LeEco Chairman: Cash Crunch “Far Worse Than Expected”
Chinese OEM LeEco is facing a serious financial crisis. Its chairman, Jia Yueting, said on Wednesday that the company’s cash crunch is “far worse than expected.” LeEco is struggling to be fully operational despite financial aid from other companies as the company is still trying to recover after allegedly “expanding at an unprecedented rate”. It appears that LeEco wanted too much too fast, and now has to face the consequences.
LeEco might have not showed us its quite financially smart, though it certainly looked quite ambitious a few months back. After taking the Chinese market by storm, LeEco tried to tackle the American and Indian markets unsuccessfully. Earlier this year, the Chinese property developer Sunac agreed to invest 15 billion yuan ($2.21 billion) including 9 billion yuan into LeEco’s non-listed entities. Unfortunately for the company, that didn’t help much.
“We had thought some 9 billion yuan for the non-listed units would have been able to solve all the problems, the result obviously did not meet our expectations, (…) Since October, we took some measures and made some mistakes, but LeEco’s non-listed units’ finances got tighter. This is what we discovered over two-to-three months.”
Mr. Jia highlighted some moves that the company is planning to take to ease the crunch. LeEco is going to consolidate its non-listed units in the next two-three months. Additionally, the company will include additional funding for its troubled car unit, which has been a major source of its money problems. Mr. Jua also said that hosting to repay its debts instead of refinancing operations had hurt the company’s ability to get on track.
Last year, the company raised $1.08 billion to build an electric car, which was announced in April. The Chinese company plans to double down on its TV/online video offerings, which are certainly where its strengths reside — the firm was once known as LeTV, and it hosts a large and successful online video service that they attempted to leverage in their smartphone ambitions.