Six Evergrande Executives Fined for Early Redemption of Investments

By Kathleen Li
Kathleen Li
Kathleen Li
October 14, 2021 Updated: October 14, 2021

Six executives who redeemed Evergrande wealth investment products in advance have returned all the money they received to the designated accounts of Evergrande Wealth, China Evergrande Group announced on the homepage of its official website on Oct. 9; the Group also said the six have been held accountable and punished.

Previously, Evergrande Group said in a statement on Sept. 18 that six executives redeemed 12 investment products in advance from May 1 to Sept. 7. All of them are high-level executives at the headquarters or the Group’s provincial branches.

The announcement on Sept. 18 also claimed that Evergrande would “strictly follow the published repayment plan” and that “Evergrande’s middle-level and higher-level employees must stick to their posts.”

Evergrande Group released an announcement on Sept. 30 introducing the situation of the redemption of Evergrande Wealth: “Evergrande Financial Wealth Management (Shenzhen) Co., Ltd. has completed the payment of the first 10 percent on Sept. 30. Relevant funds have been issued to investors’ respective accounts.”

However, the Chinese state media Economic Observer said that Evergrande’s payment was different from the Group’s announcement.

According to the article, investors went to the designated repayment site of Evergrande’s Junrui Sales Office in Guangzhou three times from Sept. 21 to 23. There were no staff on site. Two notices were posted near the door: “Wealth management in-kind cashing is suspended. For details, please pay attention to the WeChat account and SMS notices.” Under that notice was written: Please do not gather for pandemic prevention and control.

Some employees of Evergrande revealed that the repayment site at Guangzhou Evergrande Junrui Sales Office only opened for one day on Sept. 19, and then closed saying it was necessary for COVID-19 pandemic prevention. They said this is not only true for Guangzhou, but also for cash points in 27 provinces and cities across the country where there are currently no staff on site.

Regarding Evergrande’s proposed “payment of in-kind assets,” a staff member of the Housing and Urban Development department said that sales of existing houses which already have housing certificates can be transferred immediately.

In addition, several major shareholders of Evergrande Group have sold their stakes in the company.

Zhongyu Group Co., LTD. issued a profit warning on Oct. 7, informing that on Oct.5 it had all its shares in Evergrande New Energy Auto. 32.18 million shares were sold at an average price of HK $3.89 ($0.51) per share, followed by 10 million shares at an average price of HK $3.35 ($0.44) per share.

The profit warning also said that Zhongyu would also face “significant losses” on its “Evergrande Notes” (senior notes issued by Evergrande). Unrealized losses are expected to be $135 million and $296 million as of Sept. 30 in respect of the fair value changes of the Evergrande Notes and Evergrande Auto shares for the six months ended Sept. 30, respectively.

Italian Horse International Holdings ltd. also issued a profit warning on Oct. 6. The company sold its 3 million shares in Evergrande on Oct. 4. As a result, the group recorded a net realized loss of approximately HK $79.1 million ($10.283 million) for the fiscal year from the date of sale to Dec. 31, 2021. However, the group ended up with an overall net positive cash return of approximately HK $71.3 million ($9.269 million) on its investment in Evergrande.

Chinese Estates Group announced on Oct. 6 its intention to be completely privatized and delisted from the Hong Kong stock market. The Group announced on Sept. 23 that it had sold a total of 108.9 million shares of Evergrande between Aug. 30 and Sept. 21. Excluding transaction costs, the average sale price for each share sold by Chinese Estates Group was about HK $2.26 ($0.29), for a total of about HK $246.5 million ($31.689 million).

Kathleen Li
Kathleen Li