July 6, 2017 4:39:53 pm
LeEco Chairman Jia Yueting asked for more time to repay debt and realise his ambitions of disrupting the automobile industry, days after a Chinese court froze billions of dollars in assets controlled by him and associated companies.
The increasingly beleaguered tycoon, who built his sprawling tech conglomerate on a Netflix-like streaming service and smart TVs, said in a Weibo post he’s decided to devote his time to developing a futuristic electric car. He said he stepped down from his role as the chief executive officer of LeEco’s main listed company to focus on Faraday Future, the US-based startup now trying to raise funds to bring the FF91 electric car to fruition.
“I sincerely ask everyone to give LeEco a little more time, to give LeEco’s car business a little more time,” Jia said. “We’ll repay our debts to financial institutions, suppliers and everyone else.” Jia’s grip on LeEco, which he once portrayed as superior to Tesla Inc. and Apple Inc., is slipping after expensive forays into cars and smartphones that stretched its balance sheet. The entrepreneur told shareholders last week the cash shortage afflicting the conglomerate had worsened in past months, accepting blame for pushing too fast into those costly areas.
LeEco has slashed costs and staff since last year and considered asset sales to address its cash crunch. But this week, a Chinese court ordered a freeze on 1.24 billion yuan ($182 million) worth of assets held by three affiliates of the company, Jia, and his wife, according to the Xinhua News Agency. The Shanghai High People’s Court’s ruling came after LeEco failed to pay interest due on loans despite several requests for repayment, prompting a Shanghai branch of creditor China Merchants Bank Co to seek a property preservation order.
LeEco’s main listed entity, Leshi Internet Information & Technology Corp, then issued a statement saying 519.1 million shares had been frozen by the same court as of July 3: a holding worth over $2.3 billion based on its last closing price. The shares frozen amounted to 99 percent of equity held by Jia and an associated firm in Leshi, which remains suspended from trade.
It’s unclear where Faraday Future stands with the FF91, a prototype of which was unveiled with much fanfare in January in Las Vegas. The company claimed at the time it could go from zero to 60 miles per hour in 2.39 seconds, outstripping Tesla’s Model S; Tesla upgraded its software and beat the feat 15 days later.
Construction on Faraday’s Nevada factory ground to a halt at one point in 2016 after the building contractor claimed payments had stopped. At least two other suppliers, including a car seat maker and media services provider, took legal action to demand Faraday pay its debts. Jia on Thursday didn’t mention LeSee, a separate electric car being developed by LeEco itself. While Jia’s a backer of Faraday Future, he said LeEco doesn’t own any shares in the carmaker.
“LeEco’s car business is sticking with its strategy, and no matter what the obstacles, they won’t detract from our dream to revolutionise the industry,” he said in his post.
The tech conglomerate still faces significant debt, Jia told shareholders in Beijing last week. The company last year expected 9 billion yuan to be enough to solve its funding issues, and raised 9.7 billion yuan, Jia said, according to a transcript of the event. Instead, he and the company jointly paid off about 15 billion yuan in debt that year. Several suppliers to LeEco’s sports and hardware businesses in the US, Hong Kong, India and China have taken the company’s units to court over allegations of unpaid bills.
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