Hedge Funds’ Favorite Chinese Reverse Merger Stocks

Bloomberg published the list of Chinese reverse merger stocks. These stocks are performing terribly this year and recently SEC issued a warning about the Chinese reverse merger companies. “Given the potential risks, investors should be especially careful when considering investing in the stock of reverse merger companies,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “As with any investment, investors should thoroughly research the company – including ensuring there is accurate and up-to-date information – before making a decision to invest.”

We compiled the list of Chinese reverse merger companies that are favored by hedge funds and prominent investors. Of course, it is possible that these hedge funds didn’t do their homework on these reverse merger stocks and blindly bought them to gain some China exposure. Recently billionaire hedge fund manager John Paulson lost between $600-$650 Million in a Chinese company. So, investors have to be careful.

Here are the top Chinese reverse merger companies with at least 4 hedge funds investing a total of $10 Million:

ChinaCast Education tops our list with 12 hedge funds holding $88 Million in CAST. Quincy Lee’s Teton Capital, Jeffrey Tannenbaum’s Fir Tree, Chase Coleman’s Tiger Global, and John Burbank’s Passport Capital are among the CAST investors (See the complete list of hedge funds in CAST).

Harbin Electric (HRBN) is the second most popular Chinese reverse merger stock. Philip Hempleman’s Ardsley Partners made a large bet on HRBN. Matthew Halbower’s Pentwater Capital had a $26 Million long position in HRBN as well. However, Halbower also had a $33 Million put option.

On the other hand, there aren’t any hedge funds in any of the following Chinese reverse merger stocks: