Caixin
Jan 23, 2018 07:10 PM
BUSINESS & TECH

Troubled LeEco Unit to Resume Trading

Beijing's LeEco headquarters is seen. The stock market and shareholders are expecting the stock price of the company's Shenzhen-listed subsidiary to plunge sharply when shares resume trading this week. Photo: IC
Beijing's LeEco headquarters is seen. The stock market and shareholders are expecting the stock price of the company's Shenzhen-listed subsidiary to plunge sharply when shares resume trading this week. Photo: IC

The Shenzhen-listed subsidiary of cash-strapped LeEco will resume trading Wednesday according to a filing the company made to the Shenzhen Stock Exchange, nine months after it halted its shares — but the controversial unit remains mired in financial difficulties.

The unit, Leshi Internet Information & Technology Corp., reported a debt burden of nearly 9.3 billion yuan ($1.45 billion) at the end of 2017. On Tuesday, it forecast a net loss for 2017, significantly worse than its profit of 555 million yuan in 2016.

The company warned that it will run into mounting trouble if no new cash begins flowing in.

The market and shareholders are projecting its share price will plunge after trading resumes, and several mutual funds have internally downgraded its valuation to 10% of its previous size, Caixin has learned.

When asked about whether it would delist, Leshi said through statement, “There are all types of possibilities.”

LeEco’s struggles have grown since 2016, after founder Jia Yueting first admitted that it had expanded too quickly into a number of new areas outside the company’s core online video service, like smartphones and new-energy cars. Since then, many of its suppliers and business partners have complained of unpaid bills, forcing the company to seek new funds.

Sun Hongbin, chairman of property giant Sunac China Holdings Ltd., the white knight that came in with a 15-billion-yuan investment in Leshi and other LeEco affiliates, admitted Tuesday it had underestimated LeEco’s debt crisis.

Founder Jia has stepped down from his posts as legal representative and chairman of Leshi, and is now outside China, mostly involved in the electric car startup Faraday Future. He “entrusted” his wife and brother to carry out tasks on his behalf, including asset disposal at the debt-ridden company.

Leshi said that it is owed 7.53 billion yuan by companies connected to Jia and LeEco, thus making it difficult to repay its own debt. It is pushing forward a plan to get its receivables back by claiming Jia’s equity in several auto companies, including Faraday Future.

Leshi complained Tuesday that Jia and related parties used assets worth 1.4 billion yuan as collateral — contradicting the figure of 10 billion yuan his wife quoted on her Twitter-like Sina Weibo account earlier this month.

The story has been updated to reflect that Leshi will indeed resume trading Wednesday.

Contact reporter Coco Feng (renkefeng@caixin.com)

Correction: An earlier version of this story misstated the number of months that trading of Leshi shares had been halted.

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