Evergrande EV unit's shares fall after HK$2.7b share sale

[HONG KONG] China Evergrande Group's electric-vehicle unit fell after selling HK$2.7 billion (S$471.8 million) of stock at a discount to bolster its finances as it seeks to put delayed vehicles into production.

China Evergrande New Energy Vehicle Group sold 900 million shares at HK$3 each, 15 per cent below Friday's (Nov 19) closing price in Hong Kong, according to a statement from the Guangzhou-based company.

The stock, representing 9 per cent of the firm, was sold to at least 6 investors, the company said. The shares fell to as low as HK$3.42 in early trading on Monday (Nov 22) after the sale, which adds to the US$64 million it raised on Nov 10.

Evergrande NEV warned as recently as September that it faces a serious funds shortage, echoing some of the financial troubles faced by its parent company.

The startup said it had suspended paying some operating expenses and suppliers had stopped work, stoking concern it wouldn't be able to start mass production of its long-awaited electric vehicles.

At its peak, Evergrande NEV was one of the most valuable assets in Evergrande founder Hui Ka Yan's empire, and a potential source of funds to prop up the developer.

The stock has plunged from a record high close of HK$72.25 in February, before a selloff as the unit's parent company battled to ease a liquidity crisis.

"Evergrande is now showing willingness to take a wide range of steps to improve its liquidity," Bloomberg Intelligence's credit analysts Daniel Fan and Hui Yen Tay wrote in a note Monday.

A Look at Evergrande's recent fundraising efforts:

• On Nov 17, Evergrande Group sold its remaining 18 per cent stake in internet services platform HengTen Networks Group for HK$2.1 billion. Evergrande will receive 20 per cent of those sale proceeds this week with the other 80 per cent, about US$220 million, to be wired by mid-January, according to a filing.
• An associate of chairman Hui Ka Yan has pledged 2 luxury houses in Hong Kong as collateral to borrow US$105 million, according to local land documents. That adds to another luxury house pledged last month for an estimated loan as much as US$38.6 million, according to local media HK01.
• On Nov 9, Evergrande NEV planned to raise HK$500 million in a share sale. Proceeds will be used for research and development for electric vehicles. Evergrande held 65 per cent of the shares in NEV at the time.
• Earlier this month, Evergrande NEV agreed to divest Protean Holdings, a UK-based startup that provides in-wheel electric motor technology for passenger cars, according to the buyer, e-mobility company Bedeo. Evergrande NEV bought Protean in 2019 for US$58 million.
• Separately, the developer has also sold 2 private jets for more than US$50 million, Dow Jones reported.

The proceeds raised "may now be able to make overdue- and coming-due offshore coupon payments at least into January", Bloomberg Intelligence analysts said.

Evergrande doesn't have an obligation to repay principal of dollar bonds until March.

However, when the principal repayment deadline lands, Evergrande is unlikely to avoid a default, ratings firm S&P Global Ratings said in a note last week.

Evergrande has lost the capacity to sell new homes, which means its main business model is effectively "defunct", analysts led by Matthew Chow said in the report.

BLOOMBERG