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Evergrande Automobile announced today that it signed a placing and subscription agreement with the placing agent yesterday to place 174,830,000 shares at HK $2.86 per share through an old-and-new approach, with a total expected proceeds of approximately HK $500 million from the placement. Evergrande Automobile said that the company plans to use the proceeds collected exclusively for the R & D and production and manufacturing of new energy vehicles of the Group, laying a foundation for the smooth production of Hengchi new energy vehicles.

According to the announcement, the placing shares accounted for approximately 1.79% of the total number of issued shares on the date of the announcement and the issuance of new shares, which was expanded to approximately 1.76% of the total number of issued shares upon completion. The Placing Shareholders held a total of 6,219,500,000 shares of Evergrande Automobile, including the Placing Shares, representing approximately 63.67% of the total issued shares as at the date of the announcement.

It should be noted that this is Evergrande's second allotment of shares in 2021, and it is also Evergrande's third financing action this year. According to incomplete statistics, about 30.727 billion yuan of financing has been obtained this year. As early as May 13, Evergrande issued an announcement saying that 260 million shares of Evergrande Automobile were allotted at a discount of 20% at HK $40.92 per share, accounting for 2.66% of Evergrande's total share capital, with an allotment amount of about HK $10.6 billion. After the completion of the placement, the shareholding ratio of the top 20 shareholders of Evergrande Automobile will be reduced to less than 90%, meeting the necessary conditions for Evergrande Automobile to enter Hong Kong Stock Connect.

According to relevant information, rights issue is an act of a listed company to further issue new shares to the original shareholders and raise funds according to the development needs of the company and in accordance with relevant laws and procedures.

It is worth mentioning that Evergrande's first mass production model Hengchi 5 appears in the new car declaration catalogue recently released by the Ministry of Industry and Information Technology. According to the declaration information, Hengchi 5 is equipped with a motor produced by United Automotive Electronics Co., Ltd., with a maximum power of 150kW and a maximum speed of 180km/h. According to the model planning of Evergrande earlier, Hengchi 5 is positioned as A-class SUV with a price of less than 200,000 yuan. In the future, it will compete with Audi Q3, BMW X1 and other models. At present, Hengchi 5 appears in the declaration catalogue of the Ministry of Industry and Information Technology. As for whether Hengchi 5 already has the requirements for mass production and listing, but whether it will be mass produced and when it will be mass produced cannot be "guaranteed".

On October 11, Liu Yongzhuo, president of Evergrande Automobile, said at Evergrande Automobile Strategic Partner Conference that Evergrande Automobile had launched a three-month battle to ensure that Hengchi's first car would be rolled out of Tianjin factory early next year. On October 22, Xu Jiayin made a strategy to complete the industrial transformation from real estate to new energy vehicles within 10 years at the special meeting of Evergrande Group on resumption of work and production. Evergrande's losses are still expanding due to continuous R & D investment earlier. According to its semi-annual report, Evergrande lost 4.82 billion yuan in the first half of 2021, compared with 2.46 billion yuan in the same period last year. Cash and cash equivalents on account amounted to 9.577 billion yuan, restricted cash amounted to 2.936 billion yuan, accumulated losses amounted to 17.8 billion yuan and net current liabilities amounted to 13 billion yuan.

It is not difficult to see that Evergrande Automobile has accelerated the process of "self-hematopoiesis" and hopes to raise certain funds to ensure that Hengchi 5 goes offline as scheduled by means of allotment of shares. However, solving the funding problem is the first step, and how to get consumers to accept the product quickly will be a big problem.

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