Photographer: Tomohiro Ohsumi/Bloomberg

Tycoon's $1 Billion Bet Reaps a Swift 92% Gain

  • Chinese Estates emerged from shadows as a major shareholder
  • Short sellers have so far been burned as Evergrande soars

Billionaire Joseph Lau’s Chinese Estates Holdings Ltd., which emerged from the shadows this month as a big buyer of China Evergrande Group shares, has made a gain of 92 percent on its billion-dollar wager on the company.

The firm controlled by Lau and his family last week declared that its interest passed 5 percent after share purchases since April, and its wager has reaped a paper gain of about $962 million as of Thursday, according to Bloomberg calculations based on Hong Kong exchange filings.

Evergrande’s share price has risen by almost 400 percent this year, including a rally of more than 230 percent since April, burning short sellers who targeted the company over its debt levels.

Short interest in Evergrande, China’s biggest developer by market value, has tumbled to 15 percent of the free float from 21 percent in May, according to IHS Markit Ltd. data. Share buybacks, efforts to cut elevated debt levels, and better-than-expected profit estimates have helped to boost the stock, along with enthusiasm in China for big developers’ prospects as the industry consolidates.

Ties between Chinese Estates and Evergrande -- controlled by billionaire founder Hui Ka Yan -- date back to at least 2009. Chinese Estates invested in Evergrande’s initial public offering, and the two companies have shuffled assets to and fro, including Chinese Estates selling a Hong Kong office tower to Evergrande for a record price in 2015.

— With assistance by Moxy Ying

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