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Billionaire LeEco founder turns to cars as debtors close in
[BEIJING] LeEco Chairman Jia Yueting asked for more time to repay debt and realize his ambitions of disrupting the automobile industry, days after a Chinese court froze billions of dollars in assets he controlled.
The increasingly beleaguered tycoon, who built his sprawling tech conglomerate on a Netflix-like streaming service and smart TVs, on Thursday resigned as chairman of his main listed company in favor of leading LeEco's fledgling automobiles division.
The move allows Mr Jia to devote his time to cars and in particular to Faraday Future, the US-based startup he personally backs that's trying to raise funds to bring the FF91 electric car to fruition.
Mr Jia, who had quit as chief executive officer of TV and media giant Leshi Internet Information & Technology, will now step down from the board, the company said in an exchange filing.
Mr Jia's grip on LeEco itself, which he once portrayed as superior to Tesla and Apple, has slipped 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 areas.
"I sincerely ask everyone to give LeEco a little more time, to give LeEco's car business a little more time," Mr Jia said in a Weibo post Thursday.
"We'll repay our debts to financial institutions, suppliers and everyone else."
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 (S$252.11 million) worth of assets held by three affiliates of the company, Mr 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 to seek a property preservation order.
LeEco's main listed entity, Leshi, then issued a statement saying 519.1 million shares had been frozen by the same court as of July 3: a holding worth over US$2.3 billion based on its last closing price.
The shares frozen amounted to 99 per cent of equity held by Mr Jia and an associated firm in Leshi, which remains suspended from trade. After Mr Jia departs, Sunac China Holdings Ltd. Chairman Sun Hongbin - whose company bought a substantial stake in LeEco from Mr Jia this year - will join the board.
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.
Mr Jia will now assume chairmanship of LeEco's auto division. In his blogpost, he didn't mention LeSee, a separate electric car being developed by the unit. While Mr 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, Mr 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, Mr 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.