LeEco founder’s assets frozen by creditors
The asset freeze, which encompassed $183m of Mr. Yueting’s and his wife’s assets, along with three affiliated companies, is a small portion of his total net worth, which is estimated at $3.6b, but the company had recently been forced to abandon an attempt to purchase US based TV brand Vizio (pvt) (see our note 04/11/17) when it was approved by the US government but not the Chinese government. The $2b deal was officially cancelled in April, after LeEco brought in Hong Kong based Sunac China Holdings (1918.HK) as an investor in LeEco (8.6% stake in subsidiary LeTV, 16% stake in LeVision Pictures and a 33.5% stake in an LETV sub), along with another $2.44b investment from another group of Chinese investors to reduce the financial burden of the Vizio acquisition.
The final end to the acquisition came yesterday when the companies jointly announced that the deal had been cancelled due to ‘regulatory headwinds’, which would likely be the understanding that Chinese authorities would not allow the deal to be made. The Chinese government, through the State Administration of Foreign Exchange, began scrutinizing deals over $5m (formerly $50m) where capital would be leaving the country late last year, as outbound capital investments soared ($530.9b in the 1st 9 months of 2016) after the 6% depreciation in Chinese currency last year, but others cited the stretched finances of LeEco and its subsidiaries. Jia slashed his salary to 1 yuan (~$0.15) but was said to have also cut hundreds of jobs. This follows the company’s rapid growth through acquisitions, some of which were far afield of LeEco’s main businesses, such as the acquisition of US based electric car company Faraday Furture (pvt). LeEco, which gained traction through its video streaming business was once called the ‘Netflix of China’, but has been under pressure from its creditors. The banks have indicated that the risks involved in the loans “are still under control at this stage, and friendly negotiations will be considered”, but the personal asset freeze is definitely a step away from “friendly”.