Troubled LeEco lands 16.8 billion yuan lifeline after selling stakes in video, movie assets to Sunac China

PUBLISHED : Friday, 13 January, 2017, 7:17pm
UPDATED : Friday, 13 January, 2017, 10:49pm

LeEco, the cash-starved business run by Chinese entrepreneur Jia Yueting, has received 16.8 billion yuan in funding and investments from real estate developer Sunac China Holdings and other investors after selling its stakes in its video streaming and movie studio businesses.

Sunac, which achieved contract sales of more than 150 billion yuan last year, announced it has agreed to acquire an 8.61 per cent stake in Leshi Internet Information & Technology, the video streaming business, for 6.04 billion yuan, as well as a 15 per cent stake in LeEco’s film production unit, Le Vision Pictures, for 1.05 billion yuan, according to a filing to the Hong Kong stock exchange on Friday.

Sunac also agreed to acquire a 33.5 per cent stake in LeEco’s television hardware subsidiary Leshi Zhixin Electronic Technology for 7.95 billion yuan, bringing the total amount invested by Sunac to 15 billion yuan.

“The company will consider using a small amount of resources to strategically invest in companies with a competitive edge in other industries with a growth potential without affecting the sustainable and healthy development of its property business,” chairman Sun Hongbin said in Sunac’s statement.

“The company believes that the investment will bring a better return on capital for the company and will have greater room for cooperation with Leshi in the field of industrial real estate, and will also bring continued benefits to the further growth of the company’s property business.”

Leshi Zhixin widened its net losses to 730.56 million for the year ended December 2015, from 385.79 million in 2014, the statement said. But Leshi Internet reported that net profit rose 81 per cent to 199.02 million in 2015 from a year earlier, while Le Vision Pictures jumped 104.8 per cent to 128.16 million yuan in 2015 from the previous year.

LeEco received a further 1.8 billion yuan from other investors.

LeEco and Sunac will hold a joint press conference in Beijing on Sunday.

In late December, LeEco said in a filing that it had signed a strategic co-operation agreement worth 10 billion yuan, and received an unspecified sum of money as a “gesture of sincerity”.

The 16.8 billion yuan investment is the latest indication that LeEco is desperately in need of cash after it ran into financial trouble in November.

In November, Jia said in an internal letter to employees that the company was rapidly running out of money and admitted it had expanded faster than it could raise external funding, adding its capital structure was “weak”. One of its most-ambitious projects is the LeSEE Pro self-driving electric car.

Concerns overs LeEco’s capital woes have since mounted further, with mainland Chinese media reports claiming the company had defaulted on payments to vendors and suppliers.

Last week, Zhejiang Haosheng Electronic Technology, a Chinese vendor which makes speakers used in smartphones, sued LeEco’s mobile phone unit LeMobile to recover 51.74 million yuan in unpaid bills.

LeMobile signed a November 16 contract to buy speakers from Haosheng, agreeing to pay the vendor 11.02 million yuan and US$5.93 million in nine instalments, at a 6 per cent annualised interest rate. The first instalment was missed on December 11 last year, Haosheng said.

AAC Technologies Holdings, which manufactures and distributions miniaturised acoustic components, Taiwan’s Compal Electronics, and electronics experts Truly International Holdings have also made public disclosures of debts owed by LeEco’s subsidiaries, according to a January 5 report by website.

But Compal also said in November LeMobile had already rectified its arrears, according to the report.

LeEco has undergone several management restructures of late – most notably the appointment of Anthony Gao Jun to replace Mok Chui-tin as the head of its Asia-Pacific operations.

It laid off over 10 per cent of staff at its LeSports video streaming subsidiary, and retrenched 60 employees in its Hong Kong office in December as it seeks to streamline operations.

Shares were suspended in its Shenzhen-listed arm Leshi Internet Information and Technology Corp on December 7, after market watchers suggested that margin calls had been triggered when its stock price fell to an intraday low of 35.01 yuan.