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ZTE plunges 40% after saying it will pay $1 billion to the US as part of a settlement agreement

Key Points
  • Telecommunications equipment maker ZTE fell around 40 percent in Hong Kong as its shares resumed trade.
ZTE shares plunges more than 40% as shares resume trading

Telecommunications equipment maker ZTE fell around 40 percent early in Hong Kong Wednesday trading hours after its shares resumed trade there and in Shenzhen.

In a filing, ZTE said it will pay a $1 billion lump sum payment to the U.S. government as part of a settlement agreement, as well as an additional $400 million in escrow. ZTE will also replace its entire board of directors, as well as the board of subsidiary ZTE Kangxun, and create a compliance committee, the company added.

The agreement comes after the U.S. government stopped American firms from selling to ZTE earlier this year, based on the company's business dealings with Iran and North Korea.

Existing members of the company's senior leadership, from the senior vice president level and higher, would also be replaced within a period of 30 days from June 8 as part of the agreement.

Shares of ZTE were down 38.05 percent in Hong Kong and 10 percent in Shenzhen at 10:30 a.m. HK/SIN. Trade in the Shenzhen-based company had been halted since April.

The wider was down 0.56 percent and the Shenzhen composite was lower by 0.4 percent.

In the meantime, the ban enforced against ZTE will only be lifted after it satisfies the conditions of the agreement. "The company will resume operating activities ... as soon as practicable," ZTE said in its filing.

— CNBC's Saheli Roy Choudhury contributed to this report.

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