After the news of the arrest of the Vice President, China Evergrande New Energy Vehicle Group's shares plummeted on January 8.
At the opening of the trading session on January 8, China Evergrande New Energy Vehicle Group (Evergrande NEV) listed on the Hong Kong Stock Exchange lost 23%. Currently, the decrease has narrowed to only 8.4%.
The stock plunged after Evergrande NEV announced to the Hong Kong Stock Exchange that its vice chairman Liu Yongzhuo had been detained for investigation into “suspected illegal activities.” The statement did not specify what the activities were or when Liu was arrested. He was seen on the company’s social media accounts at a car delivery ceremony in Tianjin on Dec. 26.
Evergrande NEV electric vehicle models. Photo: Caixin
Evergrande NEV shares were suspended this morning pending the announcement. The stock has lost 18.6% in the first week of the year after it announced it was canceling plans to sell a stake to U.S.-listed Dubai carmaker NWTN.
NWTN had planned to buy 28% of Evergrande NEV for $500 million. However, in October 2023, they canceled this plan due to the instability related to Evergrande.
China Evergrande NEV was founded in 2019 and is the electric vehicle division of Chinese real estate company Evergrande. At the time, the company said it aimed to become the world's leading electric vehicle manufacturer in "3-5 years".
However, the company’s cash flow and growth prospects have been hit hard by the financial situation of its parent company, which is only due to produce its first electric vehicle, the Hengchi 5, in 2022 after a long delay. Last March, Evergrande NEV said it was working to maintain liquidity to continue operating.
Their parent company, Evergrande, is now the world's most indebted company, with more than $300 billion in debt. They defaulted on their international debt in late 2021, becoming a prime example of the crisis in China's real estate market.
Hui Ka Yan - Chairman and founder of Evergrande Group - has been under investigation since September 2023 "on suspicion of illegal activities". Previously, Hengda Real Estate Group - the main branch of this company in China was also investigated by authorities.
Ha Thu (according to Reuters)
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