Lau Luan-hung and his wife recently reduced their Evergrande holdings twice by a total of about 30 million shares and cashed out HK$116 million.

Lau Luan-hung and his wife reduced their holdings at Evergrande

According to Hong Kong Stock Exchange documents, Lau Luan-hung and his wife reduced their holdings of China Evergrande by 24.436 million shares at an average price of HK$3.58 per share on September 10. The shareholding ratio dropped from 8.96% to 7.96%.

Previously, Lau Luan-hung and his wife also reduced their holdings by 6.312 million shares at an average price of HK$4.48 per share on August 26. The shareholding ratio fell from 9.01% to 8.96%. At an average price, these two holdings reductions totaled approximately HK$116 million.Lau Luan-hung, a wealthy Hong Kong businessman, was the Chairman of the Board and CEO of Chinese Real Estate (00127.HK). His wife, Chan Hoi-wan, is the actual controller and executive director of Chinese Real Estate. Lau Luan-hung has a close relationship with the Xu Family.

Chinese Real Estate is the cornerstone investor of China Evergrande's listing in Hong Kong in 2009. Since then, it has increased its stock holdings of Evergrande many times. According to China Evergrande's 2020 financial report, Chen Kaiyun held 8.86% of China Evergrande's shares as an individual and company at the time. He was the second largest shareholder of China Evergrande, second only to Xu Jiayin, who held 76.76% of the shares. In addition, Lau Luan-hung and his wife and Chinese Real Estate have frequently appeared behind Evergrande's subsidiaries.

In January 2021, Evergrande Auto (00708.HK) raised an additional HK$26 billion, and Chen Kaiyun subscribed for HK$3 billion; in July 2020, Evergrande Property (06666.HK) received HK$23.5 billion in pre-IPO financing before listing. Among them, Chen Kai-yun's subscription amount was the highest, reaching HK$4.5 billion. The performance of Chinese Real Estate itself is also mostly dependent on Evergrande's dividends.

In 2020, the revenue of Chinese Real Estate was HK$3,041 million, an increase of 132.2% over the previous year. Of this, dividend income from Evergrande reached HK$1,968 million, accounting for 64.7% of total revenue.However, due to the decline in dividend income from Evergrande Co., Ltd., Chinese Real Estate's revenue for the first half of the year fell 63% year-on-year to HK$726 million, and gross profit was HK$690 million, a decrease of 64.4% over the same period last year.Due to the deep liquidity crisis, China Evergrande's stock price has dropped 80% since this year, causing huge losses on Chinese real estate books.

On July 7, Chinese Real Estate announced that using China Evergrande's closing price on June 30 as an assessment, it is estimated that the company's unrealized loss of about HK$4.11 billion due to changes in fair value in the first half of the year will be recorded as other overall expenses.This loss increased from HK$780 million at the end of 2020 to HK$4.89 billion at the end of June 2021. Chinese Real Estate said in the announcement that the unrealized fair value change was a non-cash item and had no impact on the company's cash flow. In the first half of the year, Chinese Real Estate also confirmed dividend income from Evergrande Co., Ltd. of about HK$160 million.

Recently, Evergrande's shareholders' holdings have been reduced several times. According to Hong Kong Stock Exchange documents, on August 11, Xia Haijun, vice chairman and president of the board of directors of China Evergrande, reduced the shares of Evergrande Property and Evergrande Motor, which are part of the group, and cashed out nearly 100 million yuan. After the holdings were reduced, Xia Haijun's shareholding ratio in Evergrande Property decreased from 0.61% to 0.51%, and Evergrande Auto's shareholding ratio decreased from 0.15% to 0.12%.

Evergrande hires financial adviser

Notably, Evergrande has recently hired financial advisors to evaluate the capital structure. On September 14, China Evergrande announced that the company had appointed Huali Anoki (China) Co., Ltd. and Zhonggang Capital Co., Ltd. as joint financial advisors. Evergrande said the joint financial advisors will work with China Evergrande to evaluate the company's current capital structure, study the liquidity situation, explore all possible solutions to mitigate the current liquidity problem, and seek to reach an optimal solution for all stakeholders as soon as possible.

According to public information, Hualian (NYSE: HLI) is an international investment bank headquartered in the US. It has two offices in Beijing and Hong Kong in China. The Chinese team focuses on cross-border mergers and acquisitions, financial restructuring, corporate financing, and independent financial consulting. Zhonggang Capital is a wholly-owned subsidiary of Zhonggang Financial Group and is a licensed financial institution regulated by the Hong Kong Securities Regulatory Commission.

Evergrande has sold its assets several times before, including shares in Hengteng Network, Shenzhen Hi-Tech Investment, Evergrande Bingquan shares, and various real estate project shares and non-core assets. Recently, Evergrande is also actively reaching out to a number of potential investors to discuss the sale of Evergrande Property and some of Evergrande Motor's shares, while also considering introducing new investors at the group level and other subsidiaries.

In addition, Evergrande also returned cash by selling houses at a discount. However, the above announcement stated that since continued negative news reports about the company seriously affected the confidence of potential buyers, it is expected that contract sales will continue to drop sharply in September. The company said that the continued sharp decline in sales will cause China Evergrande's sales repayment to continue to deteriorate, further putting tremendous pressure on cash flow and liquidity.

Evergrande's stock price continues to fall. By the close of trading on September 15, China Evergrande closed at HK$2.63 per share, down 6.41%; Evergrande Auto closed at HK$3.53 per share, down 11.31%; and Evergrande Property closed at HK$4.1 per share, down 3.53%.