Evergrande founder Hui Ka Yan.
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China Evergrande New Energy Vehicle Group’s shares plunged steeply after they resumed trading following a 16-month suspension, underscoring weak investor confidence in billionaire Hui Ka Yan’s prolonged restructuring of his sprawling business empire.
The Hong Kong-listed electric-car maker lost more than 61% its value on Friday, leaving it with a market cap of $1.7 billion. In a Thursday stock exchange filing, the company said it had fulfilled the requirements for a trading resumption in part by publishing financial results for the last two years, which showed 184 billion yuan ($25.7 billion) in total liabilities and $11.7 billion in combined losses for 2021 and 2022.
Yan Yuejin, director at the Shanghai-based E-house China Research and Development Institution, said the EV unit still constitutes the better part of Evergrande-related assets, especially amid the broader downturn in the country’s real estate market. The EV maker, in fact, is slated to play a crucial role in China Evergrande Group’s restructuring process. In a plan first unveiled in March, creditors owed about $19 billion of the beleaguered developer’s offshore debt are given the option of swapping their holdings into new notes or equity-linked instruments tied to the shares of Evergrande itself, its property management business or the electric car unit.
A Hong Kong court said earlier this week it would decide on the plan in September, which would allow creditors to recover about a quarter of what they are owed. Evergrande needs approval from creditors holding at least 75% of its debt to implement the restructuring through so-called schemes of arrangement. According to an April filing, the company has only secured support from 30% of creditors holdings its Class C debt, which include margin loans and repurchase obligations, whereas the support level from Class A creditors, which include bondholders, stood at 77%.
And the 64-year-old Hui, who has seen his wealth plunge more than 90% from its peak of $45.3 billion in 2017 to its current level of $2.9 billion, is a long way away from making good on his previous pledges to overtake Tesla and become the world’s largest EV maker. In the Thursday stock exchange filing, the EV arm said it has only delivered about 1,000 units of its flagship Hengchi 5 model since launching the car last year. Meanwhile, the company is seeking $500 million in new financing to “satisfy the capital requirements for production and sales of Hengchi 5 and normal operation of the company.”
Evergrande New Energy Vehicle Group, in the meantime, stressed in the filing that it can raise sufficient funds, but did not provide further details. The EV maker also acknowledged that it had made late payments of employee salaries at its manufacturing base in the northern city of Tianjin, and said its cashflow situation “would be alleviated” if it achieves its fundraising plan.