Jia Yueting, founder of LeEco. (Photo/China News Service)
Securities regulator demands firm's ex-chief fulfill due debt obligations
China's securities regulator has ordered the founder of debt-laden internet company LeEco to return to the country before the end of the year to deal with the company's financial woes.
The Beijing branch of the China Securities Regulatory Commission (CSRC) said in a notice late on Monday that Jia Yueting, the controlling shareholder and former chairman of LeEco's listed arm－Leshi Internet Information and Technology Corp, must return to China before Dec 31 to "fulfill his obligations" and protect investors' rights.
The regulator said it had earlier asked Jia to come back to China in September, but since then had not seen any action taken by the LeEco founder to comply.
According to the notice, the firms that Jia controls owe huge debts to the Shenzhen-listed Leshi, which are yet to be returned. "The behavior has seriously hurt the legal rights of the listed firm and the interests of a wide range of investors, with an extremely adverse impact on the society," the notice said.
Earlier this month, Jia was placed on a national list of defaulters, a move taken by Chinese courts to put pressure on people and entities to repay debts.
Information of Jia, including his name and ID number, were disclosed on the defaulter website after he failed to comply with a verdict by Beijing No 3 Intermediate People's Court. He had been ordered to pay Ping An Securities more than 470 million yuan (.7 million).
"Although Jia failed to fulfill his obligations, bearing the moral duties, the calls from the regulator will not bring about actual pressure on the head of the tech conglomerate, and the regulator also has no coercive means to repatriate him," said Shen Meng, director of boutique investment bank Chanson & Co, adding Jia is not the first case.
Dong Dengxin, a finance professor at Wuhan University of Science and Technology, said the probability of Jia returning to the country is low. "I think Jia does not dare to return because he still couldn't pay the huge amounts of debt and dissolve the cash crunch, and will bear legal responsibilities if he comes back."
Jia made his fortune at Leshi, the Shenzhen-listed unit, with a video-streaming service similar to Netflix, but he borrowed heavily against his shares in the company to expand into new ventures, such as smartphones and electronics.
In July, Jia resigned from all his positions at Leshi after having a majority of his shares in Leshi frozen by a local court due to unpaid debt. Jia, who is reported to be based in the United States, is focusing on LeEco's automobile unit and struggling to raise capital to fund a US-based electric car startup Faraday Future.