Evergrande, once heralded as one of China’s largest property developers, has officially been delisted from the Hong Kong stock exchange, marking a significant milestone in its long decline. The removal from the exchange took place on Monday, concluding an 18-month trading freeze imposed after the company was placed into liquidation. At its peak, Evergrande boasted a valuation exceeding HK$400 billion (approximately US$50 billion), but its stock is now valued at a mere HK$2 billion (US$260 million), with shares trading at just HK$0.16 (US$0.02) since trading was halted in January 2024.
The decision to delist was communicated to investors earlier in August, with liquidators confirming that they would not pursue a review after the stock exchange notified the company of its failure to meet the July deadline to resume trading. By Monday, Evergrande's stock was no longer available for viewing on the exchange's website, symbolizing the culmination of a dramatic fall from grace.
Since its pinnacle in 2017, Evergrande has seen a staggering loss of over 99% of its market value, primarily due to the ongoing struggles within China's real estate sector. The industry has faced significant headwinds, including a broader economic slowdown across the country. A temporary surge in government spending during the pandemic provided a brief respite in 2020, but this momentum waned in 2021 when authorities tightened lending controls.
By the time Evergrande became China’s second-largest property developer, it found itself unable to manage its colossal debts, which amounted to approximately $300 billion. This led to a default situation that culminated in a winding-up order issued by a Hong Kong court in January 2024. The court ruled that the company had failed to propose a viable debt repayment plan, prompting liquidators to take action to recover investments from creditors.
Liquidators have initiated lawsuits against PwC and its mainland Chinese branch, seeking accountability for their role in the auditing processes that contributed to Evergrande's financial collapse. This legal maneuver reflects the growing scrutiny surrounding the company’s financial practices and the overall health of the real estate market.
Evergrande's demise is not an isolated incident. Another prominent developer, China South City, was also put into liquidation earlier in August, with its share trading frozen at a market capitalization of HK$1.22 billion (US$156 million), a stark contrast to its December 2020 valuation of HK$13 billion. The broader national property market has been grappling with declining sales and stagnant growth, particularly since values began to plummet in September 2021.
According to Evergrande's 2022 annual report, the downturn has significantly affected sales, leaving them "at a standstill." The situation has continued to deteriorate, with property prices across China reported to be nearly a fifth lower as of March 2024, based on data from the Bank for International Settlements.
At the time of its collapse and trading freeze in 2024, Evergrande and its subsidiaries were involved in around 1,300 projects across more than 280 cities. The company had diversified its portfolio, investing in electric vehicle production and managing approximately 3,000 projects through its property management division. However, these ventures have done little to alleviate its financial burdens.
In March 2024, Evergrande was further penalized with a US$580 million fine after the Chinese securities regulator accused it of inflating its revenues by nearly US$80 billion during 2019 and 2020. This revelation underscores the extent of the challenges facing not only Evergrande but also the broader real estate market in China.
As Evergrande's story unfolds, its delisting serves as a cautionary tale about the risks inherent in the real estate sector and the potential repercussions of unchecked financial practices.
