You Can’t Hide from the Corporate Cops | Hacker News Reader

You Can’t Hide from the Corporate Cops

bloomberg.com

92 pointsbspn16 comments

At the risk of skipping a lot of (extremely entertaining - a highly recommended read about the innards of corporate shell structures amd shareholder rights) detail, the story boils down to 1) the common observation that laws are only as useful to you as your ability to get them enforced, 2) sometimes even very rich and able people can have a lot of trouble enforcing laws, in a rightful case, against someone determined who knows to cleverly play the legal system.

And 3) when you are buying a position in a company, take some time to get to know what you are buying. A half dozen shell companies through the BVI with no assets until you get to Hong Kong? I might dock that one a bit

This is a surprisingly common way for Chinese companies to get listed in overseas stock markets. Netflix has a good documentary about the practice called "The China Hustle"

Indeed, one wonders what sort of due diligence the investors conducted.. I suspect (since convoluted shell structures are not (at all) uncommon in practice) it could have been that they weren’t actually aware of the full potential ramifications, or to the extent that they were, they didn’t imagine it’d go to the (literally) extreme scenario. In any case, a tale of caution this certainly is.

There are plenty of Lenny stock punters who gamble full well knowing they don’t know what’s going on underneath. They expect larger returns in exchange for the added risk.

>, the story boils down to

To clarify further, only one sub-story (the "corporate cops" that's in the title) can be summarized to that.

The article's title is misleading as the full text is really a mismash brain dump of 7 subtopics that doesn't seem to have a unifying theme. (Note the subtitle is "Also data science, Hovnanian, demo platforms, Jack Dorsey and bond liquidity.") The 7 boldfaced sections:

  The corporate police.
  Data.
  Everybody won in the Hovnanian trade.
  Oops.
  CEO skill.
  People are worried about bond market liquidity.
  Things happen.

(The other 6 topics are unrelated to "corporate cops".)

It's an opinion column. Such things frequently cover multiple topics under different subheadings. It's not a "mishmash brain dump", it's just regular journalism, as has been practiced for decades.

> it's just regular journalism,

I did not intend "brain dump" to be a negative criticism but to explain further what the _full_ text article is about. It's a mishmash of various unrelated topics and I was hoping my clarification would encourage readers to look at the rest of the article.

>Such things frequently cover multiple topics under different subheadings.

Yes, this is why I took the trouble to paste all 7 subtopics/subtitles -- so readers can quickly see that.

The article's prominent title is only 1/7th of the whole story and the gp's summary is incomplete and may unintentionally steer potential readers away from the other 6/7ths of the text. (E.g. the section about Jack Dorsey doubling the stock price and the section about "data science" being the new knowledge baseline -- has nothing to do with the section about corporate police enforcing laws against Chinese shell companies.)

This is Matt Levine's newsletter Money Stuff which is published as an op-ed in Bloomberg.

The best business newsletter going, and daily, and free.

Bloomberg went to a 3/month paywall a few months ago. I used to read this column all the time. I should subscribe just as a thank you for writing it.

"Local-currency emerging-market bonds sound like they’d be pretty illiquid. Packaging them into an exchange-traded fund might make them seem more liquid, but if someone wanted to get out of a big ETF position all at once, they might find that the liquidity isn’t there. By selling the ETF they’ll cause a fire sale of the underlying bonds. Right?

And every actual event undermines it! The bond index underlying EMLC was … um … up 0.45 percent yesterday. Obviously a $321 million bond trade is not a particularly big one, but still, it’s a record for this ETF, and it just didn't have a whisper of an impact on bond market liquidity."

Only if you are assuming that who ever is holding the bonds now will want to just outright dump it and thus exacerbating the 3 month trend on that particular ETF… not to mention you have to ignore that there could be liquidations in portfolios (FX/Cash/Swaps/Equities/ other derivative contracts) going on to re-balance/cover losses as well as ignoring how central banks from India to Indonesia have been quite vocal in their worries…

Or can you? If they ignored the suit so far, then there's probably a good chance they'll just stop travelling the the U.S., and then we'll see if Chinese courts enforce this or not...

Chinese courts and law enforcement won't enforce an arrest order from a subsidiary Deleware court in a foreign country.

Just as a US courts and law enforcement wouldn't enforce a Chinese provincial subsidiary court order.

I guess it's not _entirely_ unprecedented (apparently there is exactly one example in each direction), but yeah, I think they will not be arrested any time soon.

https://www.chinalawblog.com/2014/03/enforcing-china-court-j... https://blogs.law.nyu.edu/transnational/2018/04/the-chinese-...

Assuming they were travelling to the US for business purposes, this may, however, seriously cripple their ability to do keep doing business in the way they used to.

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