Debt-laden LeEco founder defies Chinese regulator’s order to return, stays back in US

The reason he is staying back in the US is to raise funds for his electric vehicle business.
Debt-laden LeEco founder defies Chinese regulator’s order to return, stays back in US
Debt-laden LeEco founder defies Chinese regulator’s order to return, stays back in US
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Chinese entrepreneur Jia Yueting’s company LeEco is currently facing financial difficulties owing to a huge debt burden. And while the Chinese regulator had advised him to return to China from the US, before December 31, Jia has stayed back in the US and instead sent his brother to be present before the authorities.

The reason he has cited for staying back in the US, is to complete the fundraising for his electric vehicle venture. China Securities Regulatory Commission’s Beijing branch had issued the summons to Jia following piling up of debts owed by LeEco to many people and the regulator is entrusted with the responsibility to protect the interest of the investors.  

In a statement posted on WeChat, Jia Yueting has stated that he is sorry he is unable to leave the fundraising activity midway since it is progressing well and that he has asked his brother to appear before the Commission and respond to their queries on the debts and their repayments.

Jia’s LeEco is working on an electric car FF91 in collaboration with Faraday Future and the capital required for this project is being sourced from the US. However, there are doubts being raised over his capability to pull through this crisis and work on the ambitious venture. The case of the talks with the British Automaker Aston Martin having fallen through is also being cited as the reason for the low expectations from the electric car vehicle embarked on by Jia and ReEco.

Sources indicate that the total debts owed by LeEco amount up to 10 billion Yuan (or $1.54 billion). Leshi Internet Information & Technology, is one of the listed companies promoted by Jia Yueting. The regulator is taking up the issue with the promoters and Jia’s statement has assured the investors that the company’s debts issue will be resolved soon and the company’s operations will be resumed. Towards this end, the company is seeking to raise funds to the extent of $462 million (3 billion Yuan) to tide over this crisis. How far they would succeed in this effort has to be seen. Jia claims his wife and brother are also exploring the option of selling some assets to create liquidity.

The factor to be considered in all this is the challenge LeEco and Jia have taken up, of giving a fight to Tesla Motors and Elon Musk in making electric vehicles.

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