Leshi subsidiary raises 3 billion yuan investment

Updated 2018-04-19 14:44:59

Technology giants, including Tencent and JD.com, plan to invest 3 billion yuan (US6 million) in Leshi's smart TV and online video business to relieve its capital shortage, the Shenzhen-listed firm said today.

Leshi, or Leshi Internet Information and Technology, is expected to "re-activate" its smart TV business with the new investment. It has been facing "capital shortage and reputation damage" since the end of 2016, as its parent company LeEco ended up heavily in debt because of aggressive business expansion.

Tencent and JD.com will each invest 300 million yuan, alongside equal investments from TCL Corp and Suning.com, taking a 2.55 percent stake each of New Leshi Zhixin, Leshi's smart TV and online video business, the company said in a statement to the Shenzhen Stock Exchange today.

Shares in Leshi has surged 10 percent so far today.

With the 3 billion yuan investment, Leshi's holding in New Leshi Zhixin will be diluted to 33.46 percent from the current 40.1 percent, but it will remain the biggest shareholder.

Jia Yueting, Leshi's founder and former chairman, expanded LeEco's business from online video to smartphones and even electric cars as he hoped to establish China's Netflix-to-Tesla contender.

But LeEco ran into a cash crunch in 2016 and 2017 after expanding too fast. Jia left China to continue developing the electric car business in the United States.

Sun Hongbin, Sunac China's chairman, took Jia's position after Sunac invested a total of 17.1 billion yuan in Leshi and LeEco.

Sunac China has written off 97 percent of its investment in Leshi, amounting to a total loss of 16.6 billion yuan. The write-off was akin to "the pain of chopping off a head," Sun said last month, before resigning as chairman after only eight months in office.

But Sun still has a "positive view about the development prospects of large-screen operations and content in the long run," referring to the value of Leshi's smart TV business.

Leshi reported a loss of 11.6 billion yuan in 2017.

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