Trading in Evergrande shares surge in Hong Kong after a temporary halt caused by the investigation into the company’s billionaire founder, leading to a sharp rise in the stock’s value. Evergrande’s shares initially surged by over 40% on Tuesday but eventually settled at approximately 20% higher.
This suspension in trading follows a previous 17-month trading halt that was lifted just a month ago. Evergrande, once China’s top property developer, has faced a steep decline in its stock market valuation, plummeting by nearly 99% since July 2020. Currently, its shares are worth around HK$0.35 ($0.05; £0.04) each, reflecting the company’s financial struggles.
The real estate giant has been grappling with a massive debt burden exceeding $300 billion (£248 billion), which triggered concerns in global financial markets when it defaulted on its overseas debts in late 2021. Last week, Evergrande’s woes intensified when its subsidiary, Hengda Real Estate, faced difficulties in selling new debt due to an ongoing investigation by authorities.
Furthermore, the company’s attempts to renegotiate agreements with bondholders have been complicated by these developments. Evergrande confirmed that its founder and chairman, Hui Ka Yan, is currently under investigation for suspected illegal activities.
To navigate its financial troubles, Evergrande filed for Chapter 15 bankruptcy protection in the US in August. Chapter 15 safeguards the US assets of a foreign company while it undergoes debt restructuring. However, analysts are now expressing increased concerns that the company may struggle to reach a restructuring agreement with its creditors.
Moreover, Evergrande faces a court hearing in Hong Kong regarding a winding-up petition, potentially leading to liquidation. Originally scheduled for July, the hearing has been rescheduled for October 30.
The resumption of trading and the recent share price surge suggest that investors continue to closely monitor Evergrande shares surge fate amidst ongoing financial turmoil and regulatory scrutiny.