China Evergrande New Energy Vehicle Group (0708.HK) announced on Monday that its vice chairman Liu Yongzhuo had been detained and was facing criminal investigation, with shares falling, marking another setback after a share sale plan was cancelled.
The vice chairman’s detention could hurt its parent China Evergrande Group (3333.HK), the world’s most indebted property developer whose offshore debt restructuring proposals include swapping some of its debt for shares in its electric car division.
The company has about $23 billion in offshore debt and total liabilities of more than $300 billion.
According to the statement, Hui Ka Yan, chairman and founder of parent Evergrande Group, is also under investigation for suspected offences.
Shares of the car manufacturer fell 23% in afternoon trading, but trimmed losses and were last down 7%. The decline comes on top of a 19% drop last week after the company abandoned plans to sell nearly $500 million worth of new shares to US-listed NWTN (NWTN.O). It now has a market value of just HK$4.2 billion ($540 million).
The parent company is mired in a debt crisis around mid-2021. It has repeatedly warned that it may have to wind down its operations if it does not get new funding.
The company reported a net loss of 6.9 billion yuan (US$964 million) in the first half of 2023 after a combined net loss of nearly US$10 billion for 2021 and 2022.
Evergrande NEV had planned to produce one million vehicles a year by 2025. However, just over 760 units of the Hengchi 5, the only electric car model on the market, were sold in the first half of last year.
