Chinese corporation LeEco, known for its range of electronics, is going through a tough financial period, as its CEO’s bank account is frozen.
A Shanghai court has frozen $180 million in assets owned by co-founder Jia Yueting, his wife Gan Wei and three subsidiaries, according to Chinese news site Tencent and the Financial Times. The order was carried out on behalf of the China Merchants Bank, reportedly because of missed interest payments by LeEco’s mobile, watch and other divisions.
Not long ago, LeEco was a relatively unknown consumer electronics giant in China. After the company and its founder launched not one, but three different EV projects (Faraday Future, the LeEco LeSee and Lucid Motors) the firm developed a much higher profile.
Signs of trouble started popping up last October, however. The company was planning to build an EV plant in Nevada, but after doing some due diligence, the state’s treasurer told Bloomberg that the company didn’t seem to have the money to build a billion dollar plant. A former Lucid Motors executive also told the media that he left because LeEco was “being run like an old-school Hong Kong company.”
The company started selling devices in the US at the tail end of last year, but is now facing a cash crunch and has been forced to slash costs, including making job cuts. Mr Jia, who resigned as chief executive in May but retains his position as chairman, recently admitted to shareholders that its financial problems were “more severe than we expected”.
In April, a $2 billion deal to buy consumer electronics-maker Vizio was called off because of “regulatory headwinds”. Meanwhile LeEco’s smartphone sector, Coolpad, has further delayed its 2016 financial results because of audit issues. The company’s unaudited results from May suggest it lost $ 542 million last year.
Coolpad shares listed in Hong Kong have been suspended from trade for three months.
The news of the court freeze on some of LeEco’s assets was welcomed by Philip G Chiu, CEO of US-based marketing firm Beyond Media Global. He took LeEco business LeTV to court over debts of $1m but claims that it still owes his firm around $100,000. “LeTV has still not paid all their debt to our company,” he explains.