13-month low

CEO pledges to end over-ex­pan­sion and cash burn­ing, fo­cus on brick-and-mor­tar chan­nels

China Daily (USA) - - FRONT PAGE - By MASI masi@chi­nadaily.com.cn Meng Jing con­trib­uted to this story.

Leshi In­ter­net In­for­ma­tion and Tach­nol­ogy’s shares hit a 13-month low on Mon­day.

Leshi In­ter­net In­for­ma­tion and Tech­nol­ogy Corp’s shares hit a 13-month low on Mon­day, as its par­ent com­pany LeEco is fac­ing mount­ing doubts about its cash flow and over-ex­pan­sion ef­forts which could drag down its growth.

The Shen­zhen-listed firm’s shares dropped 4.68 per­cent on Mon­day, mark­ing the fourth straight daily de­cline. Its mar­ket value has de­clined by more than 12 bil­lion yuan ($1.77 bil­lion) in the past four trad­ing days.

Hong Kong-listed firm Cool­pad Group Ltd, in which LeEco holdsmorethan 28 per­cent of shares, also ended with a more than 17 per­cent de­cline in its stocks onMon­day.

The lat­est de­cline came af­ter LeEco founder andCEOJia Yuet­ing ad­mit­ted on Sun­day the firm has prob­lems in sup­ply chain man­age­ment and cap­i­tal is­sues.

“LeEco’s global ex­pan­sion has gone too far, which is putting big pres­sure on our lim­ited cap­i­tal and or­ga­ni­za­tional ca­pac­i­ties,” Jia said in an in­ter­nal let­ter.

LeEco, founded in 2004, started as a video-stream­ing ser­vice provider akin to Net­flix Inc, but it rapidly grew into a firm with a pres­ence in smart­phones, TVs, cloud com­put­ing, sports and elec­tric cars.

Ac­cord­ing to Jia, there will be no more cash burn­ing. In­stead, it will fo­cus on mak­ing prof­its by ef­fec­tively in­te­grat­ing its ex­ist­ing busi­ness and build­ing up its brick-and-mor­tar re­tail chan­nels.

Last month, the firm made its de­but in the United States. Mean­while, it is seek­ing op­por­tu­ni­ties in Rus­sia and In­dia.

Shen Meng, direc­tor of Chan­son & Co, a bou­tique in­vest­ment bank, said Jia’s long let­ter did not ease in­vestor’s doubts. In­stead, it aug­mented their wor­ries that LeEco’s string of prob­lems will af­fect its growth.

“Ap­par­ently, the firm’s core busi­ness is too weak to sup­port its grand am­bi­tion, ” Shen said.

In the let­ter, Jia ac­knowl­edged that LeEco failed to pay its smart­phone sup­pli­ers in time and LeEco’s fi­nanc­ing ca­pac­ity lags be­hind its huge de­sire for fund­ing.

He re­vealed that he had per­son­ally poured 10 bil­lion yuan into its elec­tric car project LeSEE at the ini­tial stage, but the ini­tia­tive de­mands at least 40 to 50 bil­lion yuan in in­vest­ment.

Also, the firm’s cor­po­rate or­ga­ni­za­tion is grow­ing too fast to be ef­fi­ciently gov­erned. It has added 5,000 new em­ploy­ees so far this year, but some of them are not per­form­ing their du­ties prop­erly, partly due to in­ad­e­quate train­ing.

Lu Zhen­wang, chief ex­ec­u­tive of­fi­cer of the Shang­haibased Wan­qing Con­sul­tancy, said it will be highly dif­fi­cult for LeEco to gen­er­ate prof­its from its emerg­ing busi­ness in the short term.

“LeEco’s global ex­pan­sion has gone too far...” Jia Yuet­ing, LeEco founder

PRO­VIDED TO CHINA DAILY

A tech­ni­cian from Cool­pad Group Ltd tells a se­nior cit­i­zen how to use a smart­phone at an in­dus­try expo in Bei­jing.

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