Vice president of Evergrande subsidiary arrested; shares fall 6%

The electric vehicle subsidiary of the indebted giant chinese real estate Evergrande announced today the arrest of its CEO and Vice President Liu Yongzhuo for “suspicions of illegal crimes”.

In a statement sent to the Hong Kong Stock Exchange, where it is listed, the company does not offer details about the nature of the alleged crimes for which Liu has been arrested or the date on which the Police apprehended him.

After hearing the news, the shares of the company – whose trading was suspended between 09:00 and 13:00 local time (between 01:00 and 05:00 GMT) – fell 6.02%.

Liu’s arrest is in addition to the house arrest under which the founder and president of the conglomerate, Xu Jiayin, has been under since September for “suspicions of illegal activities”.

The US newspaper The Wall Street Journal said he was being investigated for allegedly transferring assets abroad while the company was struggling to complete its promotions.

Xu’s judicial situation was a new setback for the group, which has accumulated liabilities of almost $330 billion and which went into default in 2021 after suffering a liquidity crisis due to the restrictions imposed by Beijing on the financing of developers with a high level of leverage, after which it was intervened by the Chinese authorities.

Evergrande could face a liquidation order from the Hong Kong Justice if it does not close a restructuring plan for its extraterritorial debt (‘offshore’), a matter on which it will face a new court hearing at the end of this month after achieving an unexpected postponement in December.

Arrests and stock market crashes

Likewise, also in September, Evergrande confirmed that several employees of its wealth management subsidiary had been detained, with the local press pointing to a possible case of fraud after the company failed to meet agreed payments under its investment products. investment due to its lack of liquidity.

Evergrande NEV shares had fallen almost 8% in the first days of 2024 after exceeding the deadline to close the agreed sale of 27.5% of its shares to the Emirati NWTN for about US$500 million.

After more than a year frozen, Evergrande NEV shares re-listed in Hong Kong at the end of July last year, and have since lost 67.5% of their value to currently trade at HK$0.39 (US $ 0.05, 0.05 euros), very far from the peak of US$ 69 in Hong Kong (US$ 8.84, 8.08 euros) that it marked in 2021.

The company, which until 2020 was dedicated to health services before betting on electric services, had accumulated a stock market value of more than US$ 86,000 million, and Xu even stated in 2021 that his plan was to reorient Evergrande to focus in this sector over the next decade.

Evergrande NEV revealed joint losses of almost 84,000 million yuan (US$ 11,742 million, 10,735 million euros) between 2021 and 2022, and in the first half of 2023 it reduced its negative result to about 7,412 million yuan (US$ 1,036 million , 947 million euros).