Chinese firm LeEco’s financial situation is deteriorating rapidly. A Shanghai court has frozen $180 million in assets owned by co-founder Jia Yueting, his wife Gan Wei and three subsidiaries, according to Chinese news site Tencent and the Financial Times. The order was carried out on behalf of the China Merchants Bank, reportedly because of missed interest payments by LeEco’s mobile, watch and other divisions.
Not long ago, LeEco was a relatively unknown consumer electronics giant in China. After the company and its founder launched not one, but three different EV projects (Faraday Future, the LeEco LeSee and Lucid Motors) the firm developed a much higher profile.
Signs of trouble started popping up last October, however. LeEco was planning to build an EV plant in Nevada, but after doing some due diligence, the state’s treasurer told Bloomberg that LeEco didn’t seem to have the money to build a billion dollar plant. A former Lucid Motors executive also told The Guardian that he left because LeEco was "being run like an old-school Hong Kong company."
The Lucid Motors Air, revealed in December 2016 at the LA auto show (AOL)
The next month, Jia admitted that LeEco had a cash problem. "We blindly sped ahead, and our cash demand ballooned," he said. "We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited."
Things started getting worse at an alarming speed after that. First, the LeEco Nevada plant was delayed, then LeEco revealed it was selling its Silicon Valley US headquarters and later, a planned purchase of TV maker Vizio was cancelled. Shortly after that, Jia stepped down as LeEco CEO, the company laid off much of its US workforce and, most recently, LeEco admitted it was still losing massive amounts of money, despite a $2.4 billion emergency loan.
Jia and some of his family have also put up their own holdings as collateral for the loans. A bond sale to raise funds was canceled, however, after regulators questioned the company’s ability to pay them back. As FT points out, the freezing of some LeEco assets is a possible sign of a looming bankruptcy, as it may kick off an avalanche of similar demands from other creditors.