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Evergrande EV Unit Loses $80 Billion in World’s Worst Stock Rout


Ryzen_renoir
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Shares of China Evergrande Group’s electric vehicle unit are collapsing in Hong Kong, wiping about $80 billion from what was the property developer’s most valuable listed asset.

China Evergrande New Energy Vehicle Group Ltd. sank as much as 22% Thursday after its parent said the unit will post a net loss of 4.8 billion yuan ($740 million) for the first half. The EV business was worth about $87 billion at its April 16 peak, more than Ford Motor Co. and almost four times more valuable than China Evergrande itself at the time. Its shares are now down 92% since, the worst performance in the Bloomberg World Index and lagging even China’s tutoring stocks. 

Evergrande’s subsidiaries are being punished on concern the world’s most indebted developer will need to sell assets at a steep discount amid mounting pressure from Beijing. Shares of listed businesses -- including the 65% stake it owns in Evergrande NEV -- are the most liquid if Evergrande needs to generate cash quickly. Evergrande in May raised $1.4 billion from the unit in a heavily-discounted share sale.

Evergrande said earlier this month it was in talks with “several independent third-party investors” to sell stakes in the electric vehicle and property services subsidiaries. It’s selling a Hong Kong development project at a loss, people familiar with the matter said this week.

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The financial stress of Evergrande’s parent has reached epic proportions in recent weeks, prompting some to describe the potential contagion as China’s Lehman moment considering risks associated with Evergrande are threatening to freeze global credit markets. The giant real estate developer, whose assets also span banks and media businesses, is $300 billion in debt and widely expected to default on bond payments. Whether Beijing will engineer a resolution rather than allowing a chaotic collapse into bankruptcy is something investors around the world are now watching.

Evergrande NEV flagged during its half-year earnings results last month that it might have to delay car production unless it can secure more capital in the short term. The company reported a 4.8 billion yuan ($744 million) loss for the six months to June 30.

The startup, which vowed in March 2019 to take on Elon Musk and become the world’s biggest maker of EVs within five years, has unveiled nine models under its Hengchi brand but has yet to mass produce a single car. It made a great splash at this year’s Shanghai auto show, with all nine protoypes on display and promises of 5 million cars a year by 2035.

However four models, the Hengchi No. 1, 3, 5, and 6, are still at what’s known as the Engineering Trial (ET) phase, a preliminary stage that calibrates a car’s standards and quality controls while it has an all-white body, the people said. It typically takes at least six months after completion of the ET phase to mass production.

Like investors in China Evergrande Group, shareholders of Evergrande NEV have quickly become disillusioned. The Hong Kong-listed stock is down 90% this year, a huge pullback considering the company used to have a market value greater than Ford Motor Co. and General Motors Co.

Officially created when Evergrande Health changed its name to Evergrande NEV in July last year, while the company bills itself as a carmaker, most of the money it does bring in still comes from community health services and aged-care facilities.

The EV unit is a small part of Evergrande’s sprawling empire, which includes financial services and a bank, but which is primarily reliant on residential apartment sales.

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Only five indian companies ever breached 80 billion usd. Two are staffing and arbritrage companies - TCS and Infosys. One is govt ***** - reliance and another a bank,

Whereas a single chinese company reached $80 billion usd market cap in one year and managed to lose again.

China has 19 companies above 80 billion usd and they make all kinds of things - from games to cloud to cars  and this does not include unlisted companies like tiktok

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6 minutes ago, aakalibabayya said:

cause of world market crashes earlier this week VK.gif

Nah Chinese market is pretty disconnected from rest of the world , no impact expected to the rest of the world

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2 minutes ago, Ryzen_renoir said:

Nah Chinese market is pretty disconnected from rest of the world , no impact expected to the rest of the world

then monday roju world markets anni enduku crash ayyayi antav? everyone was saying it is evergrande effect :3D_Smiles_153:

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1 minute ago, aakalibabayya said:

then monday roju world markets anni enduku crash ayyayi anrav? everyone was saying it is evergrande effect :3D_Smiles_153:

It's not a crash , minor correction due to Evergrande foreign debt concerns . 

Crash is something like 15-20% down S&Bx

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17 minutes ago, Ryzen_renoir said:

Nah Chinese market is pretty disconnected from rest of the world , no impact expected to the rest of the world

China is most connected with reat of the world it is biggest trading partners to 50+ countries including india 

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2 minutes ago, manadonga said:

China is most connected with reat of the world it is biggest trading partners to 50+ countries including india 

Let me rephrase my line 

" Chinese financial market is pretty disconnected from rest of the world " 

 

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