OFweek smart home network news recently, the US media CNBC reported LeTV in the financial dilemma how to raise huge amounts of money in the short term, and mentioned that from the beginning of last year, LeTV raised an aggregate of more than 2.1 billion US dollars through informal financing channels . The following is the main content of the article.
When LeTV suffered a cash crisis last year, the company raised billions of dollars in funds from numerous new investors. Among LeTV’s investors, there is also a music teacher.
Li Shenghong teaches music at a small training institute in southern China. He is a fan of LeTV and LeTV. When LeTV began to sell its investment products online, Li Shenghong snapped up madly, even if LeTV barely disclosed where the money would go.
"I will invest in it whenever I have a salary and I will invest in it." Li Shenghong said. He has invested about $7,000 in LeTV.
Due to the rapid depletion of cash and the depletion of cash, LeJoy regarded it as maintaining its operations and began to raise funds through unfair and potentially risky ways, including the use of shadow banking. Letv promises good returns to small investors and dilutes their risks when selling investment products.
LeTV’s financial situation has been deteriorating. Even if it continues to be financed, LeTV is still being forced by the creditors to pay the debt. For this reason, it even filled the restroom of its office building with potted plants to prevent creditors from staying.
LeTV spokesperson said that the way LeTV collects funds is legal. However, Jia Yueting refused to be interviewed on this issue.
LeEco was originally an online video site, and it was called China's Netflix. Today, it has numerous subsidiaries that sell smart phones, TVs, and wealth management products. It also invested in the electric car company Faraday Future.
Since the beginning of last year, LeTV’s subsidiaries have raised a total of more than US$2.1 billion in funds through China’s huge and covert informal financing channels.
According to publicly available data, LeTV sold online so-called wealth management products and raised 215 million U.S. dollars. In China, such wealth management products often promise good returns and security, but they disclose very little relevant information. LeTV calls its wealth management products "low risk" products.
Li Shenghong’s promised annual returns of up to 7% of LeTV products. He is not worried about whether the money will come back.
"I don't care much about where the money is." He said: "I have a TV with LeTV and a phone with LeTV. I don't worry about it."
LeTV also raised funds through equity pledges. In such transactions, the borrower mortgages its own company shares to brokers to raise funds. These loans are not included in the bank statement, which means that their risks are difficult to track. If the stock price of pledged shares plummets, these shares will be at risk of being closed.
According to the latest data, Jia Yueting has pledged 97% of his LeTV shares. As of November last year, LeTV has raised a total of US$1.7 billion in this way.
Last year, LeTV also raised US$2.4 billion by selling its unlisted company’s equity or convertible bonds. Because the financing entity is an unlisted company, it is subject to less regulation.
LeTV stated that the company only sells these shares to institutional investors who understand the risks. However, public records show that the shares of these non-listed companies as LeTV eventually fell into the hands of small investors. Many people bought these shares because they had the idea of ​​investing in startups early, and Jia Yueting promised that if these companies are not listed in the future, he or his company will repurchase these shares at a high price.
Mo Lingmei is one of the equity investors in LeTV. Mo Lingmei is the owner of an apparel e-commerce company and has invested a combined amount of $300,000 in LeTV Sports with some friends, about half of which is her family savings. Last year, LeTV Sports raised $1.2 billion in a round of financing.
"This is an impulsive decision," she said. She added that Jia Yueting was "very famous at that time and frequently appeared on television and other media. In the past, I never made any investment."
LeTV still faces many problems. Last month, LeTV laid off 325 employees in the United States. Some of LeTV's subsidiaries have started new fundraising efforts.
In April of this year, representatives of the 37 small-scale suppliers of LeTV requested LeTV’s subsidiary to pay them a $10 million payable. They took a week in LeEco's office building in Beijing. LeTV’s easy-to-use drivers were regarded by LeTV as having arrears for a few weeks, and they have already begun protests at several Lexus locations.
LeTV said that the situation is improving and announced that the company had won a US$2.2 billion investment in a real estate developer in China in January this year. At the investor conference in May this year, Jia Yueting acknowledged that the company is laying off staff and selling assets, but at the same time, it also stated that these measures will “be beneficial to our core business, especially unlisted businesses, and enter a rapid recovery period.â€
Jia Yueting's position appeases many investors, including Hu Yenan. Hu Yenan founded a joint venture company to invest in LeTV's business.
Hu Yenan’s company acquired a $1.08 billion convertible bond from Faraday Future Electric Vehicles. He said that Jia Yueting has personally secured the debt.
"If Warren Buffett comes to you to borrow money, will you lend it to him?" said Hu Yenan. "Of course you will lend him."
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