“I will shoulder all the responsibility for the challenges LeEco is facing now, and will stay accountable for the company’s employees, users, clients and investors,” Jia Yueting, LeEco’s founder, said on his weibo in July last year, when he resigned from the tech conglomerate he founded in 2004 to focus on developing all-electric smart cars.
But Jia’s words now ring hollow.
After failing to make good on his debts, the high-flying tech boss was ordered by the China Securities Regulatory Commission on December 26 to return to China by the end of 2017 to sort out his financial woes. The official news agency Xinhua has also weighed in in an unusually high-profile manner, publishing three articles in as many days which questioned Jia’s whereabouts and LeEco’s financial health.
On December 31, Jia’s actress wife Gan Wei indicated that she had already returned to China as demanded, tagging Beijing Capital International Airport as her location on her weibo.
The problem is she was flying home alone. “The fundraising for Faraday Future in the United States is making significant progress and there are many tasks I need to push forward in order to ensure the production and timely delivery of the FF91,” Jia said on his own weibo, referring to his electric car venture in Los Angeles which is bankrolled by various pledges of his holdings in other businesses (see WiC391).
With his assets frozen, Sina Finance reckons Jia would have difficulty leaving China again to pursue his dream for Faraday Future. He’s therefore authorised his wife and elder brother to act on his behalf in dealing with creditors.
His action has won him few fans (local media are debating whether he will be charged with a criminal offence) although onlookers are generally impressed with Gan’s return. Some even compared her to Madam Soong Mei-ling, wife of Chiang Kai-shek, who went to America alone in 1943 to help the Generalissimo raise war funds.
Indeed, since LeEco’s unravelling, Gan has earned herself the monicker of “China’s Best Wife” for standing by Jia, who was placed on a national list of defaulters after failing to comply with a court order to pay back Rmb470 million to Ping An Securities last month (see WiC363).
The public shaming implies that Jia could be subject to a variety of penalties including travel bans, restrictions on stays at high-end hotels and a block on his children attending private schools.
So far there have been few signs to suggest that Jia will be able to keep his company afloat.
One of its Hong Kong units, LE Corporation, filed an application to wind up its operations before Christmas, with many in the territory worrying that its affiliate LeSports HK would have to pull the plug as well on its broadcasts of English Premier League football and NBA games.
Worse, LeEco’s woes appears to be too weighty for its white knight Sunac China. The Tianjin-based property developer injected Rmb15 billion ($769.2 billion) into the precarious company at the beginning of 2017.
Since provisioning Rmb1.11 billion for losses at Leshi in June, Sunac – which is likewise highly-leveraged as a consequence of its own acquisition spree – has been busy recapitalising itself. Following a $516 million stock sale in July and $1 billion bond issuance in August, Sunac proposed another share placement last month. A request for new project financing from China Huarong, the state-owned agency that invests in bad debts, was also rejected recently, according to Bloomberg.
“Jia is one of the few entrepreneurs in China with entrepreneurial spirit,” said Sunac’s chairman Sun Hongbin at the time of his widely quizzed bailout. Both men hail from the northern province of Shanxi. But Sun added his pity. “He has truly failed. He really couldn’t bring the money home,” said Sun, shedding tears at a results announcement in Hong Kong in September.
Sun has vowed to turn LeEco around. As the second largest shareholder, Sunac also appointed its senior risk management officer as Leshi’s general manager last month.
Thanks to a protracted trading halt since April last year, Leshi is still the fifth largest company on Shenzhen’s ChiNext bourse with a market capitalisation of a little over Rmb61 billion. The suspension was supposed to allow Leshi to complete its integration of Le Vision Pictures, an affiliated film production house acquired two years ago via a rights issue to 44 investors, including director Zhang Yimou and actor Huang Xiaoming.
Stuck in limbo since then, LeEco is looking more and more like a slow-motion car wreck for all who put any money into it.
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