ZTE's $2.7 Billion Loss Shows Tougher Challenges After U.S. Fine
- Shares plunged in Hong Kong and Shenzhen as investors fled
- An entirely new management now needs to rebuild trust
ZTE Corp. unveiled a settlement with the U.S. government to rescue the Chinese telecom-equipment maker. But investors put a steep initial estimate on the cost of the deal: at least $2.7 billion.
ZTE agreed to pay at least $1 billion in penalties and overhaul its leadership to escape essentially a death sentence. That still leaves it with the challenge of replacing its entire senior management and board just as it tries to rebuild trust with phone companies and corporate customers. Its shares plunged 42 percent in Hong Kong and the 10 percent daily limit in Shenzhen, wiping out $2.7 billion of market value as trading resumed after a two-month hiatus. If the fall in Shenzhen eventually matches Hong Kong’s Wednesday slide, the value lost could reach $7.7 billion, though mainland investors typically follow their own logic.