Less than a week after the company ceased trading in its shares, Evegrande Group’s stock ended the Tuesday session 28% higher at 0.41 HKD per share. It’s unclear what sparked the rise, but there are reports that the company’s reorganization efforts may have advanced.
Why did the price of Evergande rise today?
Following news that the company’s founder was being detained by law enforcement, shares of the troubled Evergrande Group were suspended last week. On their first trading day after the suspension, the shares closed 28% higher. During the session, the stock rose as high as 42% before closing 28.13% higher at 0.41 HKD ($0.052).
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It is unknown what drove Evergrande’s rally at the time of publication. However, according to Linus Yip, chief analyst at First Shanghai Securities, some rumors “may have indicated that there may be progress in restructuring.”
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On Thursday, the business paused stock trading after announcing that Hui Ka Yan, its billionaire chairman and founder, was “subject to mandatory measures in accordance with the law due to suspicion of illegal crimes.”
The founder’s detention was the latest setback for Evergrande as the most indebted real estate developer in the world battles to survive. Analysts stated that recent setbacks have increased the danger that the developer may not reach an agreement with its creditors despite the company’s efforts to implement a restructuring plan.
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At a court hearing in Hong Kong on a wind-up petition that would push the business into liquidation, Evergrande is scheduled to appear. The hearing is set for October 30.
What became of Evergrande?
The Chinese government’s 2021 announcement of steps to reduce excessive borrowing in order to stem the increase in property prices marked the beginning of Evergrande’s demise. Property developers in the nation consequently lost access to a large financial source.
Evergrande suffered particularly from this because it had been racking up debt for years before to it during the Chinese economy’s expansion. Evergrande collapsed in December 2021 with $300 billion in obligations, which caused market panic and a cascade of defaults throughout the real estate industry.
To restructure its debt, the business filed for Chapter 15 bankruptcy protection in the middle of August. However, China’s real estate problem goes beyond Evergrande, with other significant builders routinely defaulting due to their inability to raise money in the face of declining housing demand.
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