China Evergrande (HKG: 3333) shares relisted in Hong Kong today, 3333 shares dropped 80% on that relisting. We all knew that the situation was bad for the company but not fully how bad it was. The suspension has been since March last year and we all knew matters were bad back then - that’s why there was the suspension. But, given the varied defaults on bonds and so on, clearly they’re worse now.
In detail, the exchange had imposed conditions on the maintenance of the listing: “China Evergrande Group, the world’s most indebted property developer, has sought the resumption of trading in its shares on the Hong Kong stock exchange on Monday.
In a filing with the exchange on Friday night, Evergrande said it had fulfilled all seven conditions to rescind an order suspending trading in its shares since March 21 last year.”
Do note that this is all about the Hong Kong listing. The US OTC listing never was suspended. But trade in that version of China Evergrande was tiny. Ridiculously tiny.
China Evergrande stock price from Google Finance
We’d not say that the relisting provides a grand bull opportunity: The shares have lost more than 99% of their value in the last three years as Beijing cracked down on property firms.
Evergrande is at the centre of a real estate market crisis threatening the world's second largest economy. On Sunday, the firm posted a 33bn yuan ($4.5bn; £3.6bn) loss for the first six months of the year.” Even at 99% down it’s possible to view the shares as expensive. On the grounds that no one really believes China Evergrande is going to survive long term without some considerable capital restructuring. “Evergrande incurred a combined loss of $81 billion during 2021 and 2022, according to a long overdue financial report posted last month. Its challenges are not over. Evergrande is still laden with liabilities worth 2.39 trillion yuan ($328 billion) by the end of June. That’s just slightly lower than the 2.44 trillion yuan ($334 billion) in total liabilities it reported at the end of last year. Its total assets also declined to 1.74 trillion yuan ($239 billion) from 1.84 trillion yuan ($253 billion).”
China Evergrande is really a political speculation more than anything else. What, or how much, is the Chinese government going to do to support the property market? And positions need to be calculated with reference to that, not so much the details of the corporate finances.
