Developer China Evergrande’s Backdoor Listing May Have Hit a Speed Bump

 

China Evergrande Stock

China Evergrande, 3333 hk, may have hit a speed bump on its race to its backdoor listing in Shenzhen.  In a brief, 2 page Hong Kong exchange announcement, Evergrande stated that the original agreement from December, 30, 2016  would be amended to change an intended strategic advisor’s legal entity and amount to be invested.  While on the surface it appears innocuous, the change indicates that since this investor would be raising its investment as part of the 30 Billion rmb capital injection, ($US 4.3 Billion), another investor would be potentially decreasing its investment.

The original agreement with 8 investors included the following:

Evergrandes Capital Raising orig

With the revision, assuming all pre-existing investors maintain the original investment amount, the capital to be raised would be 30.5 Billion rmb.

Evergrande Capital Raising new

China Evergrande has reason to expect this backdoor listing to occur, since on 3/16/17 it transferred its 14.1% voting rights in China Vanke, 2202 hk, to Shenzhen Metro Group, sacrificing its voting rights to augment Shenzhen Metro’s voting rights from 15.3% to 29.3% to surpass barbarian Baoneng’s 25.4% shares. (No mention of money changing hands for the transfer, although Evergrande was able to use the shares as collateral  for financing with Citic Securities).  Shenzhen is both a major entity in the Evergrande capital raise and the China Vanke controlling shareholder changes.

Although China Evergrande appears to have done everything necessary to seal its backdoor listing, this latest change implies it may not go as smoothly as it hoped.

China Evergrande, 3333hk, chart

Evergrande Chart

Chart Source: Bloomberg

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