By
Chimamanda U. Martha
October 17th, 2023
Huge stock selling for the China’s Evergrande Group trigged on Monday, as trading for the stock started a month after the real estate giant filed for the US bankruptcy.
On Monday, August 28, shares of the Chinese real estate giant – the China Evergrande Group – tanked as much as 87% as the trading for the firm opened for the first time since March 21, 2022.
During Monday’s trading session earlier today, shares of Evergrande Group dropped as low as 22 Hong Kong cents. This is a staggering 87% drop in comparison to its last close of $1.65 HKG Dollar per share on March 18, 2022.
Trading has resumed following the company’s announcement of a loss of 39.25 billion yuan ($5.38 billion) for the six months concluding in June. This loss is notably smaller than the 86.17 billion yuan loss reported for the same period last year. Furthermore, the company’s revenue reached 128.81 billion yuan, marking an increase from the 89.28 billion yuan recorded in June 2022.
Last month in July, the struggling firm initiated the process of seeking Chapter 15 bankruptcy protection in a US court, a measure aimed at safeguarding its US assets from creditors as it pursues a restructuring arrangement elsewhere.
In its disclosure to the Hong Kong exchange, Evergrande unveiled its total liabilities amounting to 2.39 trillion yuan as of June this year. This figure is marginally lower than the 2.44 trillion yuan reported in the six months ending on June 30, 2022.
By June, Evergrande’s overall assets tallied up to 1.74 trillion yuan, encompassing total cash, cash equivalents, and restricted cash of 13.4 billion yuan.
The Fall of China’s Evergrande Group
In 2021, Evergrande faced a default situation and in March, it disclosed a program for offshore debt restructuring. These measures were taken due to challenges in completing projects, repaying suppliers, and meeting obligations to lenders. In a long-delayed earnings report earlier this year, the company reported a combined loss of $81 billion.
The real estate crisis happened amid cash shortages experienced by prominent property conglomerates. This situation impacted Evergrande Group, resulting in multiple debts and eventual default. The company failed to meet a significant deadline, leading to the inability to repay interest on approximately $1.2 billion of international loans. In October 2021, Evergrande revealed plans to generate $5 billion by divesting a 51% ownership stake in its property management unit to Hopson Development.
Net losses for 2021 and 2022 amounted to 476 billion yuan and 105.9 billion yuan, respectively. These losses were attributed to property writedowns, land returns, financial asset losses, and financing expenses, as highlighted by the company. In 2020, prior to its default situation, Evergrande had recorded a net profit of 8.1 billion yuan.