Saturday , September 18 2021

Chinese EV maker once worth more than Ford wipes out $80bn

Bloomberg

Evergrande New Energy Vehicle Group Ltd shares plunged anew on Tuesday, extending a decline that has wiped out more than $80 billion in market value from the would-be electric-car maker this year.
The Hong Kong-listed company — which at its peak in April was worth more than Ford Motor Co despite not yet having a car on the market — has become ensnared in the woes of its parent China Evergrande Group. The property developer said on Tuesday it’s facing “tremendous” liquidity strains as it grapples with $300 billion of liabilities.
Evergrande also said it had made “no material progress” on plans to sell stakes in its electric-car unit, which was once one of its most valuable assets. Evergrande NEV stock plunged as much as 28% in Hong Kong trading on Tuesday to as low as HK$3.70. It has slumped 95% from its highs.
In its earnings report last month, Evergrande NEV — which stands for New Energy Vehicles — said it might have to delay car production unless it can secure more capital in the short term, making its ambitious goal of unseating Tesla Inc. as the world’s biggest EV maker even more unlikely.
The plunge is a far cry from the heady days of last year and into early this year, when the stock capped a stunning 750% rally, becoming the poster child of a bubble in EV stocks as investors plowed money into the likes of Tesla and the US-listed shares of Chinese startups Li Auto Inc., Xpeng Inc. and Nio Inc.
As recently as April, Evergrande NEV made a splash with an expansive showroom at the heart of the Shanghai Auto Show. But while nine models were put on display, none are yet available for sale, and the prospect of mass production is looking increasingly distant.
Getting out of China Evergrande Group’s shares is becoming increasingly difficult, according to a measure of market liquidity.
The stock’s average bid-ask spread — or the gap between prices sought by buyers and sellers — has more than doubled to 0.35% since July and is near the widest since the bursting of China’s stock bubble in 2015, according to data compiled by Bloomberg. The spread also affects transaction costs, making Evergrande one of the priciest stocks to trade in the Hang Seng China Enterprises Index, the data show.
While it’s normal for bid-ask spreads to widen when trading turns volatile, it adds to the difficulty for those wanting to exit their positions. Chairman Hui Ka Yan controls more than 70% of Evergrande’s equity and the company’s stock buybacks have mopped up liquidity in the past.
Volume was the lowest in eight days even as the shares sank almost 7%.

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