Shares of China Evergrande New Energy Vehicle Group (HK:0708)- the EV unit of the eponymous property developer- fell sharply on Monday after it said its vice chairman had been detained by authorities over alleged crimes.
Evergrande New Energy said Liu Yongzhuo- who is executive director and vice chairman at the EV firm- had been detained by authorities “on suspicion of illegal activities,” in a filing to the Hong Kong Stock Exchange.
The firm did not specify the nature of the allegations. Its shares slid nearly 10% to HK$0.38, and were close to record lows after falling as much as 20%.
Monday’s losses come as an extension of a weak start in 2024 for Evergrande New Energy, after it said last week that a planned share sale to U.S.-listed, United Arab Emirates-based EV maker NWTN Inc (NASDAQ:NWTN), had lapsed. Evergrande New Energy’s shares plummeted nearly 20% in the first week of 2024.
The firm had said in August that it was set to sell about HK$3.89 billion ($498.2 million) in new shares to NWTN.
Yongzhuo’s reported detention also comes amid increased regulatory scrutiny of the EV firm’s parent, China Evergrande Group (HK:3333), whose founder and chairman is also under investigation by Chinese authorities.
Evergrande is the most indebted property developer in the world, and has been struggling to renegotiate its obligations after a massive default in 2021. The firm was recently granted some relief over a petition for liquidation by its creditors, with a decision to be made on January 29.
The move gives the firm more time to finalize a revamped plan to restructure its debt obligations, which amount to more than $300 billion in liabilities. But the firm is the poster child of an ongoing property-market meltdown in China, as a debt bubble in the real estate market burst over the last three years.
Evergrande’s shares fell 1.4% in Hong Kong trade, while the broader Hang Seng index shed nearly 2%