Leshi picks new board without its founder, as picketing debtors disrupt shareholders’ meeting

PUBLISHED : Monday, 17 July, 2017, 7:01pm
UPDATED : Monday, 17 July, 2017, 11:00pm

Leshi Internet Information & Technology Corp.’s shareholders installed new members to their company’s management board on Monday, trying to sever founder Jia Yueting’s management involvement or boardroom control of the cash-starved video streaming service.

Sun Hongbin, the Shanxi tycoon who poured 15 billion yuan (US$2.2 billion) to bail out Jia’s LeEco group of companies, is very likely to appoint as chairman of Leshi’s board, according to a shareholder who attended the company’s shareholder meeting on Monday in Beijing.

The new board marks the end of the road for Jia, an entrepreneur who expanded his video streaming business into what he called an ecosystem of seemingly unrelated businesses built around mobile internet, comprising smartphones, television sets, movie production and even a self-driving electric sports car.

Jia’s companies under the LeEco Group chalked up a large amount of debt, forcing the companies to fight back talk of cash crunch, and money owed to myriad vendors and suppliers, for the better part of a year. In January, Sun -- he hails from Shanxi province, just like Jia -- swooped in with a cash injection, in the process taking control of stakes in three of LeEco’s subsidiaries in movies, smart TVs and internet businesses.

Still, the cash injection hadn’t been the salve to all of LeEco’s cash woes. At its shareholders meeting, two dozen debtors held a demonstration demanding collection on money owed to them.

Chanting “Jia, giving our money back, LeEco giving our money back”, LeEco suppliers who’re seeking to recover 60 million yuan from LeEco stormed the shareholders’ meeting, only to be informed that the founder was out of China.

“Jia is in the United States, working to get more financing,” said Zhao Lei, a general manager at LeEco, who was sent at the meeting venue to calm down the angry suppliers. “We don’t know when he will return.” Zhao pointed out that the money was owed by LeEco, and that the protestors had crashed a LeShi meeting, as he sought to distinguish between the two.

The meeting, held at a five-star hotel in Beijing’s central business district was the first since Jia announced he would step down as chairman and exiting from the board earlier this month.

Several bodyguards and hotel staff blocked at the entrance of the meeting room, trying to stop the crowd from crashing in. The standoff lasted for about 40 minutes till the suppliers were told the meeting was eventually called off.

One shareholder who was in the meeting room confirmed that Sunac’s Sun was there and the meeting lasted for about 10 minutes.

According to him, shareholders were asked to vote to approve the new board members, comprising Sunac’s founder Sun, Leshi CEO Liang Jun and LeTV CEO Zhangzhao, who were appointed as Leshi’s new directors, the same day Jia announced his stepping down as chairman.

“I see a rosy future for Leshi, despite the challenges,” Sun was quoted as saying during the meeting.

“The new Leshi is rather stable with a new team and new culture. Money is not a problem,” he said. But he admitted the connected transactions between Leshi and LeEco’s other affiliates remain a challenge.

Hu Jiaming, a Shanghai-based analyst with Capital Securities, said the listed Leshi won’t be immune from the cash woes of privately held LeEco. “Leshi’s own business doesn’t perform well,” he said in an earlier interview with the Post.

Leshi’s first half loss is estimated ay between 636.7 million yuan and 641.7 million yuan, swing from a profit of 284.4 million yuan in the same period last year, according to a Friday filing to the Shenzhen stock exchange. The company attributed the loss to declines in customer loyalty, advertising revenue, terminal sales and membership fees.