Chinese billionaire Xu Jiayin founded Evergrande in 1996 and sold bottled water. Later, the firm expanded to several areas, including pig farming and owning a football club, but what Evergrande is known for worldwide is its real estate business. The company also forayed into making electric cars and wealth management.

Evergrande Group is China’s second-largest property developer in terms of sales in more than 250 cities. In 2020, it recorded a gross profit of nearly $19 billion and in 2019, it was ranked 138th in the Fortune Global 500 list.

At its peak in 2019, Evergrande’s market cap was over US $50 billion. Even today, the company owns 2 percent of all newly constructed real estate in China.

As part of Chinese President Xi Jinping’s policy to crack down on big firms in China, more than 100 regulations were imposed on businesses that raised huge money via equity funds, borrowings, and IPOs in 2020. One of these laws sets a very strict cap on borrowings of companies.

While many Chinese firms took a financial hit due to this cap, Evergrande was one of the worst affected as it has borrowed upwards of $300 billion, which includes $19 billion in offshore US dollar-denominated bonds. The company has not just borrowed to run its real estate business but it also holds the money that people invested in its wealth management business.

With such huge debts, come huge interest payments. However, it looks like the company may default on its debt. Once the shares of Evergrande lost steam due to the cap on borrowings, people who had invested in its wealth management business started asking for their money back. Those who had pre-deposited money to buy flats — that are not yet constructed — also asked Evergrande to either give them the possession of a flat or return their deposits. At present, Evergrande is faced with nearly 800 unfinished residential buildings, many unpaid suppliers, and more than a million people who paid deposits to buy flats.

As troubles mounted for the company, its shares melted significantly. Today, Evergrande’s market cap is down to $4.9 billion, losing nearly 90 percent of its value. Now, Hong Kong billionaire Joseph Lau’s company, a major shareholder in Evergrande Group, has also hinted at plans to sell all of his stock in the ailing Chinese property developer.

Meanwhile, Evergrande has issued a statement saying, “Shareholders of the company and other investors should note that it is uncertain whether the Group could successfully implement the measures to ease the liquidity issues as mentioned in this announcement. Shareholders of the company and other investors are reminded to exercise caution when dealing in the securities of the company.”