Shares in China Evergrande New Energy Vehicle Group surged in resumed trading Monday after a potential buyer emerged.
Hong Kong-listed shares of the EV unit of beleaguered property developer China Evergrande Group rallied as much as 113% Monday, the first day of trading after the company asked for trading to be suspended in advance of an announcement. In a late Sunday stock exchange filing, the unit said that liquidators of its parent have found a possible buyer to acquire a 29% stake in the company, with the option to purchase another 29.5% stake in the future. The buyer was not identified.
Kenny Ng, a Hong Kong-based securities strategist at Everbright Securities International, said investors were encouraged by the idea of new ownership. According to the filing, the buyer may also provide a line of credit to support Evergrande New Energy Vehicle Group’s continuing operation.
But Ng cautioned that any deal is not certain yet. What’s more, competition in China’s EV market—the world’s largest—is fierce as automakers from BYD to Tesla use aggressive price cuts to sell their vehicles amid a supply glut. Evergrande New Energy Vehicle, which once expressed the ambition to overtake Tesla worldwide, sold only 1,389 Hengchi-brand cars as of the end of 2023, according to its annual report.
The company is suffering from a “severe shortage of funds,” according to Sunday’s filing, and its factory in Tianjin halted production at the beginning of this year. In a separate filing, it said government authorities are now demanding repayment of a total of 1.9 billion yuan ($262.4 million) in incentives and subsidies as the company failed to perform certain contractual obligations.
The EV maker has been struggling since parent Evergrande defaulted on its debts more than two years ago and was ordered to be liquidated in January amid China’s protracted real estate slump.
Liquidators appointed by a Hong Kong court are looking into the parent’s assets, including disgraced founder Hui Ka Yan’s stake in Hong Kong-listed Evergrande, as well as Evergrande’s ownership of its EV and property management units, to see how they can be used to repay international creditors. Hui, who has fallen off Forbes’s ranking of world’s billionaires, has been subject to “mandatory measures” by Chinese authorities since September 2023, when Evergrande announced that the former mogul was suspected of crimes.
