Court freezes part of LeEco founder assets

Updated 2017-07-05 09:29:58 China Daily
Jia Yueting, LeEco founder.

Jia Yueting, LeEco founder.

Cash-strapped Chinese internet company LeEco is facing another blow, with 1.24 billion yuan (3 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 LeEco 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 businesses, 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 cash-burning 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 video-streaming 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.

Also in the News

Nicole Kidman Recalls Oscar Glory: Loneliest Time
Showbiz2016/06/16 13:58September 23 2017 06:23:17

Nicole Kidman Recalls Oscar Glory: Loneliest Time

Attending Shanghai International Film Festival, Nicole Kidman talks about her role in "Grace of Monaco".

Labor Day Travel Peak Starts
Also in the News2014/05/01 12:16September 23 2017 06:23:17

Labor Day Travel Peak Starts

Johnny Depp Delivers a Speech 'Evolve the Future' in 'Transcendence'
Also in the News2014/04/18 13:18September 23 2017 06:23:17

Johnny Depp Delivers a Speech 'Evolve the Future' in 'Transcendence'

Hollywood star Johnny Depp's speech in the upcoming new film "Transcendence" has been disclosed on Friday, April 11th.

Most Watched

News:
China World Business Sports Showbiz Audio
Video:
C4 My Chinese Life The Sound Stage China Revealed Showbiz Video Travel Video
Photos:
China World Fun Travel Entertainment Sports
Travel:
Beijing Shanghai Guangzhou
Lifestyle:
Live Music Opera & Classical Movies Traditional Shows Exhibitions
Learn Chinese:
Chinese Studio Living Chinese Everyday Chinese Just For Fun Chinese Culture Buzzwords