Jia Yueting, founder of Chinese tech conglomerate LeEco, will likely be forced to pay off his debts by selling shares of LeVR, another affiliate of LeEco, the latest amid a series of financial woes following local judges freezing his stakes in Le.com.
According to a Jiemian report(in Chinese) on Friday, a Shanghai regional court just ruled that LeEco-owned LeView Mobile Ltd must pay debt of RMB 530 million (roughly $78 million) to the Shanghai-based private equity firm Leyu Fund. The creditor is also allowed to sell 39.63% shares of Leshi Chuangjing Technology owned by LeEco, if LeView Mobile refuses to comply. Both Jia himself and LeEco were ruled to bear joint liability by the court.
Records show Leyu Fund signed a loan contract with Jia and his companies in May 2015, offering an amount totaling RMB 410 million with a 15% interest rate over the period of three years. It filed a lawsuit against LeView Mobile Ltd as well as its parent company LeEco to Shanghai Senior People’s Court in July 2017, as the debtors failed to fulfill its obligations after the due date.
“Everyone was competing to get shares of investments back then,”Chinese media Caijing Magazine reports, citing an anonymous person from Leyu Fund’s limited partners. The source went on to say that there was not much room left for negotiating on the price, since Jia has the most voting rights on the terms of the deal. LeView Mobile Ltd was one of the Chinese home-grown smartphone makers as early as 2015 with an ambitious plan to the global market. It reportedly laid off over 80% employees in the mid 2017.
Leshi Chuangjing Technology is one of the main investors backing LeVR, one of LeEco’s affiliates founded in 2015, with a special focus on developing consumer-faced virtual reality (VR) products. The company unveiled its first VR headset LeVR COOL 1 in December 2015 and completed its Series A at a valuation of RMB 3 billion in the next year, becoming the most valuable VR startup in the country at that time.
LeVR was later dismantled in 2017, after its parent company LeEco suffered mounting debt since late 2016. LeEco’s Shenzhen-listed subsidiary Le.com publicly announced an amount of debt totaling RMB 6.7 biilion in August 2018.
In a Weibo post(in Chinese) on his personal account on Wednesday, the disgraced entrepreneur called on his employees at Faraday Future to “work hard as always for the future of a sharing and intelligent mobility ecosystem.”