Following a tumultuous first half of 2021, China Evergrande Group rebounded during Monday trading at the Hong Kong Stock Exchange as it made moves to sell off assets and stabilize its debt-ridden finances.
The firm saw its stocks rise 7.8% on the day to settle at HK$5.66 ($0.73) per share, while its market capitalization currently sits at HK$70.21 billion.
Past months have seen Evergrande grapple with a series of challenges including fragile liquidity and wavering investor confidence. Given the sheer size of the firm – a yearly report released yesterday saw it upgraded to its highest-ever Fortune 500 ranking at 122 – concerns are rising regarding the potential risk it poses to the wider economy.
Reports have surfaced recently that Evergrande has sold an 11% stake worth $420 million in a Hong Kong-based internet firm. The development indicates that the company is taking action to offload excess financial obligations and seek new ways to service its debt.
HengTen Networks Group Limited, the Hong Kong firm, is “an investment holding company principally engaged in the manufacturing and sale of accessories,” according to the Financial Times’ company profile.
The transaction’s official filing reveals that a 7% stake in the company has been sold to Chinese internet giant Tencent, while the remaining 4% was sold to an unnamed investor. The arrangement brings the two massive companies almost even in their ownership of HengTen, with Evergrande’s stake lowered to 26.55% and Tencent’s raised to 23.9%.
The share price in HengTen also rose in response to the news, surging 48% on the day to reach HK$5.06 on the day, holding a current market capitalization of $HK47.84 billion.
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One of the world’s largest real-estate companies, Evergrande has since its founding in 1996 expanded into a diverse range of business arenas, including electric vehicles, health services, professional football, insurance, agriculture and bottled water.
As the sprawling conglomerate addresses mounting debts in the months to come, it is likely to continue shedding assets in an attempt to consolidate its business model and secure cashflows.
Evergrande’s brief respite Monday in the stock market has not lasted long. At the time of publishing, shares in Evergrande on Tuesday afternoon were down 7.23% on the day so far at HK$5.26 apiece.