Compal takes a stake in LeEco, or does it?
Compal Electronics (2324.TT) announced plans to invest $101.65m in Leshi Zhixin Electronic Technology (pvt), a subsidiary of LeEco (aka Le.com – 300104.SZ), a Beijing based video company that has been very aggressively expanding in the CE space. LeEco owns a 20% stake in TCL Multimedia (1070.HK), a holding company that controls the TCL brand in China, and is in the process of acquiring US based Vizio (pvt) for $2b, however in recent months rumors that the company was having trouble paying suppliers due to the rapid expansion of its consumer electronics businesses.
As of 3Q 2016, LeEco had $274.5m in receivables with Compal, as it uses the ODM for its smartphone line, with Compal writing off $11.8m and $22.9m in bad debts in 2H, although attribution to LeEco was not specified. While LeEco has paid almost 50% of its debt to Compal according to statements made at a recent Compal investor meeting, the acquisition of the 2.15% stake in LeEco seems to be motivated by a need for Compal to see an increase in LeEco’s business to feel comfortable about the somewhat strained financial relationship. If LeEco’s acquisition of Vizio can get through both Chinese and US security probes, Compal will likely see some TV business from LeEco, whose holdings in TCL give them somewhat deeper access to Chinese LCD panel producer China Star (pvt).
As of 3Q 2016, LeEco had $274.5m in receivables with Compal, as it uses the ODM for its smartphone line, with Compal writing off $11.8m and $22.9m in bad debts in 2H, although attribution to LeEco was not specified. While LeEco has paid almost 50% of its debt to Compal according to statements made at a recent Compal investor meeting, the acquisition of the 2.15% stake in LeEco seems to be motivated by a need for Compal to see an increase in LeEco’s business to feel comfortable about the somewhat strained financial relationship. If LeEco’s acquisition of Vizio can get through both Chinese and US security probes, Compal will likely see some TV business from LeEco, whose holdings in TCL give them somewhat deeper access to Chinese LCD panel producer China Star (pvt).
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