Evergrande Shares Drop after $2.6b Deal Fails

China Evergrande shares dropped 12.5 percent on Oct. 21 after it scrapped an asset sale to Hopson Development Holdings that would have raised $2.6 billion to pay off some of its debts.

Hopson announced on Oct. 20 that Evergrande cancelled their transaction involving a 50.1 percent stake on the latter’s property management unit, saying that it “regrets to announce that the vendor has failed to complete the sale.”

Trading in Evergrande and Hopson shares was suspended earlier in the month pending the announcement of the transaction, and Hopson has requested for resumption in line with the announcement.

In a separate filing, Evergrande explained that it ended the deal because it believed that Hopson “had not met the prerequisite to make a general offer for shares in Evergrande Property Services.”

Hopson, however, refuted Evergrande’s notice, saying that it did “not accept that there is any substance” to the seller’s termination and was prepared to complete the purchase.

Investors are now eyeing Evergrande’s next move as it nears the end of the 30-day grace period to an $83 million interest payment it missed in September. The property giant had said in its filing that there was “no guarantee” it could meet its liabilities.

Once China’s largest real estate developer, Evergrande has accumulated $300 billion in debt and is threatening a potential default that is stirring fears of shaking the Chinese property sector.

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