Evergrande Shares Fall After Wall Street Learns This News
Author By Sophia VidaPosted on Shares of Evergrande took a tumble this week after a deal to raise $273 million in a business sale had been revealed.
The China Evergrande Group is the second largest property developer in China by sales. It is ranked 122nd on the Fortune Global 500.
The sale of HengTen is Evergrande’s latest effort to raise capital and the deal is worth 2.13 billion Hong Kong dollars ($273.2 million) and represents about 18% of HengTen’s issued shares.
The Indebted property developer China Evergrande is set to raise about $273 million by selling its remaining shares in film production and streaming company HengTen Networks, according to a filing released ahead of the market open Thursday.
HengTen’s subsidiary Ruyi Films was one of the producers of the film “Hi, Mom,‘’ which grossed 5.41 billion yuan, or about $838 million at the time, making it the top-grossing movie by a female director, according to Chinese ticketing platform Maoyan.
Shares of Evergrande fell 5.7% Thursday while HengTen shares jumped nearly 25%.
The developer said it reached an agreement Wednesday to sell about 1.66 billion HengTen shares to Allied Resources Investment Holdings for 1.28 Hong Kong dollars each, according to a filing that was made with the Hong Kong stock exchange.
A filing from August 1st has showed a Tencent subsidiary agreed to buy 7% of the company from an Evergrande subsidiary in a deal worth 2.07 billion Hong Kong dollars.
Evergrande will likely default because the company has essentially lost its main business, S&P Global Ratings analysts said in a report Thursday.
“Evergrande’s massive debt will catch up with it,” the S&P report said.
“The firm has lost the capacity to sell new homes, which means its main business model is effectively defunct. This makes full repayment of its debts unlikely,” the analysts said.
“We still believe an Evergrande default is highly likely,” the report said.
Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.
