HONG KONG -- Tencent Holdings, Didi Chuxing and a Jack Ma-backed private equity fund are poised to join a 4 billion Hong Kong dollar ($516.1 million) fundraising for the electric vehicle unit of property developer China Evergrande Group.
Shares in China Evergrande New Energy Vehicle Group will be placed with "not less than six" investors at HK$22.65 a piece, a 20% discount to the company's closing price in Hong Kong on Monday, the company said in a premarket announcement on Tuesday.
The unit's stock subsequently tumbled 11.5% while parent China Evergrande gained 8.1%.
Investors joining the stock sales in addition to Chinese technology conglomerate Tencent and ride-hailing company Didi include Sequoia Capital and Yunfeng Fund, which is managed by Jack Ma's Yunfeng Capital.
Along with two other unnamed investors, the group will buy 176.58 million shares in Evergrande NEV from its corporate parent, which in turn will subscribe to an equal number of new shares. This will bring down China Evergrande's stake in Evergrande NEV to 73.5% stake from 74.99%.
Shares in Evergrande NEV, which until last month was known as Evergrande Health Industry Group, have surged 350% since March amid a recovery in Chinese car sales and investor enthusiasm for a lineup of six models the company unveiled last month.
The company was previously focused on hospitals and elderly care homes. The six new models, under the brand name Hengchi, cover all major passenger car categories, including a sedan, a sport utility vehicle and a multipurpose vehicle.
The first model is expected to enter the market in the second half of 2021. The company expects to complete production facilities in Shanghai and Guangdong Province by the end of this year.
China Evergrande, controlled by billionaire founder Xu Jiayin, in 2018 announced intentions to diversify as Beijing attempted to cool an overheated property market.
The company has continued to pour money into the EV business despite soaring debt. Evergrande spent 15 billion yuan ($2.2 billion) on its EV business in 2019. The unit posted a net loss of 2.46 billion yuan for the six months to June 30.
The group has said it plans to spend another 20 billion yuan on its EV venture over the next two years. This comes even though Evergrande had 800 billion yuan in debt at the end of 2019, the highest sum among Chinese developers. Some 372 billion yuan in debt was scheduled to mature this year, according to regulatory filings.