Impact Analysis of Zotye Auto's Disposal of 3% Equity to Repay Debts

Based on the obtained data and information, I will provide you with a comprehensive analysis of Zotye Auto’s measure of disposing 3% of its equity to repay historical debts and its impacts:

According to the latest financial data, Zotye Auto is currently facing severe financial challenges:

[0]:

• Market Value: 18.61 billion USD (approximately 135 billion RMB)
• Current Stock Price: 3.69 RMB/share
• P/E Ratio: -20.74x (negative value indicates the company is in a loss-making state)
• Net Profit Margin: -151.37%
• Operating Profit Margin: -154.17%
• Current Ratio: 0.58 (far below the healthy level of 1.5)
• Quick Ratio: 0.52 (severe liquidity shortage)
• ROE: -769.28% (extremely poor return on shareholder equity)

[0]: High-risk category, indicating the company has serious debt risks and liquidity problems.

According to online search data[1], Zotye Auto’s historical debt problems have a long history:

• In 2020, it entered bankruptcy restructuring due to insolvency, with liabilities exceeding 20 billion RMB
• At the end of 2024, net assets plummeted from 1.235 billion RMB to 234 million RMB, a decrease of 80.98%
• As of June 2025, the company lacks operating funds, and its whole vehicle business has not resumed production
• As the second largest shareholder (holding 8.68% equity), China Zheshang Bank has implemented judicial freezing on the company’s restructuring special account stocks and cash accounts, with a preserved value of approximately 327 million RMB

• Disposal Scale
  : No more than 3% of the total share capital, which is 151 million shares
• Disposal Method
  : Concentrated bidding transaction (1%) + block trading (2%)
• Timeline
  : Within three months starting from December 9, 2025
• Use of Funds
  : Specifically for repaying historical debts
• Lock-up Period Requirement
  : Block trading transferees are not allowed to reduce their holdings within six months

Calculated based on the current stock price of 3.69 RMB/share:

• Maximum Raisable Funds: 151 million shares ×3.69 RMB/share ≈557 million RMB
• Compared with the company’s historical debt scale, this fund is relatively limited, but it is of great significance for alleviating short-term liquidity pressure

1. Improve Liquidity Status
   : The raised funds will be directly used to repay historical debts, helping to alleviate the current severe liquidity crisis[0]

2. Reduce Financial Leverage
   : By repaying debts, the company’s asset-liability ratio can be moderately reduced, which currently stands at a high 96.1%[1]

3. Release Operational Space
   : After reducing debts, it creates conditions for subsequent resumption of production, especially the preparation for resumption at the Chongqing base[1]

1. Equity Dilution Effect
   : The disposal of 3% equity will lead to the dilution of existing shareholders’ equity, which may affect the control structure

2. Short-term Stock Price Pressure
   : The concentrated bidding transaction method may form short-term selling pressure on the stock price, especially in the current situation of poor liquidity

3. Limited Fund Scale
   : Compared with the historical debt of more than 20 billion RMB, the fund scale of 557 million RMB is still insufficient

• 6-month increase: +73.24% (indicating market expectations for the company’s restructuring)
• YTD increase: +57.02%
• 1-month decrease: -4.40% (recent adjustment)
• Current stock price is in the upper-middle part of the 52-week range (1.70-4.36 RMB)

:

• The equity disposal itself constitutes a negative factor, which may trigger short-term selling pressure
• The market still has concerns about the company’s fundamentals, and liquidity indicators show limited capital attention

:

• Substantial improvement in debt issues helps to rebuild market confidence
• The lifting of the freeze on the bankruptcy restructuring special account clears obstacles for future development
• Overseas order business (such as the 1,200-unit order from Algeria) provides cash flow support for the company[1]

1. Continuous Deterioration of Fundamentals
   : Only 14 vehicles were sold in 2024, with zero production, indicating extremely difficult main business operations[1]
2. Doubtful Going Concern Ability
   : The company has clearly stated that if it cannot resume production in 2025, it will face the risk of delisting[1]
3. Insufficient Technical Strength
   : Long-term insufficient R&D investment in history, and the problem of lack of core technology remains unsolved[1]

1. Proactive Response from Management
   : Raising funds through multiple channels to solve debt problems, showing a responsible attitude
2. Attempts at Business Transformation
   : Focusing on developing overseas export markets, and has achieved order breakthroughs in countries such as Algeria and Egypt[1]
3. Optimization of Equity Structure
   : The six-month lock-up period for block trading transferees helps stabilize the equity structure

Zotye Auto currently has extremely high investment risks, mainly reflected in:

• Comprehensive deterioration of financial indicators and extremely poor profitability
• Main business is basically stagnant, and going concern ability is doubtful
• Heavy historical debt burden, which is difficult to completely solve in the short term

1. Delisting Risk
   : If production cannot be resumed in 2025, the company will face the risk of delisting
2. Liquidity Risk
   : The current current ratio is only 0.58, indicating severe insufficient short-term debt repayment ability
3. Operational Risk
   : Lack of core technology and insufficient product competitiveness

Zotye Auto’s measure of disposing 3% equity to repay debts helps alleviate liquidity pressure in the short term, but still cannot fundamentally solve the deep-seated problems faced by the company. This change in equity structure has limited effect on boosting investor confidence unless effective business restructuring and resumption of production and operation can be achieved simultaneously.

Investors should remain highly cautious and closely monitor the company’s progress in resuming production, debt settlement status, and the actual execution effect of overseas orders.

[0] Jinling API Data
[1] Sina Finance - “Lack of start-up funds for operation, Zotye Auto faces delisting risk again, net assets plummet by over 80%” (https://finance.sina.com.cn/roll/2025-06-18/doc-infanwwh8202075.shtml)
[2] Eastmoney.com - “Executive Shake-up: Chery and Bubugao Compete for Zotye Auto” (https://finance.eastmoney.com/a/202512123590314641.html)
[3] NetEase News - “Zotye Auto’s Latest Announcement: Plans to Dispose of No More Than 3% Equity Within Three Months to Repay Historical Debts” (https://www.163.com/dy/article/KH0O12K4051984TV.html)