Media & Gaming

Wish you were here

Why has LeTV boss Jia Yueting been abroad for five months?

Jia Yueting w

Jia: his whereabouts have been the source of much speculation

In 2007 Canton Properties went public on London’s Alternative Investment Market (AIM). This was deemed important enough that when Gordon Brown opened the London Stock Exchange’s Beijing office the following year, Canton Properties’ boss was invited to meet the then prime minister. British hopes of wooing more Chinese listings were snagged, however, when Canton Properties told shareholders that its chairman Keng Wong had gone missing. A court case afterwards in Guangzhou revealed that Wong had committed bank fraud.

Missing person notices look to be an increasingly regular feature in the stock exchange filings of Chinese companies. Agile Property said last month that its chairman had been placed under some sort of house arrest, and it had also lost contact with a second director (see WiC256). The chairman of Wilson Engineering is another of several Chinese tycoons who have disappeared from public view since graftbusters turned their sights on the oil industry last year.

Other listed firms have been affected by unconfirmed reports about key personnel going AWOL. In most cases, the rumours are followed by an official denial which normally fails to arrest a plunge in the share price. Further bad news typically follows, before the company comes clean, admitting that its boss hasn’t been at his desk for a while.

Shareholders of LeTV, one of the country’s leading private entertainment firms, now find themselves grappling with a peculiar version of this scenario.

LeTV’s founder and chairman Jia Yueting left China on a business trip in June. The 41 year-old stayed overseas for five months, despite the fact that his company has been struggling with a slew of regulatory and financial troubles at home. Jia remains contactable, doing media interviews from time to time. But during his absence from headquarters, LeTV has undergone four major trading disruptions which have seen its market value drop by more than 30% or Rmb12.5 billion ($2 billion).

The first difficulties started to emerge in early July as regulators tightened rules on internet broadcasting. LeTV suspended its Shenzhen-listed shares, saying that it was one of seven operators ordered to remove unsanctioned foreign movies and content from its video website.

Two weeks later LeTV rattled investors further with a share-sale plan to raise Rmb4.5 billion in funding. Another trading halt followed in August, as media watchdogs admonished the broadcaster for failing to comply with internet programming rules.

The upshot: LeTV’s internet broadcasting licence was at risk of being revoked.

Then in late October, LeTV again called a trading halt, pending the announcement of “a major event”. The company hasn’t elaborated on what that event might be and trading is yet to be resumed as of this week.

“Investors are all asking what is happening to LeTV,” China Business Journal reports. “Four trading halts and the five-month absence of Jia, both figures are pointing to escalating risks.”

But a company spokesperson countered to China Business Journal that business rivals have been spreading rumours about Jia, including the allegation that he has collateralised his controlling stake in the firm for bank loans. His absence was not a sinister one, the spokesman insisted. “Jia will soon return after he finalises LeTV’s overseas expansion plans. All the allegations will then be proven untrue,” he told the newspaper.

Jia has hardly been hiding, even making a cameo appearance in Hollywood in August. During the Los Angeles premiere of The Expendables 3, a blockbuster co-produced by LeTV, he was spotted with the movie’s lead stars Arnold Schwarzenegger and Sylvester Stallone (decent bodyguards, even if they are now a little long in the tooth). Last month, LeTV also opened an office in Los Angeles and announced a $200 million fund geared towards Hollywood productions.

But are these overseas appointments really weighty enough to keep Jia away from home for so long?

Many analysts are not convinced. Caijing magazine managed to interview Jia last month and confirmed that he has been spending most of his time closer to home, in Hong Kong. “It only takes seven minutes by train from Hong Kong’s border to Shenzhen. Yet still Jia prefers not to return to the mainland,” Caijing observed.

One possibility for Jia’s long road trip is that LeTV has been caught in the crossfire of a high-level power struggle in Beijing, the magazine asserts. According to Caijing, a private equity firm known as Huijin Lifang invested Rmb52 million in LeTV when it was still a startup in 2008. This angel investor was controlled by a certain “Wang Cheng”. Wang is believed to be a pseudonym for the businessman Ling Wancheng, the youngest brother (of five siblings) of Ling Jihua. Ling Jihua was the longtime right-hand man of Hu Jintao, China’s former president. WiC readers may recall a stream of seemingly unconnected gossip from the capital in early 2012 concerning a fatal crash involving a Ferrari and a failed military coup. This was shortly after China’s once-in-a-decade leadership transition and followed Bo Xilai’s arrest (to recap see WiC207). The son of Ling Jihua, the South China Morning Post reported at the time, was killed in a speeding Ferrari along with two half-naked girls. The accident, according to the New York Times, was the game-changer that ruined Ling’s political career, also putting incoming President Xi Jinping in a stronger position in the powerbroking struggle with his predecessor. The SCMP also reported last month that graft-busters are now closing the net around the entire Ling family, and that Ling Zhengce, the eldest brother and a senior official in Shanxi province, was detained in August. Citing unidentified sources, SCMP believes Ling Wancheng is under investigation too.

When asked by Caijing if “Wang Cheng” was indeed one of the powerful Ling siblings, Jia dodged the question, stressing instead that the angel investment by the company Huijin Lifang was a conventional one. “Internet companies don’t want to have anything to do with politics. And LeTV didn’t get any special help from Huijin Lifang,” Jia added.

In another interview with Sina Technology, Jia insisted that LeTV’s success has nothing to do with government connections. “Some even suggested that LeTV doesn’t belong to Jia Yueting but someone else. These allegations are all untrue,” he was quoted as saying. “People are too easily fascinated by political rumours around businessmen.”

So everything’s okay then? Hong Kong’s pro-Beijing newspaper Wenweipo, reported last week that Jia has been diagnosed with thymoma (an uncommon tumor) and has been in Hong Kong for medial treatment. On Wednesday, Jia updated his own weibo, saying that he has undergone a successful operation in Hong Kong and is now back in Beijing receiving further treatment. Jia also promised that he will soon make a public appearance with what he termed LeTV’s “Plan See”, without further elaboration.

For investors concerned with LeTV’s financial health, CBN suggested that the progress of the media group’s planned Rmb4.5 billion share sale was a good indicator. The placement had been on hold for more than three months.

In comparison, a fundraising plan by fellow media firm Huayi Brothers seems likely to have little difficulty in obtaining regulatory approval or raising cash. Huayi said last week it will sell shares worth $588 million to a handful of investors including Alibaba and Tencent. It marks a rare instance in which the internet archrivals are co-investors, signalling that Huayi has pulled off a strategic alliance of some significance. It has also brought in investment from powerful financial firms including Ping An Insurance and Citic Securities.

Jia’s firm – which is looking to raise a similar sum – will be hard-pressed to bring in investment partners with similar cachet.

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