Evergrande Auto, which announced the suspension of trading on May 17 and is awaiting the publication of insider information, has attracted market attention. Today, the matter that 29% of Evergrande Motor's shares will be immediately acquired is gradually surfacing.
On the evening of May 26, Evergrande Motor announced that on May 16, the company learned that joint and individual liquidators had signed terms and conditions with a third party buyer (potential buyer) independent of the company and its related persons for and on behalf of China Evergrande Group (under liquidation), Evergrande Health Industry Group Co., Ltd., and Acelin Global Limited (collectively known as potential seller). Based on this, the potential seller and the potential buyer may enter into a final sales agreement for the sale of company shares held by the potential seller. At the same time, the potential buyer was identified as independent of the company and its affiliates.
As of the announcement date, the potential sellers jointly held 6.348 billion shares of Evergrande Auto, accounting for 58.5% of the company's total share capital (potential shares for sale). After reaching a sales agreement and being bound by its terms and conditions, the initial plan is to immediately acquire 3.145 billion shares of Evergrande Motor's potential shares for sale, accounting for about 29% of the company's issued shares. At the same time, another 3.203 billion shares of potential shares for sale, accounting for 29.5% of the company's issued shares, will be the subject of a potential buyer's right to exercise an option within a certain period of time after the date of the sale agreement.
Meanwhile, Evergrande Auto's announcement shows that the company is aware of the signing of a credit agreement mentioned in the terms and conditions. Under the agreement, potential buyers (or third parties designated by them with the company's consent) will provide credit lines to the company to support the Group's continued operation and promote the development of the Group's electric vehicle business.
Currently, Evergrande Auto is facing a serious shortage of capital. Its factory in Tianjin has stopped production operations since the beginning of this year. As of now, the plant has not resumed production.
The announcement also stated that once the purchase and sale agreement is formally signed, it may trigger a mandatory full offer obligation. In accordance with the relevant provisions of the Takeovers Code, the offer period will commence from the date of publication of this announcement. Furthermore, the company will apply to the Stock Exchange to resume trading of the company's shares on the Stock Exchange starting at 9:00 a.m. on May 27, 2024.
Looking back, Evergrande Motor suspended trading in Hong Kong on May 17. Since then, Evergrande Motor has also announced on the Hong Kong Stock Exchange that, in response to the company's request, the company's shares will temporarily stop trading on the Hong Kong Stock Exchange Limited from 10:56 a.m. on May 17, 2024, pending the company's publication of an announcement regarding insider information.
Looking at the secondary market, the stock price of Hong Kong stock Evergrande Auto rose sharply before trading was suspended.
Market data shows that on May 17, Evergrande Motor jumped high in the morning. At one point, it soared more than 73% during the intraday period. At 10:56, Evergrande Motors suspended trading in Hong Kong. It rose 53% before the suspension of trading. It sold 68.12 million HK$68.12 million, a 761% increase from HK$7.91 million on the previous trading day. Prior to the suspension of trading, Evergrande Motor's total market value was approximately HK$4.1 billion.
It is worth mentioning that recently, Evergrande Auto was asked to refund 1.9 billion yuan in rewards and subsidies, which also attracted market attention. On the evening of May 22, Evergrande Motor announced that recently its subsidiary Evergrande New Energy Vehicle Investment Holding Group Co., Ltd. was requested by the relevant local government to cancel the investment cooperation agreement and return all rewards and subsidies already issued totaling about 1.9 billion yuan.
According to the announcement, Evergrande Auto received a letter from the relevant local administration department showing that since April 29, 2019, Evergrande Auto's subsidiary Evergrande New Energy Vehicle Investment Holding Group Co., Ltd. and other subsidiaries have signed a series of investment cooperation agreements with relevant local administrative departments. Since the company has failed to fulfill its contractual obligations in accordance with the relevant provisions of the relevant agreement, the relevant local administrative departments intend to request the relevant subsidiary to cancel the relevant agreement and return the various rewards and subsidies already issued to the relevant local administration departments totaling about RMB 1.9 billion. The relevant subsidiaries are also jointly and severally liable to each other in accordance with the provisions of the “Civil Code of the People's Republic of China” and other Chinese laws and regulations.
Regarding this matter, Evergrande Motor said that currently the relevant subsidiary is planning to send a letter to the relevant local administration department to coordinate. At the same time, Evergrande Motor admits that if the requirements in the above letter are finally implemented, it will have a significant adverse impact on the financial status and operations of the company or various related subsidiaries. The company will fulfill its disclosure responsibilities in due course in accordance with the provisions of the listing rules, and require relevant subsidiaries to actively communicate and handle it properly in accordance with the guidelines of the letter.
In terms of operating performance, in 2023, Evergrande Auto achieved total revenue of 1.34 billion yuan, of which more than 1.1 billion yuan in revenue came from property sales; annual losses reached 11.995 billion yuan, a decrease from the previous year's loss of 27.664 billion yuan. According to statistics, since car construction began in 2019, Evergrande Motor has accumulated losses of more than 100 billion yuan, and delivered more than 1,389 vehicles by the end of last year.
As of the end of last year, Evergrande Auto's total assets were RMB 34.851 billion; total liabilities were RMB 72,543 billion, of which RMB 26.484 billion was borrowed, RMB 43,012 billion in trade and other accounts payable, and RMB 3,047 billion in other liabilities. Evergrande Auto's unpayable maturing debts totaled about $9.447 billion; on December 31, 2023, the Group's overdue commercial tickets totaled about $3.401 billion. Furthermore, the total number of pending litigation cases with a target amount of 30 million yuan or more is 68, with a total amount of about 13.608 billion yuan.
Earlier, Evergrande Motor acknowledged facing financial difficulties. The company stated that it will make every effort to bring in strategic investors to actively raise capital to maintain the Group's survival and future development plans; and whether the company can continue to operate continuously will depend on the Group's ability to generate sufficient financing and operating cash flow through some aspects, and be able to successfully implement and complete business and operational restructuring plans and financing plans.
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