Freez­ing of as­sets set to de­crease in­vestor con­fi­dence in Leshi unit

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

With 15.9 bil­lion yuan ($2.34 bil­lion) worth of stocks frozen by a court, Chi­nese bil­lion­aire Jia Yuet­ing and his in­ter­net com­pany LeEco are fac­ing a “big­ger than ever” cri­sis.

Leshi In­ter­net In­for­ma­tion and Tech­nol­ogy Corp, the listed video-stream­ing unit of LeEco, said in a fil­ing on Tues­day that un­paid debts prompted a lo­cal court to freeze its founder Jia’s 519 mil­lion shares, around 26 per­cent of Leshi’s stock.

That equals 15.9 bil­lion yuan, given that the mar­ket value of Leshi stands at 61.2 bil­lion yuan, and ac­counts for 99 per­cent of Jia’s hold­ing in Leshi.

The ac­count will re­main frozen for three years. Shang­hai High Peo­ple’s Court an­nounced the rul­ing be­cause LeEco failed to pay in­ter­est due on bank loans taken out to fund its smart­phone busi­ness. Jia used his shares in Leshi as col­lat­eral for the loans.

Lu Zhen­wang, CEO of Shang­hai-based Wan­qing Con­sul­tancy, said al­though the shares were frozen due to Jia’s per­sonal be­hav­ior, it will un­doubt­edly de­crease in­vestors’ con­fi­dence in the Shen­zhen-listed Leshi unit.

“It will have neg­a­tive im­pact on LeEco’s on­go­ing ef­forts to in­te­grate its film busi­ness in Leshi,” Lu said. “This is a big­ger than ever cri­sis for Jia and LeEco.”

Leshi’s stocks have been sus­pended from trad­ing since April. On Tues­day, LeEco con­firmed that an­other 1.24 bil­lion yuan ($183 mil­lion) in as­sets be­long­ing to Jia, his yuan

the to­tal value of LeEco stocks frozen by Shang­hai High Peo­ple’s Court

wife and three af­fil­i­ated com­pa­nies, had been frozen by the court due to un­paid debt.

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

The cash crunch wors­ened in re­cent months, al­though the com­pany man­aged to raise a 16.8 bil­lion yuan in­vest­ment from real es­tate de­vel­oper Sunac China Hold­ings and other in­vestors at the be­gin­ning of the year.

Shen Meng, di­rec­tor of bou­tique in­vest­ment bank Chan­son & Co, said it would be pos­si­ble for Jia to un­freeze his Leshi stocks through ne­go­ti­a­tions with banks.

“But the chances are very low given that LeEco is so weak fi­nan­cially that al­most no bank is will­ing to lend Jia money,” Shen said.

“In fact, Jia’s in­flu­ence is fad­ing, as Sun Hong­bin, chair­man of Sunac, be­comes the real leader of LeEco’s qual­ity as­sets, namely the videostream­ing and smart tele­vi­sion busi­ness,” he added.

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

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