What?
Evergrande Automobile’s shares surged by 86% on the Hong Kong Stock Exchange following news that a mystery buyer plans to acquire a 29% stake in the company. The company, known for its Hengchi brand, has faced financial struggles, with disruptions in production and key executives being arrested for illegal activities.
Why does it matter?
The potential acquisition of a significant stake in Evergrande Auto could provide much-needed financial support and operational stability. Despite challenges, the company managed to produce the Hengchi 5 model, but production halts and financial woes have plagued its EV business. The deal includes extending a line of credit to Evergrande Auto to aid in ongoing operations and EV development.
How is it going to shape the future?
The future of Evergrande Auto remains uncertain, with significant liabilities outweighing assets. The recent deal could offer a lifeline, but whether it will be enough to secure the company’s future remains to be seen. Comparisons are drawn to a previous deal to rescue HiPhi, indicating differing levels of potential success due to track record and product readiness. The outcome will impact the EV industry in China and determine the fate of the Hengchi brand moving forward.