Shanghai, China, Sep 27 (EFE).- The shares of the electric vehicle subsidiary of Chinese real estate giant Evergrande fell almost 26 percent at the Hong Kong Stock Exchange on Monday after it disclosed not having sufficient liquidity for pending payments and operations.
China Evergrande New Energy Vehicle Group’s shares experienced a sharp fall at the start of trading session, but the decline moderated to around 11.2 percent after 11 am.
On Friday night, the company had announced a “severe shortage of funds” due to which it had “suspended paying some of its operating expenses” and some suppliers had suspended supplying for projects.
“In view of the difficulties, challenges and uncertainties in improving its liquidity as mentioned above, there is no guarantee that the Group will be able to meet its financial obligations under the relevant contracts,” it added.
The company said that while it was exploring different avenues to generate working capital, until now, “the Group has not entered into any legally binding agreement with any investor” and “it remains uncertain as to whether the Group will be able to consummate any such sale.”
“If the said potential introduction of strategic investments and/or the potential sale of assets cannot materialize within a short period of time, the Group will lack further capital injection, which is expected to affect the daily operations of the Group, worsen its ability to pay employees’ salary and/or other expenses… (and) impede the research and development progress of new energy vehicles and have a material adverse impact on the Group’s mass production of new energy vehicles” it added.
The entry of Evergrande, which has racked up a total liability of more than $300 billion, into electric cars sums up the strategy of the group, which faces a liquidity and debt crisis amid large debt payments due in coming months.
Evergrande New Energy Vehicle has yet to sell a single car but the company’s promises attracted such a volume of investment that it achieved a market value of about $86.6 billion, almost double that of its parent company, according to the Caixin private digital newspaper, which pointed out that the company’s valuation now stands at only four percent of that amount.
In another statement issued on Sunday, Evergrande’s electric vehicle subsidiary announced that it was calling off its plans for listing on the Shanghai Stock Exchange, announced last year and through which it was seeking to raise almost $5 billion.
Just over a year ago, Evergrande New Energy Vehicle Group Liu Yongzhuos said that the company’s plan was to globally surpass rivals such as Tesla.
“We are aiming to become the world’s biggest and strongest EV maker in three to five years with much lower cost,” he said. EFE