Stock trading of Evergrande, a real estate developer that sparked a crisis in the Chinese real estate industry after falling into a massive default two years ago, resumed on the 28th, 17 months after the suspension of trading. However, the market capitalization of HK$18.9 billion evaporated as stock prices plunged 87% during the day.
Evergrande stock, listed on the Hong Kong Stock Exchange (HKEX) traded at HK$0.22 during the day, reducing its market capitalization to HK$2.9 billion from HK$21.8 billion on March 20 last year, just before the suspension of trading. Evergrande has caused a crisis in the Chinese real estate industry, with housing construction suspended since its default declaration at the end of 2021 and subcontractors not paying for construction. The stock’s market capitalization was close to HK$420 billion in 2017.
It came a day after Evergrande announced that its net loss in the first half of this year was significantly reduced thanks to its recent increase in sales. Evergrande’s net loss in the first half of this year was 33 billion yuan, down more than half from the same period last year, with sales rising 44% to 128.2 billion yuan. The size of the debt also decreased slightly to 2.39 trillion yuan from 2.44 trillion yuan at the end of last year.
The resumption of stock trading has a special meaning for Evergrande. This is because it has planned to swap some of its debts into equity-linked products in an overseas debt restructuring plan estimated at about $31.7 billion. Evergrande filed for bankruptcy protection with the Bankruptcy Court in Manhattan, New York, earlier this month, saying it could only continue its business if negotiations with the rest of the lenders were concluded after the plan was successfully implemented.
Evergrande said in its business report to the authorities that it “actively planned to resume sales and successfully captured a short-term boom in the real estate market at the beginning of the year,” but Prism Hong Kong and Shanghai, Evergrande’s external auditors, retained their audit opinion for the third time.
