The company was coming aboard NYSE 9th June just as the bunch of US-listed Chinese companies has been under fire following a series of accounting scandals and alleged short sale of their own stocks.
A number of Chinese stocks took a beating in trading on Wednesday after Interactive Brokers Group Inc. said earlier this week it would prohibit clients from borrowing money to take leveraged positions on 160 Chinese securities, and discount brokerage TD Ameritrade said it is closely monitoring Chinese stocks in the United States.
Lack of sufficient accounting resources and essential expertise to comply with US Generally Accepted Accounting Principles (US GAAP) and to prepare and review financial statements and related financial disclosures under US GAAP for Securities and Exchange Commission reporting and compliance purposes is not unusual for a Chinese company, and Taomee is no exception to this phenomenon.
In its prospectus, the company said the company and its auditors found "significant deficiencies in our internal control over financial reporting" and that it lacked enough expertise to comply with US accounting rules.
Up by 24.06 per cent from its IPO day closing price, Taomee closed at $10.21 on 10th June, the second day following its IPO, whilst most Chinese companies were not kept from plunging further on the same day. Thereby, Taomee market value reached US$ 370 million the day.
In the past 30 days or so, Chinese companies listed in the US suffered its Waterloo ever since the first Mainland Chinese company went public in the nation. They were cross-examined and scrutinized over the credibility of their accounts and their alleged misconduct of short sale of own stocks for profit. The prospect for Chinese cohorts has never been dimmer before.
Yet the Taomee listing and ensuing price up bestowed US-listed Chinese companies in trials and tribulations a much-needed ray of light. To have a company listed in the US, that possibly changes one from featureless to Forbes overnight without the fatigue of diligently building up a business empire for a life, is the dream for many in China.
