Three co-founders of ride-hailing service Yidao Yongche (易到 in Chinese), announced their resignations today in a joint statement, following a recent spat between Yidao CEO Zhou Hang and the company’s controlling shareholder LeEco, our sister site TechNode Chinese is reporting.
In the joint statement, the three co-founders Zhou Hang, Yang Yun and Tang Peng said that they started to fade out from the management since LeEco appointed Peng Gang as Yidao’s president last June. They stayed with the company (job titles retained and a token amount of compensation paid but had no real power) to help facilitate financing and ensure a smooth handover of the company at the request of LeEco but found only unwanted interference and their reputations being maliciously attacked.
LeEco bought a 70% stake in the ride-hailing service in October 2015 and became its controlling shareholder.
Public information shows that Zhou, Yang, and Tang remain Yidao’s second, third and fourth-largest shareholder, each holding a 25.33%, 2.29% and 1.91% stake in Beijing Dongfang Cheyun Information Technology (北京东方车云信息技术有限公司 in Chinese), the operator behind Yidao.
The verbal grenades may subside with the departures of these co-founders, but serious financial challenges have yet to be resolved for Yidao and LeEco.
It all goes back to LeEco’s cash squeeze. Shallow-pocketed LeEco began to slash its spending on the ride-hailing service last year, as years of breakneck expansion into myriads of businesses, coupled with declining performances, has put a strain on the purse of LeEco.
And LeEco’s cash spinner Leshi Internet Information (乐视网 in Chinese) even saw its 2016 net profit fall 3.19% year on year to RMB 555 million, the first decline since it went public eight years ago (in Chinese).
This cash crunch has inevitably threw Yidao into turmoil, as the ride-hailing firm has been relying heavily on LeEco’s financial support to subsidize rides.
In this ride-hailing market gradually cornered by Didi Chuxing, Yidao and other small players have had to continue their subsidy campaigns to woo consumers and drivers in hopes of a turnaround in this brutal contest.
Yidao’s cash conditions have scarcely improved even after LeEco managed to secure an RMB 15 billion funding program from real estate titan Sunac in January, as the investments are meant to boost LeEco’s core business lines such as the company’s TV making and film production units, while those non-core and cash-burning ones are not in the picture.
Word is out (which has not yet been officially confirmed) that Zhou found another potential investor Shunwei Capital and submitted an investment plan to LeEco in February. Yet the plan was scrapped as LeEco failed to reach consensus with Zhou on the sum of the consideration. And an even deeper reason may be LeEco’s fear of losing control of the company since Shunwei Capital is a VC firm set up by Lei Jun, founder of Xiaomi, a longtime rival of LeEco. Zhou joined Shunwei two weeks ago.
There are signs that LeEco is orchestrating a new round of financing for the besieged car-hailing service. An executive at Yidao revealed that the company’s financing plan is still underway, but did not give a timetable.
As for the RMB 1.3 billion cash diversion squabble between Zhou and LeEco, sources said the RMB 1.4 billion syndicated loan to Yidao was not provided by banks but by Zhongtai Specialty Financing (中泰创展 in Chinese), a Beijing-based private lender.