China Evergrande, the embattled property behemoth, stopped trading in its shares on the Hong Kong stock market on Monday without citing a reason.
The company’s stock price has plummeted by roughly 80% since the beginning of the year, as it teeters on the verge of bankruptcy while battling a pile of debt.
“Trading in China Evergrande Group shares will be suspended,” the company stated in a statement to the exchange. “As a result, trading in all structured instruments linked to the Company will be suspended at the same time.”
Shares in an electric car firm, which had a proposed Shanghai IPO canceled last week, were not stopped, but they plummeted 6% in early trading.
Officials at the company have been battling a crisis that has left it more than $300 billion in debt, raising worries of contagion for the Chinese economy that may spread internationally, according to some.
It said last week that it will sell a $1.5 billion stake in a small Chinese bank to obtain much-needed cash as it struggled to pay bondholders’ interest.
Beijing has remained mute on the property empire’s woes, but official media has reported on diverse reactions, indicating public sentiment against a private firm that developed on a debt spree during China’s real estate boom years.
According to sources, authorities have ordered local governments to prepare for Evergrande’s probable collapse, implying that a big public rescue is unlikely.
As investors and suppliers want their money back, the liquidity crisis has sparked public outrage and unusual rallies outside its Chinese headquarters.
The company has acknowledged that it is experiencing “unprecedented problems” and has warned that it may be unable to satisfy its obligations.
Last year, officials announced limitations for three distinct debt ratios in a plan nicknamed “three red lines,” putting the country’s real estate industry under closer supervision.
Foreign investors and local regulators have been keeping a tight eye on the real estate developer, which was once China’s most prolific after it missed two key interest payments on US dollar debts. Because each missed payment has a 30-day grace period before it is declared a default, the missed payments may not necessarily result in a default.
Contractors and staff owing more than $300 billion in outstanding payments, as well as house purchasers waiting on as many as 1.6 million unfinished units, are putting pressure on Evergrande. Wall Street banks and financial sleuths have started finding more Evergrande liabilities in the form of guarantees in recent days, which might add to the company’s massive debt load.
The business has not addressed its missing bond payments, but it said last week that it had sold a $1.5 billion interest in a Chinese bank to help pay off some of its obligations. Investors who are due money stated they had not received any communication from the firm.