The embattled founder of Chinese conglomerate LeEco, Jia Yueting, has told one of the company’s subsidiaries that he is no longer able to offer it financial support as he had previously promised, in a further blow to the image of the once high-flying internet tycoon.
In a statement to the Shenzhen Stock Exchange, Le.com, one of LeEco’s main subsidiaries, said it had received a letter from Jia saying he was not in a position to keep a promise he had made in 2015 to lend the money raised from his sale of shares in Le.com back to the company, interest free.
“I have received notices from the board of Le.com that reminded me to fulfil my promise to either keep lending with the money I got from selling the shares in the company, or to purchase more shares in the company,” Jia was quoted as saying in the letter.
“However, due to a worsening cash crunch faced by myself and the non-listed firms under LeEco since the second half of 2016, I have used all the proceeds I received from selling the shares to repay the debt owed by the non-listed arms and myself.
“I thus now have no ability to fulfil my promise of lending to the company, and neither am I able to buy more shares.”
Although Jia is not in breach of any rules by not offering to lend money, his decision is a blow to his prestige. He has already been forced to step down from all his executive posts at the group he founded, and whose rapid growth he oversaw from its early days as a video streaming service to a conglomerate with interests in smartphones and electric vehicles.
LeEco ran into financial strife at the end of 2016, suffering from a severe capital crunch which Jia admitted had been caused by an over-aggressive expansion plan.
Le.com, or Leshi Internet Information & Technology Corp, a streaming service and electronics manufacturer, used to be seen as China’s answer to Netflix. According to its exchange filings, Jia had made around 4.7 billion yuan (US$707.7 million) from selling his shares in the company.
Jia said in an interview with a Chinese media outlet this month that he had around 40 billion yuan in assets that had been frozen by Chinese authorities because of unpaid debts, while group parent company LeEco’s total debt was about 20 billion yuan.
China’s securities regulator, the China Securities Regulatory Commission (CSRC), has already begun investigations into the 730 million yuan initial public share offer by Le.com in 2010.
At least two former members of CSRC’s initial public offering review committee are believed to have been detained by police, and two lawyers it had previously hired to review and approve IPOs on the start-up board ChiNext are now under investigation for alleged dereliction in assessing the listing application by Le.com, according to two sources close to the CSRC.