LeEco chairman says cash
crunch 'far worse than expected'
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[June 28, 2017]
By Sijia Jiang
HONG KONG (Reuters) - LeEco's cash problems
are "far worse than expected" and the funds raised in recent months are
unexpectedly not enough to help the Chinese technology conglomerate ride
out the crunch, its chairman, Jia Yueting, said on Wednesday.
LeEco, one of China's most ambitious companies that grew from a Netflix-like
video website to a business empire spanning consumer electronics to cars
within 13 years, is struggling to support its goals that include beating
Elon Musk's Tesla Motors in premium electric vehicle making.
Its billionaire founder and CEO Yueting has previously said the firm was
battling a cash crunch after expanding at an unprecedented rate.
Earlier this year, Jia thought the company had found an answer to its
cash problems when Chinese property developer Sunac agreed to invest 15
billion yuan ($2.21 billion), including 9 billion yuan into LeEco's
"We had thought some 9 billion yuan for the non-listed units would have
been able to solve all the problems, the result obviously did not meet
our expectations," Jia said at the annual shareholder meeting of the
group's main listed unit, Leshi Internet Information & Technology Corp.
"Since October, we took some measures and made some mistakes, but
LeEco's non-listed units' finances got tighter. This is what we
discovered over two-to-three months," he said, a company transcript of
the meeting held in Beijing shows.
LeEco will need to further consolidate its non-listed units in the next
two-three months, "dispose of some fixed assets and even equity assets"
in order to combat what Jia described as "a second cash crunch" from
He added that although LeEco had paid back some 15 billion yuan in debt,
including loans under his name, the company still did not have enough
[to top of second column]
Jia Yueting, co-founder and head of Le Holdings Co Ltd, also known
as LeEco and formerly as LeTV, poses for a photo in front of a logo
of his company after a Reuters interview at LeEco headquarters in
Beijing, China, picture taken April 22, 2016. REUTERS/Jason Lee/File
Photo - RTX2WSUP
Choosing to repay debts instead of refinancing operations had hurt the company's
ability to get back on track, Jia said.
On business plans, LeEco's car unit - which Jia described as the number one
source of LeEco's financial troubles - is seeking to complete round-A financing
and start production as soon as possible, Jia said. The company also plans to
strengthen its smart TV business under a strategy centered around larger-screen
products, though Leshi chief executive Liang Jun said the TV industry in China
in the first half of 2017 saw the worst sales declines in nearly a decade due to
rising panel costs, with sales down around 20 percent during the May holiday
Leshi had income receivables of 9.5 billion yuan as of the first quarter,
representing 28.4 percent of its total assets of 33.6 billion yuan, according to
its financial report. Chief Financial Officer Zhang Wei said the company aims to
lower that ratio to below 20 percent and reduce the receivable account by around
3 billion yuan.
(Reporting by Sijia Jiang; Editing by Himani Sarkar and Louise Heavens)
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