Corruption In Chinese Companies on US Exchanges

Corruption is prevalent in the Chinese space and China Mobile Games and Entertainment Group CMGE just gave investors another reason to be skeptical.

Last week, the company announced it will sell 2,500,000 shares to two private equity firms for $10 a share. One of the funds, Zennon Capital Partners, is located in the Cayman Islands while the other, New World Strategic Investment, is based out of Hong Kong.

At $10 a share, this represents a whopping 34 percent discount to what shares were trading at when the announcement was made.

CEO Ken Jian Xiao commented, “We believe that the relationships and experience of these two investors, particularly in the TMT sector, will benefit us in our future business development activities and in identifying potential financial and strategic partners.”

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Dan David of GeoInvesting, a firm renowned for its research and experience analyzing Chinese companies brought this to Benzinga's attention in an email. Dan commented on the transaction by saying, “This is bullshit.”

Shares of China Mobile Games and Entertainment are up more than 200 percent this year, even after falling 9.2 percent since the company made this announcement last week.

At the time of publication, shares traded at $13.80.