Tesla challenger Evergrande plans Shanghai stock offering in rush for capital to fund electric car ambitions

Proposed sale of yuan-denominated shares on Star Market is pending regulatory approval, China Evergrande New Energy Vehicle says filing

Move follows this week’s plan for a private stock placement to raise HK$3.99 billion from outside investors including Tencent and Yunfeng Capital

Reading Time:2 minutes

China Evergrande is in a rush to accumulate capital to fund its ambition to dominate the global electric car marker. Photo: Reuters

Published: 2:30pm, 18 Sep 2020Updated: 6:42pm, 25 Oct 2020

China Evergrande is seeking to raise money from onshore stock investors to fund the group’s capital-hungry electric car venture and fuel its ambition of overtaking Tesla over the next five years.

Hong Kong-listed unit China Evergrande New Energy Vehicle Group has proposed to sell yuan-denominated shares on the Star Market, the Nasdaq-style board of the Shanghai Stock Exchange, according to an exchange filing. The secondary listing is pending regulatory approval, it said without providing further details.

The move follows within days of the carmaker’s decision to tap outside investors including Tencent Holdings and Jack Ma-backed private equity firm Yunfeng Capital for HK$3.99 billion (US$516 million) through a private stock placement.

“It is positive as the unit can raise the additional cash to fund its own growth and reduce its reliance on China Evegrande,” said Raymond Cheng, an analyst at CGS-CIMB Securities in Hong Kong. This should alleviate the pressure on the balance sheet of China Evergrande, the property developer which owns 73.5 per cent of the carmaker.

A view of the production line at an Evergrande factory in mainland China. Photo: Handout

Shares of China Evergrande New Energy tumbled as much as 5.6 per cent in the morning following the announcement amid concerns about earnings dilution before the venture could turn a profit. The stock has surged 219 per cent through Thursday this year.

The EV maker, however, recorded a pre-tax loss of 2.68 billion yuan in the first half of this year in its gestation period, widening a loss of 1.96 billion yuan reported a year earlier.