New Delhi

Shares of China Evergrande New Energy Vehicle Group soared dramatically on Monday, more than doubling in value as trading resumed following an announcement that liquidators had arranged for a significant stake sale in the electric vehicle (EV) maker.

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This surge marks a notable recovery for the embattled unit amid ongoing financial troubles for its parent company, China Evergrande Group.

The EV unit's shares jumped as much as 113 per cent, reaching HK$0.81, their highest level since September 22, making them the top gainers on the Hong Kong stock exchange. By the end of the session, shares were still up by 79 per cent, reflecting investor optimism after a trading halt that began on May 17.

This price surge follows a non-binding agreement facilitated by liquidators on behalf of China Evergrande Group, Evergrande Health Industry, and Acelin Global. The deal involves a third-party buyer taking a 29 per cent stake in the EV unit, with an option to acquire an additional 29.5 per cent. Together, these entities currently hold 58.5 per cent of the EV unit, which halted production at its Tianjin factory at the start of 2024 due to financial constraints.

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In addition to the stake sale, the term sheet indicates that the prospective purchaser would provide a line of credit to support the EV unit's operations and business development, offering a much-needed financial lifeline.

This development comes on the heels of a demand from local administrative bodies for the EV unit to repay 1.9 billion yuan ($262 million) in subsidies and incentives, highlighting the financial pressures the company faces. Earlier this year, China Evergrande, the world’s most indebted property developer, was ordered to be liquidated after failing to present a viable restructuring plan more than two years post-default on its offshore debt.

The agreement to sell a stake in the EV unit represents a strategic move to alleviate some of the financial burdens and revive the business. Investors reacted positively to the news, signalling a potential turning point for the beleaguered automaker.

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As the situation unfolds, the successful completion of this stake sale and the infusion of credit could stabilise the EV unit's finances, enabling it to resume production and expand its market presence.

(With inputs from Reuters)