Evergrande loses $2.8 billion market value after shares dive

BLOOMBERG

China Evergrande New Energy Vehicle Group Ltd plunged as trading resumed in its shares for the first time since April 2022, wiping $2.8 billion off the company’s market value in Hong Kong. The China Evergrande Group unit was down 62%, having fallen as much as 69% when trading started, leaving it with a market value of about $1.7 billion.
Evergrande NEV released results that showed a net loss of 84 billion yuan ($11.7 billion) for 2021 and 2022 combined. The company also warned of its ability to continue as a going concern.
Total liabilities in its 2022 earnings statement amounted to about 184 billion yuan. Evergrande NEV said it plans to raise about $500 million to satisfy capital requirements for production and sales of its Hengchi 5 EVs. It is also in discussions with potential investors, it said.
“The potential $500 million fundraising could help restore the subsidiary’s operations and sales of Hengchi 5,” Bloomberg Intelligence analyst Daniel Fan said, referring to the automaker’s only available model.
Evergrande NEV shares are an important part of the wider group’s debt restructuring plan, among one of the biggest ever in China. Evergrande proposes that creditors can choose to receive a combination of new debt and instruments tied to the shares of its property-services unit, EV division or the builder itself.
Founded in 2019, the Guangdong-based EV unit of what was China’s largest developer announced ambitions to become the world’s biggest EV maker within three to five years and that it would start selling vehicles “soon.”
The company’s Hong Kong-listed shares soared over 1,000% in 12 months to peak in April 2021, when Evergrande NEV was worth more than Ford Motor Co and General Motors Co despite still not even having a car on the market. It had also made a splash that year’s Shanghai Auto Show, displaying nine prototype vehicles and targeting sales of 5 million cars a year by 2035.
China is the world’s biggest EV market and competition is intensifying, with the likes of Tesla Inc playing a dominant role, along with market leader BYD Co Legacy automakers such as Volkswagen AG, which is investing $700 million for a 4.99% stake in EV maker Xpeng Inc, are also battling it out for sales.
Chinese EV Startup Nio Inc’s gross margins only turned positive in mid-2020, after years of heavy losses and a lifeline from a municipal government.
Evergrande NEV delayed payments and halted production when liquidity strains and liability issues mounted around its parent. Still, the carmaker plans to raise more money to sustain operations and roll out more Hengchi models.
“The earnings reporting and trading resumption show that regulators may have made some progress in the Evergrande investigation, and the handling of its problems is likely to enter into a new stage,” said Shen Meng, a director with Beijing-based investment bank Chanson & Co., suggesting that other Evergrande companies may resume trading soon. However, “unless there’s white knight who can come and assist, Evergrande will hardly have any potential investment value at this stage in the electric-car industry,” Shen said.