Trading in shares of heavily indebted China Evergrande were suspended on Monday, days after some bondholders said the property developer at the center of jitters over China’s financial system had missed a key bond interest payment.
The Evergrande Group or the Evergrande Real Estate Group is the second largest property developer in China by sales. It is ranked 122nd on the Fortune Global 500. It is incorporated in the Cayman Islands and headquartered in the Houhai Financial Center in Nanshan District, Shenzhen, Guangdong Province, China.
Currently Evergrande employees almost 200,000 people around the world. The company also sustains more than 3.8 million jobs each year around the globe.
Some analysts fear that the Evergrande crisis could turn into China’s Lehman Brothers moment, sending shockwaves across the world’s second largest economy. Real Estate and related industries account for as much of 30% of China’s GDP.
Evergrande is part of the Global 500, meaning that it’s also one of the world’s biggest businesses in terms of revenue.
The company owns more than 1,300 projects in more than 280 cities across China, but they have interests that extend far beyond that.
Outside of housing, the group has invested in electric vehicles, sports and theme parks, it even owns a food and beverage business, selling bottled water, groceries, dairy products across China.
In 2010, the company bought a soccer team, which is now known as Guangzhou Evergrande. That team has since built what is believed to be the world’s biggest soccer school, at a cost of $185 million to Evergrande.
Guangzhou Evergrande continues to reach for new records: It’s currently working on creating the world’s biggest soccer stadium, assuming that construction is completed next year as expected. The $1.7 billion site is shaped as a giant lotus flower, and will eventually be able to seat 100,000 spectators.
So how is all of this bad you’re asking?
The group has became infamous as China’s most indebted developer, with more than $300 billion worth of liabilities. Over the last few weeks, the group warned investors of cash flow issues, saying that it could default if it’s unable to raise money quickly.
The warning became reality this month when Evergrande disclosed in a stock exchange filing that they were having trouble finding buyers for some of its assets.
Now comes the news on Monday morning that trading has been suspended on the company, which isn’t good, in fact it could be the start of a global crisis.
Shares of its unit Evergrande Property Services Group were also suspended, the Hong Kong Stock Exchange said.
The bourse didn’t say why trading in the companies’ stock had been halted, and it was unclear who initiated the suspension.
Evergrande did not immediately respond to a request for comment.
With liabilities stretching into hundreds of billions of dollars, equal to 2% of China’s gross domestic product, Evergrande has sparked concerns its woes could spread through the financial system and reverberate around the world.
Shares of Evergrande have plunged 80% so far this year, while its property services unit has dropped 43% as the group scrambles to raise funds to pay its many lenders and suppliers.
Stock in its electric vehicle unit, China Evergrande New Energy Vehicle Group, fell as much as 8% early on Monday before paring losses.
Meanwhile Chinese property group Hopson Development said in a statement on Monday it had suspended trading in its shares, pending an announcement related to a major acquisition by Hopson of a Hong Kong-listed firm and a possible mandatory offer.
It was unclear whether the deal was related to Evergrande Group, and Hopson did not respond to a request for further comment.
Shares of Hopson, which has a market value of HK$60.4 billion ($7.8 billion), have jumped 40% so far this year.
($1 = 7.7868 Hong Kong dollars)