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In an exclusive interview with Benzinga, Dan David of GeoInvesting explained what he looks for in the reverse merger space to determine legitimacy.

Change in Environment

Dan David began by explaining how this process has adapted over the past several years. Now, a majority of Chinese firms that underwent the reverse merger process are trading at fraud multiples. “In the past it was more basic things. You could look at the margins and say ‘Okay, this is way out of line of the industry standard, even in China’. Or, a particular region of the country that is known for fraud.

Sphere of Influence

David went on to explain how companies’ relationships are used to determine fraudulence.
“Now I find that one of the best indicators is what I like to call the sphere of influence. When you look at a company, you look at who their deal maker is, who their law firm is, who their auditor is. That sphere of influence can give you a good indication of whether you are spending your time usefully or not.”

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