Court freezes part of LeEco founder as­sets

China Daily (Hong Kong) - - BUSINESS - By MA SI masi@chi­

Cash-strapped Chi­nese in­ter­net com­pany LeEco is fac­ing another blow, with 1.24 bil­lion yuan ($183 mil­lion) in as­sets be­long­ing to its founder Jia Yuet­ing and three af­fil­i­ated com­pa­nies be­ing frozen by a court.

The in­ci­dent high­lights that LeEco’s cash crunch is far worse than pre­vi­ously ex­pected and is likely to fur­ther weigh on the busi­ness of its listed video-stream­ing unit Leshi In­ter­net In­for­ma­tion and Tech­nol­ogy Corp, an­a­lysts said on Tues­day.

Shang­hai High Peo­ple’s Court made the rul­ing af­ter a China Mer­chants Bank branch ap­plied for a prop­erty preser­va­tion or­der in June to block the 1.24 bil­lion yuan of as­sets owned by Jia, his wife and three af­fil­i­ated com­pa­nies.

The ac­tion came af­ter LeE- co failed to pay in­ter­est due on bank loans taken out to fund its smart­phone busi­ness, China Mer­chants Bank said.

LeEco has been wrestling with a fi­nan­cial squeeze since last Novem­ber, with Jia ad­mit­ting pub­licly that its ex­pan­sion into smart­phone, au­to­mo­bile, cloud and in­ter­net fi­nance busi­ness had been a step too far.

Shen Meng, di­rec­tor of bou­tique in­vest­ment bank Chan­son & Co, said the lat­est in­ci­dent un­der­lines that LeEco’s cash flow prob­lems are wors­en­ing, de­spite a 16.8 bil­lion yuan in­vest­ment from real es­tate de­vel­oper Sunac China Hold­ings and other in­vestors at the be­gin­ning of the year.

“The cash gap is far big­ger than most peo­ple had ex­pected,” Shen said.

“Most of Sunac’s money goes to LeEco’s listed video-stream­ing and smart tele­vi­sion busi- nesses, which are con­sid­ered by in­vestors as its qual­ity as­sets. But it turns out that even these busi­nesses are now fi­nan­cially af­fected by LeEco’s over­ex­pan­sion into un­listed cash­burn­ing units in­clud­ing au­to­mo­bile and smart­phones,” Shen said.

Mean­while, Jia stepped down as the le­gal rep­re­sen­ta­tive of Leshi Hold­ing (Bei­jing) Co Ltd, the par­ent com­pany of LeEco’s sprawl­ing busi­ness units, in June, data from Na­tional En­ter­prise Credit In­for­ma­tion Pub­lic­ity Sys­tem show.

Jia was re­placed in June by Wu Meng, who has been work­ing at LeEco for a long time and held a num­ber of se­nior po­si­tions, though Jia re­mains as the ex­ec­u­tive di­rec­tor.

LeEco said the reshuf­fle is meant to free Jia from the bur­den of daily tasks and al­low him to fo­cus more on core busi­nesses in­clud­ing elec­tric cars.

Lu Zhen­wang, CEO of Shang­hai-based Wan­qing Con­sul­tancy, said Jia’s in­flu­ence is fad­ing, as Sunac plans to sep­a­rate LeEco’s listed video-stream­ing unit from its money-los­ing au­to­mo­bile and smart­phone busi­nesses.

“But these units are in fact highly linked. The videostream­ing busi­ness will be weighed down fur­ther, as now it is next to im­pos­si­ble for Jia to find in­vestors to back his elec­tric car plan,” Lu said.

In May, Jia stepped down as chief ex­ec­u­tive of Shen­zhen-listed Leshi In­ter­net In­for­ma­tion and Tech­nol­ogy Corp, al­though he re­mains its chair­man.

Jia Yuet­ing, LeEco founder

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