LeSports refutes media reports claiming key investors reduced stakes
Live-broadcasting platform LeSports has refuted media reports that investors Wanda Group and Jack Ma’s Yunfeng Capital had reduced their stakes in the company following the financial woes faced by parent LeEco, claiming instead that the holdings were diluted as a result of its second round of financing.
Last week, state-owned publication The Paper reported that Wanda Group had withdrawn its stake in LeSports entirely at the end of 2015, while other investors such as Yunfeng Capital and Beijing’s Prometheus Capital drastically decreased their stakes in November. The report cited LeSports business information records.
According to the report, Yunfeng Capital decreased its stake from 10 per cent to 3 per cent on November 24, the same month that LeEco chief executive Jia Yueting announced in an internal letter to employees that the company was facing an impending cash crunch.
Real estate developer Wanda Group, which led LeSports’ US$122.9 million Series A funding round and owned an 8 per cent stake in LeSports, purportedly withdrew entirely on December 30, 2015, less than a year after LeSports closed its first round of financing.
Beijing’s Prometheus Capital reduced its stake from 11 per cent to just 4 per cent in November.
LeSports chief executive Lei Zhenjian said on Saturday that new investors had come on board during its second round of financing, thus leading to a dilution of shares for investors such as Prometheus and Yunfeng Capital, which is controlled by Ma, executive chairman of Alibaba which owns the South China Morning Post.
LeSports had secured US$1.2 billion in a Series B funding round in March last year.
Lei also stated that Wanda Group had sold its stake to Prometheus Capital at the end of 2015. Wanda Group declined to comment.
The news of a stake reduction by Yunfeng Capital and Prometheus Capital came amid a string of problems surrounding cash-starved LeEco.
Following Jia’s letter in November, the company was plagued by reports that its subsidiaries had defaulted on vendors and suppliers.
In January several vendors, including Zhejiang Haosheng Electronic Technology, sued LeEco’s mobile phone unit LeMobile in an effort to recover unpaid bills amounting to 51.74 million yuan (US$7.51 million).
Reports that LeSports had failed to make payments on time for its rights to broadcast the English Premier League (EPL) on the mainland also surfaced in December last year. The company reportedly made a last-minute partial payment to the broadcaster and worked out a repayment plan that would let it continue broadcasting EPL matches.
Last week, the Asian Football Confederation (AFC) announced that it would be terminating its contract with LeSports. Reports by Bloomberg and Reuters, citing unnamed sources, said that the contract was terminated after LeSports defaulted on its payments to AFC.
LeSports also cut 10 per cent of its staff in December last year as it looked to improve efficiency in its operations. LeEco has reduced its India staff from 350 to about 80 as it downsized operations, according a report by TechCrunch on Friday, citing a company spokesman which it did not identify. LeEco said separately in a company statement last week that it remains committed to the Indian market.
In January, real estate firm Sunac extended a lifeline to LeEco, providing 15 billion yuan in the form of fresh funding and investments in LeEco’s video streaming business, television hardware subsidiary and its film production unit.