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Evergrande shares suspended ahead of possible buyout news

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Trading in Evergrande (SEHK: 3333) shares has been suspended by the Hong Kong Stock exchange, as the company prepares for “an announcement containing inside information about a major transaction.” The firm’s property management division said that the news related to a possible acquisition or a merger.

Evergrande is the Chinese real estate firm at the centre of worries that have spread across the world’s stock markets in recent weeks.

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The company is suffering under huge debt problems, and fears have been aired that it could even go bust. In fact, Evergrande is the world’s most heavily indebted real estate firm, carrying debts of more than $300bn. Evergrande shares have collapsed in 2021.

As well as the impact on stock market confidence, worldwide investors have an additional concern. There are bondholders around the globe. The company has already failed to make an $83.5m interest payment due on 23 September. And some bondholders have said a second payment has also been missed. There has not been a formal default yet, but something surely has to happen quickly.

A buyer for Evergrande?

Some Chinese news outlets suggest the transaction will involve fellow Hong Kong-listed property company Hopson Development. The rumours suggest Hopson is about to buy out 51% of Evergrande for around $5bn.

Hopson, meanwhile, has requested a suspension of trading in its own shares. It says the suspension is “in relation to a major transaction” and that it has “agreed to acquire the shares of a company…

Following the news, the Hang Seng index in Hong Kong has dropped 2.5%. Will the sale of Evergrande’s property management arm settle the markets, if that is indeed what is happening? We should know soon enough.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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