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Chinese Tech Giant LeEco's Financial Problems Are ‘Far Worse Than Expected'

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【Summary】According to a report by Reuters, recent funding efforts are not enough to help LeEco get out of its financial predicament.

Original Vineeth Joel Patel    Jul 08, 2017 12:00 PM PT
Chinese Tech Giant LeEco's Financial Problems Are ‘Far Worse Than Expected'

LeEco is currently having a large amount of financial problems, but that's not new. The Chinese technology company showed a lot of promise in the beginning by raising $1.08 billion in order to build an electric last October (the LeEco LeSEE is pictured above), but has recently come under pressure because of its financial woes. Recently, LeEco cut 325 jobs in its U.S. office after founder Yueting Jia resigned as the CEO of the company. 

In addition to the employee change, LeEco has also halted its purchase of Vizio and may even sell land it purchased from Yahoo to get it through the rough patch. The tech company is also pulling its investments in Faraday Future and Aston Martin concerning electric vehicles. That's bad news. But according to a new report by Reuters, the situation is a lot worse than it appears.  

Things Are Worse Than They Appear

According to Yueting, the technology company's financial issues are "far worse than expected" and despite recent fundraising efforts, LeEco is not in a good position to survive. 

The company that once looked like it would become a true rival to Tesla is now struggling across its array of businesses, including an electric automobile. While the founder, Yueting, previously blamed the company's financial issues on expanding at a rapid pace. The company's problems seem to be solved after LeEco secured an investment of $2.21 billion from Chinese property developer Sunac, claims Reuters

"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," Yueting said at an annual shareholder meeting. 

Despite getting the large investment, the problems continued. "Since October, we took some measures and made some mistakes, but LeEco's non-listed units' finances got tighter," he said. "This is what we discovered over two-to-three months." 

What Can LeEco Do To Bounce Back?

To get through its financial problems, Reuters claims that LeEco will need to continue to consolidate its non-listed units in the coming months and "dispose of some fixed assets and even equity assets." 

LeEco, though, has paid back approximately 15 billion yuan in debt, which include loans in Yueting's name, reports the outlet. But that still hasn't made the company's situation any better. In fact, Yueting believes that paying back LeEco's loans instead of using the funds to refinance operations further hurt the company. 

According to Yueting, LeEco's automotive section is the number one cause of the company's financial troubles. To fix that side of its business, LeEco plans to complete round-A financing and begin production of an actual vehicle as soon as possible, reports Reuters. But getting more investments for its automotive business isn't LeEco's only option, as the company also has plans to strengthen its smart television business by focusing on a new strategy that heavily relies on larger-screen product claims the outlet. 

LeEco's situation has gotten so bad, that the company has turned towards selling its office furniture on Craigslist. In spite of all of the financial problems that LeEco's having, the company probably will probably hang around for a while and will get its own car on the road somewhere in the near future. 

via: Reuters

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