Jakarta, CNBC Indonesia – A new Chinese startup, LeEco, has recently become the talk of the world. The reason is, LeEco shares quickly managed to climb to the trading board of ChiNext, a stock group similar to Nasdaq in the United States.
In 2015, LeEco raised at least 805 million yuan from Series A funding for its sports streaming division as well as the sale of about 500 million shares. Meanwhile, LeEco’s publicly traded parent company, LeShi Internet, reported revenues of about 13 billion yuan ($1.9 billion) for 2015, and profits of 573 million yuan ($85 million).
LeEco’s rapid expansion after the 2010 listing is impressive. Within a few years, they expanded their business from online streaming services to a hardware ecosystem, including smart TVs, smartphones, bicycles and cars.
Despite that brilliance, there are problems that plague LeEco. Jia Yueting, the founder of LeEco, was involved in RMB 16.8 billion (Rp 36 trillion). In addition, many of LeEco’s subsidiaries have lost and owed millions of dollars, one of which is LeSports.
LeEco’s streaming unit closed after months of arrears on rent for its office, according to local press reports, quoted from Mingtiandi, Thursday (26/5/2022).
LeSports rents the 33rd and 35th floors of The Octagon K Wah International in Tsuen Wan. Meanwhile, Le Corporation occupied the 36th floor.
Hong Kong media reported last October that a pair of LeEco subsidiaries had failed to pay a combined monthly rent of HK$1.04 million since May last year. This cost the bankrupt company with outstanding liabilities of HK$10.4 million.
LeEco set up formal operations in Hong Kong in 2015, but the company known as China’s Netflix has been the subject of many court cases in the territory.
Apart from the unpaid rent, LeSports apparently has not made payments to its network provider either so Hong Kong customers cannot watch the three Premier League games on Monday and last Saturday that they paid for.
Le Corporation has also been the subject of several legal cases in the city, including a US$224,000 lawsuit for copyright fees initiated by film distributor Sundream Motion Pictures in December 2016, and a HK$530,000 claim.
Previously, a marketing company also sued a subsidiary of LeEco for HK$14 million ($1.8 million) in unpaid marketing fees in August 2016.
The problems faced by LeEco, according to many, arise because of the expansion that is too fast. However, behind the expansion there are reported to be many problems.
LeEco’s diversification requires a sizeable cash injection, which is only natural if a company is profitable. LeEco appears to be a healthy company over the years raising millions of dollars in capital.
According to Caixin, LeEco has enjoyed “5 years of double-digit growth”, since 2010. However, most of LeEco’s businesses, including about 39 subsidiaries that have not gone public, have never disclosed their financial performance.
A former employee told Engadget that LeEco was moving cash from one company to another to cover losses.
Former CEO of online transportation service Yidao Yongche, who once owned 70% of LeEco, accused them of misusing capital to cover their debts.
In September 2018, LeEco founder Jia Yueting was forced to leave the company after the company was annexed by Sunac, a Chinese property conglomerate.
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Go Public & Big Names, This Startup Closes Office Rent Arrears
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