarian history, to be a peasant. Fundamentally, food price inflation in China represents a colossal transfer of wealth from China’s more affluent urban areas to the rural hinterland where half of China’s population still lives.

    If this lasts, it will narrow the gap in living standards and income levels between China’s cities and countryside. This is one of the overarching goals of the Chinese government. And yet, no one is applauding.

    Instead, the Chinese central government has reacted with some alarm to the recent price increases. It knows that higher food prices are putting the squeeze on city-dwellers, including, of course, those in the capital Beijing and other major cities. In China, communist power originally took hold in the countryside, and a lot of party doctrine still speaks about its roots among the peasantry. But, political power today is firmly rooted in urban areas.  China’s political, economic and cultural elite all live in major cities, as do most of their friends and family. So, price rises effect this group directly.

    When apples, the staple autumn fruit in most of China,  almost double in price, as they have this year, political leaders will soon hear about it. The fact that China’s apple farmers now have a lot more money in their pockets is not necessarily part of the political calculus.

    Yet, it is undeniable that the fastest and most effective way to raise peasant living standards and real incomes is higher farm prices that don’t fuel overall inflation. There are signs that’s now the case, that the only area of significant double-digit inflation is in food prices. If so, this is unquestionably the best time in Chinese history to be tilling the land.

    How long will this last? Of course, commonly, a spike in food prices leads to overall price levels rising as well. This can erode, or even wipe out,  the rise in income for farmers from higher food prices. Also, today’s high prices will certainly lead to more land being cultivated next year, as farmers chase the fat profits from today’s prices.

    I was just in Jiangsu Province, in central China, and it seemed like most of the farmland is under plastic cover this winter, allowing peasants to keep growing and selling vegetables. Supply goes up, price comes down. Eventually.

    How high are food prices at present? Looking around my local covered market, prices in the stalls for many fruits and vegetables are now as higher or higher than prices commonly seen in the US. Looking just at autumn fruit, apples are about $1 a pound; navel oranges around 60 cents; clementines about $1 a pound; bananas are 50 cents a pound. Meat prices have risen sharply.

    Pork remains comparatively cheap at about $2 a pound, but chicken is quite a bit higher here. Garlic and ginger, the two fundamental staples of all Chinese cooking, are both at all-time highs of around $1 a pound.

    So far, in my experience, higher food prices haven’t yet fed through to higher prices at restaurants, noodle shops or even the outdoor steamer wagon where I buy corn-on-the-cob and potatoes as snacks. This means restaurant margins must be hurting. One notable exception, McDonalds in China. They recently announced price increases to counter effect of rising raw material costs.  With about 900 restaurants in China, all in larger cities, McDonalds feeds a lot of people.

    Wages are also rising very steeply in urban China, as is household wealth for anyone who owns property. This seems to be allowing most urban Chinese to absorb higher food costs without much of a fuss.

    In other words, just about everyone across this country of 1.4 billion is doing much better, year by year. For now, the 600 million peasants are doing best of all. Viewed across the breadth of China’s long history, no less than across the last 30 years of unparalleled economic progress, this is a singularly welcome development.

    .



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Dec 14 7:32 PM | Link | Comment!
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