A Historic Delisting Marks the End of an Era

Evergrande, once heralded as one of China’s leading property developers, has officially been delisted from the Hong Kong stock exchange, marking a dramatic collapse for a company that boasted a valuation of over HK$400 billion (approximately US$50 billion) at its height.

Trading Halted for 18 Months

The delisting comes after a staggering 18-month halt in trading, initiated when Evergrande was placed into liquidation. This freeze on trading started back in January 2024, setting the stage for a countdown to the inevitable cancellation of its listing.

Liquidation and Investor Losses

In August, liquidators signaled to investors that they would not contest the impending delisting, emphasizing that the stock exchange had communicated Evergrande had missed a crucial deadline to restart trading. By Monday, the company's shares had plummeted to a laughable valuation of just HK$2 billion (around US$260 million), with shares worth a mere HK$0.16 (US$0.02) since trading halted.

Once a Giant, Now a Shadow

In its prime in 2017, Evergrande’s market value was decimated, losing over 99% as China's real estate sector faced a relentless downturn. A brief recovery was witnessed in 2020 fueled by government spending, but this was short-lived as stricter lending controls were reintroduced. The company amassed a staggering $300 billion in debts and ultimately defaulted.

Legal Battles and Recovery Efforts

In January 2024, a Hong Kong court confirmed the winding-up order for Evergrande due to the firm’s failure to propose a viable debt repayment plan. Liquidators are now aggressively pursuing legal action to reclaim funds for its creditors, including filing lawsuits against auditing giant PwC for their oversight during Evergrande's financial turmoil.

A Broader Crisis in China's Property Market

The collapse of Evergrande is part of a larger crisis engulfing the Chinese real estate market, where major companies like China South City have similarly been liquidated. With property sales and prices declining since September 2021, the market shows no immediate signs of recovery, with values down nearly 20% according to the Bank for International Settlements.

The Ripple Effect of a Downward Spiral

Before its downfall, Evergrande managed approximately 1,300 ongoing projects across more than 280 cities. The company even branched into electric vehicle production and offered property management for 3,000 projects. However, by March 2024, it faced a daunting US$580 million penalty from Beijing's securities regulator for inflating its revenues by nearly US$80 billion during 2019 and 2020.

What Lies Ahead for China’s Real Estate Sector?

As Evergrande exits the stock exchange, questions loom over the future of China's sprawling real estate sector. Investors and analysts alike are left to wonder where the bottom of this crisis truly lies and if any avenue for recovery exists.