As the collapse of Evergrande reverberates throughout the Chinese economy, pissed off retail investors have gone from storming the company's headquarters to taking management hostage, according to the Straits Times, citing posts 'making the rounds' on social media.
What we know so far: over 70,000 retail investors forked over vast sums of money, in some cases their entire life savings, after the country's second largest, 'too big to fail' property developer wooed them with promises of 10%+ annual returns. And while the company most likely is TBTF (as you can read in gory detail here, although Beijing has yet to make an official proclamation), these anxious retail investors may be in more of an "Alive" situation than a Sully Sullenberger landing when it comes to resolving this mess.
After accumulating some 1.97 trillion yuan (US$410 billion) in liabilities, the company - which became the country's largest high-yield dollar bond issuer (16% of all outstanding notes) - sparked protests across the country earlier this week after announcing they were forced to delay payments on up to 40 billion yuan in wealth management products.
As we noted earlier Thursday, in an effort to appease its angry (and very soon, poor) stakeholders, Evergrande plans to let consumers and staff bid on discounted apartments this month as compensation for billions in overdue investment products as the embattled developer seeks to preserve cash, according to people familiar with the matter.
According to Bloomberg, the company will organize an online property event by Sept. 30 for investors who opt for real estate in lieu of cash. The world’s most-indebted property developer is pushing the discounted real estate as the preferred of three options for angry investors seeking repayments.
The plan, it would appear, did not go off quite as planned: in response, nearly 100 investors stormed Evergrande's headquarters to demand their money back.
And while we believe Evergrande's chaotic, freefall default poses such a catastrophic risk to the Chinese economy (a nightmare scenario echoed in graphic detail by Bloomberg) that a rescue will materialize, enraged retail investors now squatting at the company's headquarters claim to be holding management hostage in their offices, according to the Straits Times.
"I have with me Nanchang's top Evergrande representative surnamed Chen," said WeChat user Yang Qiwen, referring to the city in Jiangxi province in south-eastern China, in a post accompanied by a photo of a man lying on the floor.
"He can't leave the office. There are more than 300 of us (investors) stopping him," Yang added on one of at least three WeChat groups discussing the company's dire straits.
Evergrande has more than 700 projects across 223 cities - most of which lie in the country's less developed regions - and has committed to complete some 1.4 million properties by the end of June, according to the Times. Last week, over 100 people who had bought homes with Evergrande staged a protest in Guangzhou after construction stalled on the projects.
On Wednesday, state media Global Times sought to restore investor confidence, calling the company's liquidity problems an "isolated incident," and insisting that Evergrande's debt crisis will "not affect China's efforts to strengthen regulation of the housing market to prevent major financial risks and ensure sustainable development."
As the Times further notes, however, Beijing has yet to make an official statement on what actions will be taken.