LeEco heads off cash crunch with fresh fund­ing

China Daily (Hong Kong) - - BUSINESS - By MA SI masi@chi­nadaily.com.cn

In­ter­net ma­jor LeEco said on Fri­day it has raised 16.8 bil­lion yuan ($2.4 bil­lion) in fund­ing led by Sunac China Hold­ings Ltd, a Hong Konglisted real prop­erty de­vel­oper, in a move to head off its fi­nan­cial woes, ac­cord­ing to caixin me­dia.

The deal, an­nounced in a fil­ing to Shen­zhen Stock Ex­change, is ex­pected to tem­po­rar­ily solve LeEco’s cash crunch and help Sunac find new rev­enue sources, an­a­lysts said.

Sunac will spend 6 bil­lion yuan to buy 8.61 per­cent shares of Leshi In­ter­net In­for­ma­tion and Tech­nol­ogy Corp, the listed arm of LeEco. Once the deal is com­pleted, Sunac will be­come the sec­ond big­gest share­holder of Leshi.

The Shen­zhen-based real es­tate firm will also spend 7.95 bil­lion yuan on 33.5 per­cent shares of Leshi Zhixin Elec­tronic Tech­nol­ogy, the smart TV unit of LeEco and 1 bil­lion yuan on 15 per­cent of the shares of Le Vi­sion Pictures.

LeEco has been fac­ing mount­ing doubts from in­vestors since Novem­ber, af­ter its co-founder and CEO Jia Yuet­ing ad­mit­ted in a pub­lic let­ter that the com­pany was suf­fer­ing from a cash crunch due to over-ex­pan­sion.

Lu Zhen­wang, CEO of the Shang­hai-based Wan­qing

The deal can help Sunac branch into the promis­ing in­ter­net sec­tor.” Lu Zhen­wang, CEO of Wan­qing Con­sul­tancy

Con­sul­tancy, said the deal of­fered a short-term so­lu­tion to LeEco’s cap­i­tal short­age.

“It makes sense for Sunac to pour money into LeEco’s listed arm and TV unit, which are prof­itable busi­nesses and the lat­ter’s core as­sets.

“The deal can help Sunac branch into the promis­ing in­ter­net sec­tor, which can of­fer new rev­enue sources,” Lu said. “But LeEco’s cash­burn­ing elec­tric car off­shoot is still in dire need of money,” he added.

Founded in 2004, LeEco started as a video-stream­ing ser­vice in the mold of Net­flix Inc and di­ver­si­fied into the au­to­mo­bile sec­tor in 2014.

Shen Meng, di­rec­tor of Chan­son & Co, a bou­tique in­vest­ment bank, said the deal was more like LeEco bor­row­ing money from Sunac rather than an in­vest­ment.

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