Shares of China Evergrande Group (EGRN.F) had a wild ride on Friday. The penny stock soared in the morning and was up by 27% at 1:02 p.m. ET to nearly $0.16. Then it fell precipitously in the afternoon, and by the closing bell, it was back down to $0.11 per share -- down 10.93% for the day.
The catalyst was the resignation of its CEO and chief financial officer amid an internal investigation.
China Evergrande Group is one of the largest property developers in China, and it has amassed a huge quantity of debt, which is becoming more problematic due to that country's struggling real estate market.
The company was investigating how some $2 billion of its deposits from its property services unit had been used as security for third parties to obtain bank loans, according to Bloomberg. Some of those borrowers did not repay those loans, and the banks had seized the funds that had been used as collateral, leaving the property services unit's cash holdings severely depleted.
As a result, the board requested that CEO Xia Haijun and CFO Pan Darong resign for their involvement in the scheme, which they did. The market initially reacted positively, but a sell-off kicked in late in the day.
Shawn Sui, an executive director with the company, has been named the new CEO.
According to Bloomberg, Sui said China Evergrande Group is working with multiple creditors on debt restructuring and is seeking a "law-compliant" solution to the seized funds issues. Meanwhile, the outlook for China's real estate market is not any better in the near term.