(Bloomberg) — Shares of China Evergrande Group’s electric vehicle unit are collapsing in Hong Kong, wiping out about $80 billion of what was the developer’s most valuable publicly traded asset.
China Evergrande New Energy Vehicle Group Ltd. sank as much as 22% on Thursday after the parent company said the unit lost 4.8 billion yuan ($740 million) in the first half. The market value of the EV business was about $87 billion at its peak of April 16, surpassing Ford Motor Co.’s. and nearly four times the capitalization of China Evergrande itself at the time. Evergrande NEV stocks have since fallen 92%, the worst performance in the Bloomberg World Index and even lag behind China’s leather stocks.
Evergrande’s subsidiaries are being punished over concerns that the world’s most indebted developer will have to sell assets at a steep discount amid mounting pressure from Beijing. Shares of publicly traded companies — including the 65% stake it holds in Evergrande NEV — are the most liquid if Evergrande needs to generate cash quickly. Evergrande raised $1.4 billion from the unit in May in a deeply discounted stock sale.
“It’s very clear that Evergrande New Energy is short on money,” said Castor Pang, head of research at Core Pacific-Yamaichi International HK Ltd. “With the parent company facing a liquidity problem, Evergrande New Energy will not be able to meet previous car production targets.”
The launch of electric cars has already been a capital-intensive project for Evergrande chairman Hui Ka Yan, who funneled billions of yuan into the company in a bid to make it “the world’s largest and most powerful new energy vehicle group” by 2025. Formerly known as Evergrande Health Industry Group Ltd. before a name change last year, the company still generates the majority of its revenue from its health business.
Hui spoke of an earnings call in late March after Evergrande NEV’s full-year 2020 loss rose 67%, saying the company plans to begin pilot production of cars at the end of this year, delayed from a original timeline from last September.
Evergrande said earlier this month it was in talks with “several independent outside investors” to sell stakes in its electric vehicle and real estate services subsidiaries. It is selling a development project in Hong Kong at a loss, people familiar with the matter said this week.
Nearly 93 million Evergrande NEV shares switched hands on Thursday, about seven times this year’s daily average. The stock closed 19% lower at HK$5.18, its lowest price since March 2020.
(Updates to add a quote in the fifth paragraph, background information about the company in the sixth and seventh, and update the numbers throughout.)
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