LeEco CEO admits capital crunch
Although LeEco's splashy entrance into the US market in mid-October remains vivid, the company, whose products include smartphones, smart TVs, electric cars, and a sports media platform, has severe cash crunch issues and must consider slashing product lines as well as expectations.
LeEco has blindly sped ahead, resulting in a ballooning cash demand, LeEco's co-founder Jia Yueting said in an internal letter to his employees over the weekend, which has circulated publicly among Chinese media.
Jia admitted a problem with the company's growth pace -- including its global expansion strategy which had gone too far -- in the face of "rather limited capital and resources". He said that LeEco will cut costs to reinforce capital control and realize efficient operations.
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Jia also pledged to slash his income to 1 yuan (15 cents), as well as a more moderate pace in its business expansion.
Investors have already raised eyebrows over LeEco's capital issues. LeEco's listed smart TV subsidiary Leshi Internet Information & Technology Corp slumped over 7.5 percent last week on rumors that the company failed to make payments to its suppliers. The stock further fell 4.7 percent on Monday after the wide circulation of Jia's letter. Coolpad, which assembles LeEco's handsets alongside its own brand, tumbled over 17 percent to a three-year low on the same day.
Jia said the company has spent some 10 billion yuan ($1.5 billion) on the LeSee car in its early stage, the all-electric concept supercar unveiled by LeEco in April to compete with Tesla's Model S.
The company also added over 5,000 new staff over the year -- rarely seen among any other company within the industry.
Besides its various product lines within the country, LeEco has been actively pushing its presence in overseas markets. Last month, the Chinese company unveiled a high-spec budget smartphone Le Pro3, a seven-foot smart TV, the electric car LeSee, and a VR headset in San Francisco, and talked ambitiously about its plans for the American market.