Chinese Estates, the second-biggest shareholder of the property giant Evergrande intends to completely sell its holdings amidst fears of Evergrande’s probable collapse. As of September 10, the company owned almost 6.5% of the Evergrande Group’s equity capital. It recently sold $32 M worth of its shares.
In a notification to the Hong Kong Stock Exchange, the company emphasized that “The directors are cautious and concerned about the recent development of China Evergrande Group including certain disclosure made by China Evergrande Group on its liquidity,”.
Evergrande has recently come under fire as it admitted its inability to pay off debt obligations with liabilities worth $305 billion. Investors and market participants are anticipating a ripple down effect which could be caused in case Evergrande’s default derail the Chinese economy. Dips in financial markets throughout the world were witnessed owing to the aforementioned concerns.
Refinitiv Eikon data reported that Chinese Estates has said that it has authorized the sale of its remaining 5.66% stake in Evergrande through block trades or on the market. It further added that the mandate will be valid for 12 months after its shareholder meeting scheduled to be held on Sept 23 with regards to the approval of the sale.
Currently, the company is reported to have sold 0.82% or 108.91 million shares for HK$246.5 million between Aug. 30 and Sept. Chinese Estates has estimated a loss of around about HK$9,486.3 million ($1.22 billion) which it will have to incur once the entire stake is sold by December 2021.
Chinese Estates intends to use its proceeds to contribute to the working capital as well as for reinvestment in future opportunities.
The company experienced a surge in its shares which rose around 32%, marking the highest daily percentage increase since the company was listed on the stock exchange in November 2009. The rise in Chinese Estates Holding came about following its announcement on Wednesday that it had resolved a coupon payment on an onshore bond. Its shares climbed up 15.1% in early trading against HK$2.51, achieving the highest daily percentage gain it has had since June 2020.
