New World Development Co. suspended trading of its shares in Hong Kong on Thursday morning, amid reports that CEO Adrian Cheng is poised to step down.
The shares are halted pending the announcement of inside information, the Hong Kong-based developer said in a statement. New World Department Store China Ltd., of which Cheng is chairman, has also halted trading.
The property developer owned by the billionaire Cheng family is considering replacing the third-generation scion as CEO after writedowns that led to the company’s first annual loss in two decades, people familiar with the matter told Bloomberg on Wednesday.
Cheng is set to be replaced by current COO Ma Siu-Cheung, one of the people said.
The company, owned by the family of billionaire Henry Cheng, is due to report financial results later Thursday.
A resignation by Adrian Cheng would be rare in Hong Kong’s property industry, where the biggest players are all controlled by families that carefully plan their succession. Long assumed to be a favourite of the late patriarch Cheng Yu-Tung, Adrian had until recently been seen as the heir apparent of the family’s conglomerate, which spans industries from property to jewelry and logistics.
See also: Hong Kong’s New World shares drop 14% after first loss warning in 20 years
The junior Cheng joined the family’s flagship developer in 2007 as an executive director and soon helped lead the company before cementing his position as CEO in 2020.
A Harvard graduate with a stint at Goldman Sachs Group Inc. as an investment banker, Cheng has transformed the traditional property company into a brand with artsy apartment blocks and ambitious projects while accumulating heavy debt.
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New World earlier warned that it expects to post a loss of as much as HK$20 billion ($3.35 billion) for the financial year ended in June, citing asset impairment, losses on investments and higher interest rates.
Shares of the company have underperformed its peers, tanking more than 30% since the beginning of the year, compared with the 12.8% decline in the Hang Seng Properties Index.
New World’s debt level — the highest among its rivals in the past few years — has become a concern for investors amid high borrowing costs and a weak property market. Its net debt to equity was 82.7% at the end of last year, compared with 41.4% at peer Henderson Land Development Co. and 21.2% at Sun Hung Kai Properties Ltd., according to Bloomberg Intelligence.
Infographic: Bloomberg
