LeEco busi­ness plan crit­i­cized by its in­vestors

China Daily (Hong Kong) - - BUSINESS - By FAN FEIFEI fan­feifei@chi­nadaily.com.cn

Chi­nese in­ter­net firm LeEco said it is talk­ing with strate­gic in­vestors and that trad­ing in shares of LeEco’s listed com­pany, Leshi In­ter­net In­for­ma­tion and Tech­nol­ogy Corp, will con­tinue to be sus­pended.

LeEco said it has al­ready re­cruited a fi­nan­cial ad­viser to con­duct due dili­gence and has pre­pared doc­u­ments re­lated to fur­ther ne­go­ti­a­tions with strate­gic in­vestors, ac­cord­ing to a state­ment of the com­pany.

The state­ment also said that in or­der to en­sure the im­por­tant is­sues go smoothly and to avoid fluc­tu­a­tions of the stock price, trad­ing of its listed arm will con­tinue to be halted on Shen­zhen Stock Ex­change.

Jia Yuet­ing, CEO and founder of LeEco, said at the China En­trepreneurs Sum­mit in Bei­jing on De­cem­ber 11, that its sub­sidiary LeTV Zhixin Elec­tronic Tech­nol­ogy (Tian­jin) Co Ltd, which is re­spon­si­ble for LeEco’s TV busi­ness, will fin­ish a round of large-scale fi­nanc­ing within one month. He added that this move will solve the com­pany’s cash flow crunch to a cer­tain de­gree.

Its listed arm Leshi now holds 58.55 per­cent of the shares of LeTV Zhixin. The rev­enue of LeTV Zhixin reached 7.64 bil­lion yuan ($1.1 bil­lion), with a net loss of 56.87 mil­lion yuan in the first half of fis­cal year 2016.

Zeng Qiang, the sec­ond­largest share­holder of Leshi and the founder of China Bridge Cap­i­tal, said that be­cause LeEco ex­panded too fast and the elec­tric car costs the com­pany a large sum of money, the com­pany will pay a higher price for fi­nanc­ing than ever be­fore, ac­cord­ing to a re­port from South­ern

It should cut down the busi­nesses which burn cash and lack core com­pet­i­tive­ness ...” Shen Meng, di­rec­tor of Chan­son & Co

Me­trop­o­lis Daily.

If Jia doesn’t change his con­cept, the cap­i­tal chain of LeEco will still have prob­lem, said Zeng, adding that LeEco doesn’t lack money, but con­cen­tra­tion and up­grad­ing plans, said Zeng.

Shen Meng, di­rec­tor of Chan­son & Co, a bou­tique in­vest­ment bank, said: “What LeEco lacks is not the money, but the ex­e­cu­tion. Un­less LeEco makes a sig­nif­i­cant re­form in busi­ness and prod­uct, no strate­gic in­vestors will en­ter into it,” Shen said.

“It should cut down the busi­nesses which burn cash and lack core com­pet­i­tive­ness, shift­ing its fo­cus to the R&D of key tech­nolo­gies of core prod­ucts.”

Shen added that smart­phones, TVs and its con­tent plat­form should be its core busi­nesses. Apart from the price war, the com­pany should en­hance its tech­nol­ogy and ser­vice to in­crease users’ stick­i­ness.

Jia said the firm’s prof­its will also rise sig­nif­i­cantly next year, driven by the rapid growth of its video-stream­ing and TV busi­nesses.

Trad­ing in shares of Leshi was halted on Dec 6 at 35.80 yuan, hav­ing dropped 39 per­cent from about a year ago.

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