China Evergrande Group was kicked off the Hong Kong stock exchange on Monday in one of the largest delistings by market value and volume in recent years and marking an end to what’s been a tumultuous boom-and-bust saga for its investors.
Trading in shares in the world’s most indebted developer, with more than $300 billion in liabilities, had been suspended since a court order on January 29 that the company be liquidated after defaulting on its debts and failing to come up with a reorganisation plan.
That paved the way for Evergrande‘s delisting on Monday under the exchange’s rules.
For the most part, the company lived true to its name — it was once the country’s premier developer, its listing in Hong Kong in 2009 was the biggest by a Chinese private developer, and it had the largest pile of debt in the property sector globally.
But for investors in the firm, the journey has been anything but grand.
The developer started with a strong public market debut and a stock value of $9 billion in late 2009 that grew more than five-fold to $51 billion eight years later.
It was worth a meagre $282 million at the time the trade suspension kicked in.
The company’s journey from stock exchange darling to a pariah in the financial markets is a cautionary tale of unbridled debt-fuelled expansion in the world’s second-largest economy.
Its shares fetched HK$31.39 apiece at its peak, and it was down to HK$0.163 when it exchanged hands for the last time.
“The delisting marks a significant milestone, symbolising the culmination of Evergrande‘s dramatic downfall and signalling the end of an era for China’s property-driven growth model,” said Alec Tseung, a partner at investment and advisory company KT Capital Group.
Evergrande declined to comment.
SECTOR HOBBLED
Evergrande is unlikely to be the last to meet such a fate as the sector, which was hit by an unprecedented debt crisis in 2021, continues to be hobbled by a liquidity squeeze and a lack of homebuyer demand, analysts have said.
Earlier this month, China South City became the first state-backed property developer to be subject to a liquidation order from the Hong Kong High Court, following a similar fate for a handful of privately owned peers.
Chinese authorities have been striving to revive the property sector, which once accounted for a quarter of the economy’s GDP, while buyers wait for their unfinished homes and creditors hope to recoup their money.
Evergrande‘s delisting came on a day when property shares in Hong Kong and mainland China rallied on hopes of more stimulus measures from Chinese authorities and as Shanghai removed some restrictions on home purchases.
But not many analysts are convinced about the sector’s recovery prospects.
“It’ll be hard to revive consumption demand and sentiment when people have an empty pocket,” said Oscar Choi, chief investment officer of Hong Kong-based Oscar and Partners Capital Ltd, who covered Evergrande as an equity analyst for many years previously at an investment bank.
LIQUIDATION PROCESS
Many other developers are scrambling to stay afloat and avoid liquidation by securing creditors’ support to revamp debt, analysts have said.
Evergrande‘s rapid rise to the top followed by its dramatic collapse mirrors the fate of its founder, who was raised by his grandmother in a rural village in central Henan province, started as a steel technician and became one of China’s richest people.
At Evergrande‘s listing party in 2009, the founder Hui Ka Yan was joined by many of Hong Kong’s tycoons, including Cheng Yu-tung, the late founder of Hong Kong property giant New World Development, and Chinese Estates’ founder Joseph Lau.
In March last year, Hui was barred from the securities market for life and fined 47 million yuan after the regulator accused the group’s flagship unit of inflating results, securities fraud and failing to make timely disclosures.
While Hui has not been seen in public since he was detained by Chinese authorities in 2023, the company liquidators are fighting court battles with him to freeze his and his former spouse’s overseas assets and to recover $6 billion in dividends and remuneration paid to him and other former executives.
Lawyers expect the liquidation process to take a decade and the recovery rate for creditors is likely to be very low.
Evergrande‘s liquidators said last week they have recovered about $255 million from selling the firm’s offshore assets, which included school bonds, club memberships, artwork and motor vehicles.
That compares to creditors’ claims made to liquidators of $45 billion. Hopes for some homebuyers and investors, who put money into Evergrande wealth management products, meanwhile, are also diminishing.
“After a lot of property viewings, I chose Evergrande because I thought such a big developer would not collapse. I was wrong,” social media user 8AD2D1D4, who is waiting to receive his home purchase, wrote in a post on the Douyin platform.
Reuters
