Evergrande (HKEX: 3333), China’s second-largest real estate developer by sales on Sunday announced that its planned merger with Shenzhen-listed shell company Shenzhen Real Estate will not go ahead.
This also ends its plan of a backdoor listing for the debt-loaded Evergrande which is facing an investor repayment as high as RMB 130 billion (USD 19.4 billion), not taking into account dividends.
In the same Sunday filing, Evergrande said that strategic investors holding 66% of the equity have agreed not to require a repurchase and will continue to hold their interests in the group, with the remaining 34% still in negotiations.
Limited by the low valuation of real estate companies on Hong Kong’s stock market, Evergrande, which also does electric vehicles (EV), healthcare, and runs a football club, has sought three rounds of strategic investments worth RMB 130 billion (USD 19.4 billion) in 2017. If a listing is not completed by January 31, 2021, Evergrande will have to buy back the investments, according to the previous filing.
According to Evergrande’s interim financial report, its current debt ratio is 86%, 16% higher than the 70% standard set by the regulators, according to 36Kr.
Media reports said that China’s tighter fundraising policy for fast-growing, high-risk businesses like fintech and real estate is the reason behind the demise of Evergrande’s listing. Last week, Ant Group’s highly anticipated IPO plan was called off at the last minute due to a sudden change of regulation, KrASIA reported.
Meanwhile, Evergrande’s automobile unit Evergrande Auto (HKG: 0708) is preparing for a Shanghai listing after raising USD 516 million, KrASIA reported in September.
This article is part of KrASIA’s “Key Stat” series, where KrASIA picks and presents the most significant figures of the day’s technology and business world.