Key Developments
The electric vehicle (EV) unit of China Evergrande Group, China Evergrande New Energy Vehicle Group Ltd, saw a significant 23% fall in share value on Monday after the arrest of its executive director, Mr. Liu Yongzhuo.
Major Implications
Hong Kong-listed shares of China Evergrande’s EV division dropped sharply after the company revealed that Mr. Liu Yongzhuo had been apprehended on suspicion of illegitimate activities. Trading of the company’s shares was suspended before the market opening in Hong Kong on Monday, resuming at 1 p.m. local time.
Financial Volatility
Evergrande’s financial troubles have been ongoing, marked by Moody’s downgrading China’s debt outlook in December 2023, and were accompanied by a significant fall in shares, in line with Evergrande’s substantial loss in the first half of 2023.
In August of the same year, Evergrande filed for Chapter 15 bankruptcy protection in the United States due to its severe debt crisis. This incident follows a significant 18% drop in Evergrande NEV shares last week after the termination of a planned share sale to U.S.-listed NWTN Inc.
The company has yet to disclose further information regarding the allegations or the precise timing of Mr. Yongzhuo’s detainment.
This incident comes on the heels of a significant 18% drop in Evergrande NEV shares last week after the termination of a planned share sale to U.S.-listed NWTN Inc.
The company’s substantial debt, pegged at $300 billion, led to its chairman Hui Ka Yan’s fortune plummeting by 93% by the start of 2023.
Later that month, the company suffered another blow when its shares plunged by 87% as trading resumed after a 17-month hiatus.
“The company has learned that its executive director Mr. Liu Yongzhuo has been detained in accordance with the law on suspicion of illegal crimes,” Evergrande NEV announced in a filing to the Hong Kong exchange, reported CNBC.
In August of the same year, Evergrande filed for Chapter 15 bankruptcy protection in the United States due to its severe debt crisis. This incident comes on the heels of a significant 18% drop in Evergrande NEV shares last week after the termination of a planned share sale to U.S.-listed NWTN Inc.
The company has learned that its executive director Mr. Liu Yongzhuo has been detained in accordance with the law on suspicion of illegal crimes,” Evergrande NEV announced in a filing to the Hong Kong exchange, reported CNBC.
The company has yet to disclose further information regarding the allegations or the precise timing of Mr. Yongzhuo’s detainment.
In Conclusion
The turmoil in Evergrande’s EV division is yet another chapter in the ongoing saga of the company’s financial struggles. The fallout from the executive’s arrest has dealt a severe blow to the unit’s share value, sending reverberations throughout the industry.
Not long after Evergrande NEV shares dropped 18% last week, the arrest of Mr. Liu Yongzhuo has created heightened uncertainty and volatility in the company’s financial prospects.
Whether the unit can weather this storm and regain market confidence remains to be seen, but the recent events have further eroded investors’ trust in the embattled company.