Shares in LeEco group companies plunge after founder reveals cash crunch
Technology giant suffering from expanding too fast and in too many directions, says Jia Yueting
Chinese technology giant LeEco’s shares plummetted on Monday after founder Jia Yueting said the company is facing a shortage of cash and suffering from rapid expansion in too many directions.
“LeEco’s expansion is too fast, and that has caused great challenges to our organisational capacities and fundraising,” Jia said in a lengthy letter to employees on Sunday.
The company, which has invested in several high-tech products ranging from electric cars to smartphones, has been burning cash to support its global expansion, which had outpaced its funds and resources, he said.
LeEco acquired US television manufacturer Vizio in a US$2 billion (HK$15.5 billion) deal in August to aid its expansion plans in the North American market. It has also made huge investment in its electric cars, both under its own brand LeSee and in partnership with US carmaker Faraday Future.
Jia said the car business’ investment alone has surpassed 10 billion yuan (HK$11.4 billion), and consequently he had run out of enough cash to support LeEco. The automobile unit in September raised more than US$1.08 billion from a consortium of Chinese investors.
“We blindly sped ahead, and our cash demand ballooned. We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited,” said Jia.