Evergrande has ally against shorts as Lau invests $1bn

Bloomberg

Turns out China Evergrande Group, the indebted developer which earlier this year fought off short sellers, had a hidden ally. Chinese Estates Holdings Ltd., the company controlled by Hong Kong billionaire Joseph Lau and his family, bought HK$8.1 billion ($1 billion) worth of Evergrande shares since April, Lau’s firm revealed on Wednesday as it announced its interest had passed 5 percent. The announcement came a day after Bloomberg reported that Lakewood Capital Management is betting against Evergrande stock.
Purchases by Chinese Estate and Evergrande’s own share buybacks helped billionaire founder Hui Ka Yan beat back bearish investors. Short interest reached 21 percent of the free float in May and has since fallen to 16 percent, according to Markit data. The stock price doubled in the same period.
Ties between Lau and Hui go back to at least 2009, when Chinese Estates invested in Evergrande’s initial public offering. Since then, the two companies have sold assets to each other on several occasions. Chinese Estates’ latest investment in Evergrande was an expensive foray: the developer’s stock trades at almost five times the average valuation of its peers by one measure. “Chinese Estates is returning a favor for Evergrande, whose string of purchases of their assets helped them cash out,” said Francis Lun, Hong Kong-based chief executive officer of Geo Securities Ltd. “It’s known to the market that Chinese Estates is a good friend of Evergrande — buying shares at such an expensive price is just another sign.”