LeEco secures $600 million from Y.T. Jia's classmates
【Summary】With the leak of an internal letter from LeEco written by its CEO Yueting Jia, the billionaire cautioned about the company’s too-quick international expansion, and noted that a new fund of $600 million is on its way.
While showing the world that LeEco is expanding aggressively on its electric vehicle project, a recent report also revealed that its parent company, LeShi, is encountering a capital shortage. Luckily, with the help of some new investors who funneled in $600 million, LeEco might be able to proceed with its business plan.
With the leak of an internal letter written by LeEco CEO Yueting Jia, the billionaire cautioned against the company's too-rapid international expansion. Jia also noted that a new funding bonanza of $600 million is on the way. A spokesperson for LeEco told TechCrunch that the capital support was coming from Yueting Jia's classmates at Cheung Kong Graduate School of Business in China. The school is renowned for training over 3000 CEOs from various big Chinese companies. Notable alumni including the founder of the Alibaba Group Jack Ma; Fu Chengyu, Chairman of Sinopec; and Wu Yajun, fifth richest person and richest woman in China as of 2012.
Later reports revealed that the investors are from more than 10 companies, including the Hailan Group, Hengxin Group, Yihua Group, ManWah Holdings and others. Among the investors, some are from the real estate industry, and some are medical and pharmaceutical companies. But most are private enterprises. Reuters reported that $300 million will be ready by the end of this November. This new seed money is going to fuel the LeEco EV project and its global LeMall business in the U.S. That latter is an e-commerce platform for selling LeEco's hardware.
Zhou Jianping, chairman of Hailan Group, an apparel firm leading the fresh investment, was quoted as saying they are injecting the funding to support China's indigenous automobile industry. They feel LeEco's connected cars project could propel China to the top of the industry.
"We are just financially supporting LeShi, but not involved in the company's business details, as we fully trust YT Jia," Zhou Jianping told reporter at Tencent Finance.
However, many are casting doubts on LeEco's developing model. The company began as a TV manufacturer and "Chinese Netflix" in 2004. Then within just a few years, it drastically expanded to commerce, smartphones and an electric car project along with U.S.-based Faraday Future. According to Caijing magazine, since 2015, LeEco has been investing over 70 billion RMB (around $10 billion) on expanding its technology eco circle. And the funds collected from different investors have almost been used up during this process. It seems (to many observers) that LeEco's cash flow and service/technological ability can't match up with its aggressive expansion into North America and Asia.
In a recent letter to shareholders, Jia admitted that he was "blindly speeding ahead" into new ventures. The company will pause its expansion in the Asian market, and strengthen its financial management. Meanwhile, it aims to increase its cash flow and user base.
LeEco's North American operations lead Brian Hui stressed that the development of LeSee is the firm's "highest priority" and will continue. Hui also admitted that LeEco is entering a new phase of its business which will see less large scale acquisitions like buying Vizio with $2 billion.
Will the Chinese tech giant survive the current crisis? LeEco stakeholders will be keeping a keen eye on all of the upcoming developments.
Claire Peng has over 6 years of professional experience in the media industry, covering TV, newspaper and online media. She was once a reporter and producer for Fairchild Television based in Toronto Canada, and worked as an English news reporter for the Global Times in Beijing. She writes mainly about self-driving, companies investment, and the enterprise lab.
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