Evergrande Group, once a leader in the real estate industry, is now in the midst of an unprecedented crisis. The capital chain is broken, debts are rising, unfinished buildings are everywhere, and the market reputation has plummeted. Evergrande's investors, home buyers, businessmen, employees, and partners have paid for its crisis. At the same time, executives are still living lavish and well-paid lives. Xu Jiayin, the founder of Evergrande, was also deeply involved, facing the iron window outside the window, and lived like a year.
Greedy investment strategies and operational processes.
Evergrande's investment strategy, in short, is greed. Its core business is real estate development, but the operation process is to buy a steady stream of land, mortgage it to the bank to obtain loans, and then use the loans to buy more land, forming a vicious circle. Evergrande's land bank is the largest in the country, with a total area of 4600 million square meters, equivalent to 35 times. This kind of land greed practice does not distinguish between regions, industries, and natures, and even does not hesitate to obtain land resources by means of forced demolition, forced occupation, and forced expropriation.
This greedy operation is based on the erroneous assumption that house prices will never **. However, this strategy of relying on the continuous development of housing prices, once the market fluctuates, the capital chain may be broken, and the land bank will become a huge liability. This is not only a damage to the rights and interests of home buyers, but also an immoral and illegal practice that violates the national real estate policy and disrupts the market order.
Over-expansion and diversification lead to diversification of funds.
Behind Evergrande's overextension is a false goal – to become number one in the world. The owners of the company are ambitious and are not satisfied with success in the real estate sector and are eager to achieve the same in other areas. However, this idea of diversification is too naïve, believing that anything can be done and anything can be made. This leads to the dispersion of funds, reduces the efficiency of the enterprise, and violates the core competitiveness of the enterprise.
Evergrande has made a large number of high-cost, high-risk, low-return investments in the fields of automobiles, mineral water, song and dance troupes, football, film and television, new energy, and the Internet, and most of these investments are mortgaged by real estate. However, these investments did not create economies of scale, created brand value, and did not lead to profitable growth. Over-expansion and diversification are very failed decisions that expose the ignorance and blindness of the company and become a joke and a tragedy.
Reason for the rupture of the capital chain: the flow of funds is unknown.
Evergrande's capital chain broke due to the wrong decisions of the management, in which the flow of funds became an unknown mystery. There is no transparency, standardization and rationality in the process of fund allocation, use, supervision, and auditing. Evergrande's funds consist of contract bonds
Bank and bond financing, merchant advances, home buyers' advances, and other means, but these lack regulatory and accountability mechanisms.
The lack of clarity in the flow of funds has led to a funding gap, increasing demand and pressure on the company. This is not only dangerous, but also unethical, harming the interests of investors, home buyers, merchants, employees, and partners. It also violates the state's financial laws and regulations, disrupts the market order, and undermines social stability.
The problem of unfinished buildings and the difficulty of recovering funds that are difficult to deal with.
Evergrande's problem with unfinished buildings is rooted in a false expectation that it will be easy to return funds. The boss is optimistic that as long as there is enough land reserve, the pre-sale method can attract the advance payment of home buyers and realize the rapid return of funds. However, factors such as the downturn in the real estate market, the shortage of funds, the suspension of projects, and the change of policies have led to the problem of unfinished buildings.
This problem has seriously affected the company's capital withdrawal, triggering capital demand and pressure. The company's response strategy is based on the false assumption that it can shift responsibility. Bosses try to hand over unfinished buildings to other small companies, sell diversified investments to other companies, and transfer executive salaries and assets to other countries and regions. However, these coping strategies did not solve the company's underlying problems, but only temporarily relieved the financial pressure, but caused more problems, such as deterioration in quality, loss of reputation, legal disputes, etc.
Financial Black Hole and False Data: Demystifying Evergrande's Financial Operations.
Evergrande's financial figures are nothing more than a false report, a false report. How exactly are these financial figures compiled, published, and interpreted?This is nothing more than a well-known lie, a farce that no one can believe. Behind the financial data are a series of means, including inflating revenues, inflating costs, inflating profits, inflating assets, inflating debts, and fictitious cash flows. The purpose of this ** is to attract investors, deceive home buyers, confuse ** businessmen, evade banks, evade **, and cover up the crisis within the company.
This false financial data not only lacks any credibility, but also lacks oversight and auditing, and even lacks accountability mechanisms. This not only violates the country's financial laws and regulations, but also causes great damage to market order and social stability.
Debt Trap and Funding Pressure: Evergrande's Debt Structure Problem.
Evergrande's debt problems stem from a highly leveraged structure that poses a huge burden. This huge debt covers many aspects such as contract debt, bank and bond financing, ** merchant advances, and home buyer advances. These debts are not only borne by the company, but also involve multiple entities such as shareholders, subsidiaries, affiliated companies, and cooperative companies. In the face of a large and complex debt system, the company's repayment methods also involve a variety of methods, such as assets, transfer projects, issuance, bond issuance, and deferred payments.
By the end of 2020, Evergrande's debt had reached 258 trillion yuan, of which the company's debt accounts for the vast majority. This is not only a huge burden, but also a very dangerous, unstable and unreliable situation. Evergrande's debt problems have led to a crisis in the company's funds, increasing demand, and huge financial pressure.
land banks and dangerous financial woes.
Evergrande's land bank may seem huge, but its value is based on the illusion of inflated value. This huge land bank includes residential, commercial, tourism, cultural, educational, medical and other fields, and can be acquired in a variety of ways, including auctions, auctions, agreements, forced demolitions, forced occupations, forced expropriation, etc. However, all this is nothing more than a numbers game, and as of the end of 2020, Evergrande's total land bank area was as high as 4600 million square meters, with a value of 11 trillion yuan. Behind these figures, however, lies a great deal of uncertainty.
Evergrande's land bank problems have caused the company to fall into financial difficulties. This not only has a serious impact on the company's capital demand and pressure, but also damages the interests of investors, home buyers, businessmen, employees and partners. This immoral behavior not only violates the state's land laws and regulations, but also disrupts the market order and undermines social stability.
Profligacy and Executive Pay Imbalances: Evergrande's Waste and Management Problems.
Evergrande's business puzzle is not only reflected in the financial black hole, debt distress, land reserves, etc., but also in the company's capital profligacy and executive compensation imbalance. In this crisis, the high salaries of Evergrande's top executives have become the focus of many attention. The high remuneration of the company's senior management not only far exceeds the level of the same industry, but also violates the basic principles of the company's economic and social benefits. This exorbitant remuneration is not only a pressure on the company's finances, but also a challenge to corporate governance.
At the same time, Evergrande's squandering of funds is also a problem that cannot be ignored. In the process of the company's operation, there is a lot of waste, including excessive publicity, extravagance and waste, luxury offices, high salaries and awards, abuse of company funds, etc. This kind of profligacy is not only a waste of the company itself, but also a waste of the resources of the whole society. This not only violates the company's economic and social benefits, but also has a huge impact on the entire market order and social stability.
In this crisis, Evergrande Group not only needs to face problems such as financial black holes, debt difficulties, and land reserves, but also needs to face problems such as capital squandering and imbalance in executive compensation. Only by truly solving these problems can we get rid of the current business difficulties and achieve sustainable development.