LeEco chairman admits that its expansion was too ambitious
But it seems that the company formerly known as LeTV has spent too much money in getting to this point in neglect of its shareholders, according to a letter to employees spreading around social media and obtained by Bloomberg.
“We blindly sped ahead, and our cash demand ballooned,” said chairman and co-founder Jia Yueting. “We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited.”
Jia said that he has cut his annual salary to ¥1 or just 15 cents. Cost reduction measures will be implemented and growth targets will be more modest going ahead. Consumers will also see fewer discounts and rebates as well.
Just this year, LeEco established multiple offices in the US, acquired TV manufacturer Vizio and tried to get government funding from the state of Nevada in order to build a smart car development facility and equip it with utilities. While it failed to obtain the money, LeEco did launch a slate of TVs and smartphones. It is still partnered with Faraday Future to debut the LeSee car at CES 2017, though the project was explicitly pointed out in Jia’s letter to be a boondoggle, costing the company over ¥10 billion in early development.
The letter triggered a social media tiff with Xiaomi with that company’s co-founder, Lei Jun, criticizing LeEco for not being transparent its debt and rumoring about how much it owes to its creditors. Both companies’ Weibo accounts have volleyed responses on the issue.
Jia Yueting has been funding all of his LeEco ventures through leveraging shares against the original LeTV (or LeShi) content streaming business he brought up in 2004, the only profitable unit of the conglomerate. In the case of Nevada refusing to dispense the funds LeEco needed for its car plant, treasurer Dan Schwartz may have decided against risking taxpayer money on a company essentially riding the Chinese stock market.
Jia also is chairman of manufacturer Coolpad. Both LeEco and that company have suffered tumbles in share prices.