On the evening of October 25th, China Evergrande and Evergrande Auto issued announcements that they have decided to cease all discussions related to potential share transfers with a potential buyer. They have also decided not to proceed with the potential share transfer. According to the announcement by China Evergrande, the potential seller is currently seeking possible buyers and exploring feasible opportunities to sell the shares of the new energy vehicle group held by the potential seller. However, as of the date of the announcement, no agreements, arrangements, or opportunities have been reached with any potential buyer.
The withdrawal of the potential buyer is undoubtedly a further blow to Evergrande Auto, which is already deeply embroiled in a debt crisis. Some analysts believe that this may signify Evergrande Auto losing its last chance at a lifesaver. It is worth noting that this is not the first time Evergrande Auto has encountered a potential investor exiting mid-process.
Last August, Evergrande Auto announced that it had received a strategic investment of $500 million from a company listed by the United Arab Emirates’ National Sovereign Fund, Newton Group (NWTN.US), with an additional 600 million yuan in transition funds to arrive gradually within five working days after the announcement. The proposed transaction was expected to be completed in the fourth quarter of 2023. After the completion of the transaction, Newton Group’s stake in Evergrande Auto would expand to 27.5% of the total issued common stock.
The investment from Newton Group was seen as a lifeline for Evergrande Auto, which had been incurring losses for multiple years. However, on the evening of October 8, 2023, Evergrande Auto announced that due to changes within China Evergrande, Newton Group suspended its support for the company’s transition period funding and was renegotiating the adjustments needed for the proposed transaction.
On April 5th this year, the strategic investment agreement signed between Evergrande Auto and Newton Group was officially terminated. In May, Evergrande Auto announced the possibility of welcoming a new “white knight.” At that time, Evergrande Auto stated that 29% of its shares had been immediately acquired by a third-party buyer (potential buyer).
According to the announcement, the potential buyer and seller would sign a credit agreement. The potential buyer would provide credit to Evergrande Auto to support the continued operation and development of the electric vehicle business.
Amidst these negotiations, negative news about Evergrande Auto continued to surface. In terms of performance, Evergrande Auto’s losses worsened this year. In the first half of this year, Evergrande Auto’s net loss was 20.256 billion yuan, an increase of 13.383 billion yuan from the same period last year, which was 6.873 billion yuan. It is noteworthy that Evergrande Auto’s loss in the first half of this year far exceeded the full-year loss of 11.995 billion yuan in 2023.
In March this year, Evergrande Auto’s 2023 annual financial report revealed that as of the end of last year, their total assets were 348.51 billion yuan, while total liabilities amounted to a staggering 725.43 billion yuan. This included 264.84 billion yuan in loans, 430.12 billion yuan in trade and other payables, and 30.47 billion yuan in other liabilities.
Furthermore, Evergrande Auto’s Tianjin factory has ceased production operations since the beginning of this year, and its related subsidiaries are at risk of bankruptcy and restructuring.