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China Evergrande Shares Suspended After Reports of Founder’s Disappearance

Chairman Hui Ka Yan has been placed under police surveillance, according to media reports

HONG KONG—Trading in the shares of China Evergrande Group EGRNF 20.00%increase; green up pointing triangle and two of its publicly listed units was suspended on Thursday, after reports that the beleaguered property developer’s founder and chairman had been placed under police surveillance.

Hui Ka Yan, who is also Evergrande’s controlling shareholder, was taken away by Chinese police earlier this month and is being monitored by authorities, Bloomberg News reported earlier. A domestic Chinese media outlet said Hui was being held at a location in Beijing. He hasn’t been formally charged with any crimes.

The developer’s Hong Kong-listed shares, as well as those of its property-services unit and electric-vehicle manufacturing business, were all halted from trading on Thursday. They recently plummeted to multiyear lows.

An Evergrande spokesperson didn’t respond to requests for comment. The police in Guangdong province, Beijing and Guangzhou—the city where Evergrande is based—couldn’t be reached for comment.

In China, police have been known to place people suspected of crimes in so-called residential surveillance away from their homes, or in state-run detention centers. Individuals have in the past been held in this manner for weeks or months before being formally charged.

Hui, who is now 64 years old, founded Evergrande in 1996 in the southern province of Guangdong. Under his oversight, the company expanded aggressively and became China’s largest and most indebted residential developer before it defaulted on its international bonds in late 2021. Evergrande had the equivalent of more than $327 billion in liabilities at the end of June this year.

Evergrande’s debt crisis set off a cascading series of problems for China’s housing market, construction companies and many other businesses that were deeply entrenched in the property sector. It also caused losses for many investors. Dozens of other developers have also defaulted and some stronger players are now struggling to survive.

New home sales have slumped for much of the past two years and Chinese policy makers and regulators have been using different methods to stop the declines.

Evergrande’s problems have mounted recently. Last week, the company scrapped an offshore debt restructuring plan that had taken more than a year to agree upon with international investors.

Over the weekend, Evergrande said an investigation into a subsidiary barred it from issuing new bonds outside of mainland China—something that was essential for the debt restructuring to go ahead. On Monday, Evergrande’s mainland property business, Hengda Real Estate Group, skipped roughly $547 million of principal and interest payments on a yuan-denominated bond, according to a stock exchange filing.

In late August, Evergrande’s wealth-management unit said it couldn’t make previously agreed payments to investors. On Sept. 16, police in Shenzhen said they had detained several employees of the unit, which is based in that city. The police have asked investors to report losses that they have incurred from investing in Evergrande’s wealth products.

Evergrande’s former chief financial officer was recently detained by police, who also imposed restrictions on the company’s former chief executive officer, according to a September report in Caixin, a domestic business news outlet. The duo had been ousted by the developer last year following an internal investigation into how about $2 billion in a subsidiary’s cash was seized by banks.

For much of the past two years, Hui kept a relatively low profile but was featured regularly in Evergrande’s social-media posts leading internal meetings and working on the company’s restructuring plans. The company last published pictures and a video of Hui attending a meeting in December last year.

Some big corporate failures in China in past years have been followed by arrests or detentions of the companies’ leaders.

In 2021, hotels-to-airlines conglomerate HNA Group said Chairman Chen Feng and CEO Adam Tan were detained by police on suspicion of committing crimes. HNA was one of China’s most acquisitive private companies outside the country, until it struggled to repay its debt and was forced to file for bankruptcy and reorganization.

Wu Xiaohui, the former chairman of Anbang Insurance Group, another formerly highflying company that acquired trophy assets abroad, was detained by Chinese authorities in 2017 and charged with fraud the following year. Wu ended up being penalized with a large fine and sentenced to 18 years in prison.

ChatGPT creator in early discussions to create the ‘iPhone of artificial intelligence’

OpenAI is in advanced talks with former Apple designer Jony Ive and SoftBank’s Masayoshi Son to launch a venture to build the “iPhone of artificial intelligence”, fuelled by more than $1bn in funding from the Japanese conglomerate.

Sam Altman, OpenAI’s chief, has tapped Ive’s company LoveFrom, which the designer founded when he left Apple in 2019, to develop the ChatGPT creator’s first consumer device, according to three people familiar with the plan.

Altman and Ive have held brainstorming sessions at the designer’s San Francisco studio about what a new consumer product centred on OpenAI’s technology would look like, the people said.

They hope to create a more natural and intuitive user experience for interacting with AI, in the way that the iPhone’s innovations in touchscreen computing unleashed the mass-market potential of the mobile internet.

The process of identifying a design or device remains at an early stage with many different ideas on the table, they said.

Son, SoftBank’s founder and chief executive, has also been involved in some of the discussions, pitching a central role for Arm — the chip designer in which the Japanese conglomerate holds a 90 per cent stake — as well as offering financial backing.

Son, Altman and Ive have discussed creating a company that would draw on talent and technology from their three groups, the people said, with SoftBank investing more than $1bn in the venture.

Discussions are said to be “serious”, but no deal has been agreed, they cautioned, and it could be several months before a venture is formally announced. Any resulting hardware product is likely to take years to bring to market.

OpenAI, SoftBank and LoveFrom declined to comment. The Information previously reported some aspects of their product discussions.

Ive played a central role in the creation of the first iPhone, which was launched in 2007, ushering in a new era of personal computing.

But as the smartphone market reaches a plateau, many in Silicon Valley have been considering what might become the next big consumer electronics device.

Virtual reality headsets such as Meta’s Quest and smart speakers such as Amazon’s Echo have been billed as having potential. But nothing has come close to rivalling the smartphone, which has become an essential item for billions of people.

For Ive, the compulsive nature of many smartphone users’ behaviour has become a worry. He told the Financial Times in 2018 that Apple had a “moral responsibility” to mitigate the iPhone’s unintended consequences, such as addictive apps, and has said he limits his children’s screen time.

The project with OpenAI presents an opportunity to create a way of interacting with computers that is less reliant on screens, according to people familiar with his thinking.

This week OpenAI announced upgrades to its breakthrough chatbot, ChatGPT, including capabilities to control the app through voice or by uploading an image and which allow it to browse the web.

The Wall Street Journal reported on Tuesday that OpenAI, which is backed by Microsoft, was considering a share sale that would value the San Francisco-based company at as much as $90bn, tripling its valuation in less than a year.