Evergrande’s EV deal drives wishful thinking

Robo.ai

16/08/2023 03:59

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his / her own.)
    By Katrina Hamlin
       HONG KONG, Aug 16 (Reuters Breakingviews) - The
embattled property group is giving up control of its stalled
electric-car unit to help pay down debt. Its new partner,
Dubai-based NWTN, hopes the purchase will charge up its own
China strategy. But that seems overly optimistic in an
increasingly cutthroat market.
    
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    CONTEXT NEWS
    China Evergrande New Energy Vehicle on Aug. 14 said that it
will issue a total of 11.6 billion new shares, more than
doubling its outstanding stock. Dubai-based mobility company
NWTN has agreed to buy 6.18 billion of the new stock for around
HK$3.89 billion ($500 million). At an implied price of HK$0.6297
a share, the sale equates to a 63% discount to ENEV’s Aug. 14
closing price of HK1.70 a share. 
    The company will use the rest of the new stock in a
debt-for-equity swap to retire around $2.7 billion of loans owed
to parent China Evergrande and others. 
    Assuming the transactions go ahead, NWTN will own 27.5% of
ENEV. It will also have the right to appoint three of the
company’s five board members, including the chair. China
Evergrande’s stake in the company will fall to around 47%.
    NWTN’s shares had fallen by 1.3% by market close on Aug. 15,
compared to the undisturbed price on Aug. 11.
    ENEV’s stock closed at HK$1.73 on Aug. 15, up 1.8% compared
to the previous close and 175% higher than the deal price.

 (Editing by Antony Currie and Thomas Shum)
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