Unhappy comeback: Embattled Chinese real estate giant Evergrande crashes again by 87% after 17-month suspension

The shares of the bankrupt former Chinese property giant Evergrande plunged 79 percent on Monday, its first trading day following a suspension of more than 17 months, which it used to try to restructure its offshore debt.

The stock of the embattled real estate developer Evergrande Group, which trades in Hong Kong under what was supposed to be the “lucky” ticker 3333, opened 87 percent lower and ended the day at HK$ 0.35. Investors immediately wiped more than four-fifths off the market value of the company, which last month reported a combined loss of $81 billion for 2021 and 2022. According to reports, it lost more than 99 percent of its share market value over the past three years.

The company stopped trading on March 21 last year, when shares were priced at HK$1.65. It filed for bankruptcy protection in a New York court on Aug. 17, a technicality since the company had defaulted on its debt almost two years earlier. The company’s bonds remain frozen and do not trade in the secondary market. (Related: Evergrande Group files for bankruptcy in the U.S. after two years of distress… debt defaults will now spread across America.)

Moreover, Evergrande said that a meeting with creditors to discuss offshore debt restructuring has been pushed back from Monday to Sept. 26, citing various reasons for the delay. One of the reasons includes “numerous media reports which have wholly mischaracterized the restructuring recognition under Chapter 15 of the U.S. bankruptcy code.

Evergrande was once China’s real estate giant but it defaulted on a number of debt obligations, leaving homeowners with unfinished homes and suppliers with unpaid bills. According to Nikkei, the company applied for the trading suspension to be lifted on Friday evening after it said it had cleared various conditions set by the Hong Kong Exchange, including the release of financial reports.

The results for the first six months of the year were announced Sunday night when the company was reported to have a net loss of 33.01 billion yuan ($4.53 billion). It was deemed better than the 66.35-billion-yuan loss from a year ago but still considered catastrophic. It also posted long-overdue annual earnings reports for the last two years on Aug. 16, where it showed a combined net loss of a record 581.94 billion yuan, a reversal from 8.07 billion yuan in net profit in 2020.

Evergrande is also facing more than 2,000 lawsuits involving about 535 billion yuan.

Evergrande to sell out part of its EV subsidiary

The Chinese property developer also laid out a plan earlier this year to compensate investors with notes linked to its listed Hong Kong subsidiaries, which include an electric vehicle (EV) company.

Its EV unit China Evergrande New Energy Vehicle Group on Friday night also separately announced a net loss of 6.86 billion yuan for the first six months of the year, compared to a net loss of 13.36 billion yuan last year. The subsidiary’s financial position remains strained just like the parent company as its cash and cash equivalents came to 117 million yuan as of the end of June. Meanwhile, its net current liabilities are at 36.61 billion yuan.

As part of the financial restructuring, Evergrande proposed selling part of the EV unit to Nasdaq-listed NWTN (Zhejiang) Automobile, a Dubai-based mobility product company founded by Chinese entrepreneur Alan Nan Wu.

NWTN is willing to take in 27.5 percent of the bloated share capital of the EV unit for HK$3.88 billion to “support the business recovery and growth” of Evergrande Group. The new shares will be issued at HK$0.6297 apiece, representing a 63 percent discount to the stock price when the agreement was signed on Aug. 14.

Also, the company with its major shareholders, including its founder and Chairperson Xu Jiayin, also known as Hui Ka-yan, agreed to convert loans into a total of 5.44 billion new shares, at a price of HK$3.84 per piece. The Hong Kong-listed shares of the EV unit closed at HK$1.22 on Monday.

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Sources for this article include:

ZeroHedge.com

Bloomberg.com

Asia.Nikkei.com

TheGuardian.com