Shares of China Evergrande Group (3333.HK) fell as much as 87% early on Monday when trading resumed following a 17 month suspension, wiping out almost $2.4 billion of its value, after saying it had “adequately” fulfilled all guidance issued by the Hong Kong Stock Exchange.
Evergrande, the world’s most-indebted property developer, is at the centre of a crisis in China’s property sector that has seen a string of debt defaults since late 2021. Next month, courts will decide on Evergrande’s plan to restructure almost $32 billion worth of offshore debt obligations.
Shares listed in Hong Kong traded as low as HK$0.22 on Monday, with its market capitalisation shrinking to HK$2.9 billion ($369.73 million) from HK$21.8 billion ($2.78 billion) from when it last traded. Valuation hit an all-time high of close to HK$420 billion in 2017.
The stock had been suspended since March 21, 2022. Its Hong Kong-listed units, China Evergrande New Energy Vehicle Group (0708.HK) and Evergrande Property Services Group (6666.HK) have both resumed trading in the past month after a 16 month halt.
The resumption of trading in all three companies is crucial for Evergrande Group because its offshore debt restructuring plan includes swapping part of the debt into equity-linked instruments backed by them.
Evergrande would have faced delisting if the suspension had reached 18 months.
“Going forward things will continue to be difficult for both its operations and share performance,” said Steven Leung, Hong Kong-based director of UOB Kay Hian.
“There’s little hope that Evergrande can rely on selling houses to repay debt because homebuyers would prefer state-owned developers, and it won’t be able to benefit from stimulus policies.”
The trade resumption also came after the developer on Sunday reported a narrower net loss for the first half of the year due to a rise in revenue.
Its liabilities slightly dropped 2% to 2.39 trillion yuan ($328.14 billion) during the six months period, while total assets shrank 5.4% to 1.74 trillion yuan.
Evergrande posted a combined net loss of $81 billion for 2021 and 2022 in a long-overdue earnings report last month, versus an 8.1 billion yuan profit in 2020.
As with Evergrande’s previous two annual financial statements, auditor Prism Hong Kong and Shanghai has not issued a conclusion on this report, citing multiple uncertainties relating to the business as a going concern, including future cashflow.
Evergrande said its ability to continue will depend on a successful implementation of the offshore debt restructuring plan, and successful negotiations with the rest of the lenders on repayment extensions.
Courts in Hong Kong and the Cayman Islands will decide in early September whether to approve an offshore debt restructuring plan involving $31.7 billion worth of instruments including bonds, collateral and repurchase obligations.