Li Ka-shing files bankruptcy petition against Chinese electric carmaker chief after HK$341.8 million investment stalls

Hong Kong billionaire Li Ka-shing, known for his prescient and successful investments in industries ranging from property to infrastructure, has hit a speed bump as far as his foray into the electric-vehicle sector is concerned.

His four-year-old investment in FDG Electric Vehicles, a Hong Kong-listed Chinese maker of new-energy vans and buses, has shrunk by 42 per cent in value. Over the weekend, he filed a bankruptcy petition against Cao Zhong, FDG’s chairman, through his foundation in Canada.

Shares of FDG, which is based in the eastern Chinese city of Hangzhou, tumbled 29 per cent to 26.5 HK cents on Monday, extending its losses to 73 per cent this year. FDG was unable to assess the impact of Li’s petition on the company as the petition was still at a preliminary stage, it said in an exchange filing with the Hong Kong bourse.

Li now holds a 2.1 per cent stake in FDG, as its fourth-largest shareholder, while Cao has a 4.1 per cent stake and is FDG’s third-largest shareholder. Li bought 743 million shares of FDG for 46 HK cents apiece in 2015, valuing the deal at HK$341.8 million (US$43.6 million).

FDG has been unprofitable over the past few years and its business has worsened recently amid headwinds facing the industry, such as an economic slowdown in China and the government’s scaling back of subsidies on new-energy vehicle purchases. It posted a net loss of HK$1.99 billion for the financial year ending in March, after a loss of HK$2.23 billion for the previous year.

The company acknowledged its financial difficulties in its annual report and said it had defaulted on a couple of bank loan repayments, and that it was negotiating with debtors to convert debt into equity and had asked the government for help. One of its subsidiaries, Hangzhou Changjiang Automobile, had even stopped paying employees, the National Business Daily reported in July.