Cash Crunch at Chinese Billionaire's LeEco Empire Worsens

  • Jia Yueting blames inexperience in the hardware business
  • LeEco underestimated the cash-flow risks involed, Jia says

Jia Yueting

Photographer: David Paul Morris/Bloomberg

Chinese billionaire Jia Yueting told investors the cash crunch afflicting his LeEco technology empire has worsened in recent months, thanks to expensive forays into cars and smartphones.

Jia, who built his fortune on a Netflix-like service now operated by Leshi Internet Information & Technology Corp., in past years branched out into the development of electric vehicles and mobile devices. But the self-made tycoon told Leshi’s annual meeting Wednesday that LeEco had over-extended itself. It realized the extent of the shortfall in the past two to three months, well after its cash-flow issues became public in October.

“Since last October we’ve taken a series of measures and made some mistakes,” Jia told shareholders, according to a partial Q&A transcript that Leshi provided. “The unlisted side of LeEco faces a worse cash crunch than when the crisis began.”

Jia is struggling to revitalize a sprawling conglomerate he once portrayed as superior to Tesla Inc. and Apple Inc. It’s been forced to slash costs and lay off employees and has mentioned plans to sell assets to address its cash crunch. It also secured capital from strategic investors including $2.2 billion from real estate developer Sunac China Holdings Ltd.

Read more: Outspoken Billionaire Works to Salvage His Tech Empire in China

LeEco still faces debt, Jia told the room of fewer than 50 shareholders sprinkled around a Beijing ballroom. The company last year expected 9 billion yuan ($1.3 billion) to be enough to solve its funding issues, and raised 9.7 billion yuan, Jia said, according to the transcript. Instead, he and the company jointly paid off about 15 billion yuan in debt that year.

Cars were the single most important factor in LeEco’s cash problems, Jia said in the transcript. “It imposed great pressure on our capital and resources,” he said. “The other factor was smartphones, even though we performed miracles in that business.”

It’s unclear whether Jia addressed demands for his companies to pay off debts that have been detailed in lawsuits. Several suppliers to LeEco’s sports and hardware businesses in the U.S., Hong Kong, India and China have taken the company’s units to court over allegations of unpaid bills. Separately, ride-hailing service Yidao Yongche said on Wednesday Leshi was no longer its controlling shareholder, without elaborating.

Jia accepted responsibility for pushing LeEco too rapidly into new realms.

“We didn’t prepare adequate capital,” Jia was cited as saying in the transcript. “That reflected our inexperience, as an Internet company, in dealing with cash-flow risks in the hardware business.”

But he added: “I believe LeEco can succeed in all of its seven divisions. Everyone will gradually see the big moves we have planned.”

— With assistance by David Ramli, and Yuan Gao

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE