Court Won’t Toss AutoChina Manipulation Case

AutoChina International (AUTCF) asked a Massachusetts federal court to toss out a complaint brought by the SEC in April 2012 alleging that the company used $60 million in cash to trade up its stock and create the appearance of liquidity, but the court rejected AutoChina’s venue arguments. The suit was filed in Boston’s U.S. District Court. China-based auto leasing and service provider AutoChina obtained $70 million in PIPE financing in March of 2010 according to PlacementTracker data. Rodman & Renshaw and co-agent Chardan Capital Markets placed the deal, which included investors Stratus Capital Management, Millennium Management and GCA Strategic Fund Ltd. Law firm Loeb & Loeb represented the issuer.

VelaTel

Investor Sees VelaTel Opportunity

Ironridge Global IV, a San Francisco-based growth equity fund focused on emerging growth companies, is taking a bet on a telecommunications company that’s struggling to gain investor interest despite an ambitious global expansion. In mid-December, Ironridge agreed to invest $12 million in VelaTel Global Communications (VELA), a San Diego-based holding company of telecommunications carriers in China, Europe and South America, to help the company finance a key acquisition in Asia and to fund other growth projects. Under the terms of the deal, Ironridge is buying 1,200 shares of convertible preferred stock from VelaTel in tranches of 60 preferred shares each, according to PlacementTracker, a division of Sagient Research. The fixed conversion price of 20 cents a share was at market when the conventional PIPE was announced, but since then the share price has slid to around 13 cents. The deal includes a 2.5% annual cash dividend and requires VelaTel to file a registration statement by Jan.

SEC

Chinese Affiliates of U.S. Auditors Hit by SEC

The misery afflicting Chinese issuers spread to the Chinese affiliates of big U.S. accounting firms this month when the Securities and Exchange Commission began administrative proceedings against the affiliates for violating the Securities Exchange and Sarbanes-Oxley acts. The action stemmed from the commission’s fruitless efforts to obtain documents from the firms related to nine China-based companies under investigation. Under Sarbanes-Oxley rules, foreign accounting firms are required to give the SEC “audit work papers” upon request for any company trading on U.S. markets. The commission cited BDO China Dahau CPA Co., Ernst & Young Hua Ming, KPMG Huazhen, Deloitte Touche Tohmatsu Certified Public Accountants and PricewaterhouseCoopers Zhong Tian CPAs in the complaint. The move is also part of the SEC’s larger initiative to “address concerns arising from reverse mergers and foreign issuers,” the commission said, which to date has resulted in deregistration of the securities of 50 companies and fraud cases against 40 foreign issuers and executives.

UTStarcom Hangs Tough

 

Amid the wreckage strewn across the Chinese company landscape – what with the Securities and Exchange Commission’s ongoing investigations into the nooks and crannies of Chinese issuers and short-seller assaults – at least one growth company that conducted an actual IPO 12 years ago is still trying persevere. UTStarcom Holdings Corp. (UTSI), a Beijing-based provider of media support services and broadband equipment, earlier this month launched a tender offer to buy back up to 25 million shares, or 17.4% of its total shares outstanding, as part of a broader growth strategy announced in mid-November. The company is offering $1.20 a share, which represented a 52% premium over the stock price on Nov. 16.