Evergrande Group's Shares Plummet by Over 80%

28 Aug, 2023

Evergrande Group's Shares Plummet by Over 80%

August 28, 2023: Evergrande Group, the world's most heavily indebted real estate developer, witnessed a staggering 87% plummet in its shares on Monday, following a 17-month trading suspension being lifted, as reported by CNN.

In its filing to the Hong Kong Stock Exchange on Sunday, Evergrande revealed a loss attributable to shareholders amounting to 33 billion yuan (approximately USD 4.5 billion) for the first half of 2023. This represents half of the 66.4 billion yuan loss (around USD 9.1 billion) incurred during the same period in the preceding year. Notably, the company's revenue experienced a notable upswing, surging by 44% year-on-year to reach 128.2 billion yuan (about USD 17.6 billion).

Evergrande indicated that it strategically navigated the property market's early-year surge and capitalized on the short-lived boom through proactive sales planning. Once a prominent player in China's property development scene, the Shenzhen-based firm faced severe challenges due to its extensive borrowing for expansion, culminating in a default on its debt in 2021. This default triggered a crisis within China's real estate sector, accounting for nearly 30% of the nation's economy. CNN reports that Evergrande sought bankruptcy protection in the United States earlier this month.

Seeking refuge under Chapter 15 bankruptcy, Evergrande aimed to employ US bankruptcy laws to restructure its debt. The company's decline traces back to 2021, when the Chinese government intervened to curb excessive borrowing, consequently throttling a key funding source for property developers and precipitating a downward spiral. With liabilities amounting to 300 billion USD, Evergrande struggled to generate funds for debt servicing swiftly. The aftermath saw a default in December 2021, prompting a market-wide panic. Subsequent to the default, a wave of defaults rippled across the vast Chinese real estate market, which remains in flux. Numerous projects were suspended, leaving numerous pre-sale buyers without homes and burdened by substantial debts, according to CNN.

The measures adopted by Beijing to restructure offshore debts in the billions of dollars carry monumental implications for China's financial system, CNN reports. (ANI)