Leshi, previously known as LeTV, is likely to get suspended from the Shenzhen’s Stock Exchange, the Paper is reporting.
On July 13, Leshi (乐视网) released a financial forecast for the first half (H1) of 2018 reporting net profit losses for shareholders between RMB 1.10 and 1.11 billion. In the same period last year, the company reported net losses of RMB 637 million.
The company released a statement the same day saying that if its net assets will be negative for the year of 2018, it will be at risk of being suspended from its listing. According to Shenzhen Stock Exchange regulations, if financial reports show that the net assets are negative at the end of the year, the exchange may decide to suspend the listing of the stock.
The news comes just days after the Shenzhen Stock Exchange questioned Leshi regarding the new blockchain business of its smart TV subsidiary Lerong Zhixin. The company found itself under the suspicion of using blockchain buzzwords to hype up its stock price.
Leshi’s long string of financial woes began in 2016 but the real troubles emerged in June 2017 when Chinese courts started freezing the assets of Jia Yueting, the founder and former CEO of what was then called LeEco. In September 2017, the company rebranded in an attempt to distance itself from its founder. Three months later, Jia was added to a government blacklist for credit defaulters. He was called back to China in February 2018 to sort out the company’s mounting debt. The newest on Jia is that he was banned from air and rail travel in China.
In April, Leshi received a much-needed capital infusion when Tencent, Suning, and JD.com invested RMB 3 billion ($478 million) in Leshi Zhixin. The affiliate owns LeTV Super TV, which is considered the highest quality asset within the group.
Leshi added in its statement that at present, the company’s board of directors and management are trying to solve its current difficulties, but its operations have not been fully improved and the possibility of sustained losses in the second half of the year has not been solved. Leshi is currently trying to restore the company’s cash flow by negotiating with financial institutions to extend its loans as well as seeking third parties to increase the company’s capital and solve investment in its subsidiaries.
Leshi’s announcement also uncovered a staff reshuffle with Bai Bing replacing Kai Zhao who has quit the position of Secretary of the Board of Directors.
Meanwhile, YT Jia’s other big project, US-based electric car company Faraday Future (FF), has been facing its own cash crunch. The Paper recently reported that China’s real estate giant Evergrande Group, which owns the largest stake in FF, has allowed Jia too keep its CEO position in hopes of starting production in China. On Friday, June 13, FF’s headquarters in Los Angeles were visited by the president of FF Xia Haijun. The company started work on a new factory in Guangzhou which came under public eye because of Jia’s status in China.