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It's over! Evergrande's share price plummeted

2024-04-22 Update From: AutoBeta NAV: AutoBeta > News >

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On January 1, Evergrande issued an announcement that the share subscription agreement and debt-for-equity swap agreement between Evergrande and Newton Group, originally scheduled to expire on December 31, 2023, have expired. Evergrande stressed that although the agreement had expired, Evergrande, Newton and other interested parties were still negotiating key terms of these deals, indicating that the two sides could still reach a new agreement or revise the original agreement.

Affected by the news, Hong Kong shares of Evergrande Motor fell more than 17%.

On Aug. 14, 2023, Evergrande announced that it had received the first strategic investment of US $500 million (RMB 3.55 billion) from the NWTN Group, which accounted for 27.5% of the expanded common stock outstanding after the completion of the deal.

At the same time, in order to support the recovery and growth of the New Energy vehicle Group, the two sides signed a transitional financial support agreement. In accordance with the requirements of the agreement, subject to meeting the prerequisites in the agreement, Newton Group will provide 600 million yuan of interest-free and guaranteed transitional funds for Evergrande's R & D, production and sales business.

It is understood that the Newton Group is an electric car company located in Dubai, United Arab Emirates, and was previously an enterprise in Tianjin, China. Its founder Wu Nan, who is also from China, established Tianjin Tianqi Group Co., Ltd. in 2016, and its controlling shareholder is Econic (Tianjin) Investment Co., Ltd. In 2018, Econic New Energy vehicle settled in Zhaoqing, Guangdong Province. In 2019, seven concept models were unveiled at the Shanghai Auto Show, and in the same year, nearly 870 million yuan was spent on the acquisition of Tianqi Meiya to obtain the car-building qualification. According to Econic's earlier plans, its first product, the Econic 7 Series, will be launched in 2019, and two new cars built on the same platform as the Econic 7 Series will be launched in 2021 and 2022, respectively. However, due to the epidemic and financing problems, there has been little news about the brand after 2019.

As for the cooperation between the two sides, Evergrande said that holding hands with Middle East Capital will effectively solve the financial difficulties faced by Evergrande Automobile Development. With its advanced technology accumulation, intelligent manufacturing base, excellent product quality and global supply chain system, Evergrande will make every effort to promote the production and sales of Hengchi 5 and quickly occupy the market. and further promote Hengchi 6, Hengchi 7 and other new model research and development and mass production.

On September 28, 2023, China Evergrande announced on the Hong Kong Stock Exchange that the company had received notification from relevant departments that Xu Jiayin, the company's executive director and chairman of the board of directors, had been taken compulsory measures in accordance with the law on suspicion of breaking the law and committing crimes.

On October 8, 2023, Evergrande disclosed in an announcement that it had received a letter from Newton Group (the subscriber) on September 29, 2023, including: in view of the company's announcement of the suspension of trading of its shares on September 28, 2023, together with a series of recent changes in China Evergrande Group, there is significant uncertainty, which in turn will bring significant uncertainty to the share subscription agreement and the proposed transaction. Under the share subscription agreement, the completion of Evergrande's debt restructuring and a series of other prerequisites are very important delivery prerequisites. In this case, the subscriber shall suspend the performance of the relevant obligations in the share subscription agreement.

It should be noted that there is still widespread skepticism about whether Newton really has the strength to inject money into Evergrande, and the background of Wu Nan, the founder of Newton Group, and his relationship with Xu Jiayin have also attracted a lot of attention. In terms of technology and production, Evergrande still has a certain combination of technology accumulation and patents. In addition, Evergrande has vehicle and parts manufacturing bases in Tianjin, Shanghai and Guangzhou, which is still attractive to some new power car companies that lack car manufacturing qualifications.

At present, the competition in the new energy vehicle industry is extremely fierce, and many multinational joint venture brands are struggling, not to mention the heavily indebted real estate cross-border car companies, while returning to the product itself, Hengchi 5 positioning compact pure electric SUV is not expensive compared with the same class of models, and the product configuration is not very poor, but Hengchi has not formed its own advantages. Hengchi 5's power, range, auxiliary driving and so on can only be regarded as regular, and it is difficult to show enough competitiveness compared with BYD, Tesla and other brand products. Most crucially, China Evergrande is heavily in debt, and Xu Jiayin, chairman of the board, has been forced to take enforcement measures. How Hengchi can persuade consumers to buy the products of such a company is another big problem.

In addition, Evergrande lost money year after year, with a cumulative loss of 84.008 billion yuan, including a net loss of 56.344 billion yuan in 2021 and 27.664 billion yuan in 2022. As of December 31, 2022, Evergrande had a cumulative loss of 98.906 billion yuan, of which from 2018 to 2020 Evergrande lost 1.429 billion yuan, 4.426 billion yuan and 7.394 billion yuan respectively. In terms of debt, by the end of 2022, Evergrande's total debt was 183.872 billion yuan, excluding 3.314 billion yuan of prepaid accounts, the debt scale was 180.558 billion yuan, while Evergrande's total assets of 115.22 billion yuan, has been seriously insolvent.

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