LeEco has been making headlines for a few years now. It was the first video streaming company to go public in China, and since then they’ve been tapping into multiple markets that help deliver their video streaming service to its customers. They expanded into TVs, smartphones, and have recently started investing in autonomous cars too.
It’s clear they were growing fast when they announced the acquisition of Vizio for $2 billion, followed by launching some of their products in the United States.
Last month, though, the chairman of LeEco confirmed they had “overexpanded”, and that they were running out of cash. A few days later, LeEco announced they were able to secure $600 million in funding from a dozen investors in China. This is what they needed as a $150 million offshore loan arranged by Credit Suisse Group AG and Deutsche Bank AG was delayed for unknown reasons. Reports say LeEco has also gone to investment banks in Hong Kong to work on fundraising options as well.
Still, this good news hasn’t been enough to keep the stock price of LeEco’s holding company (known as Leshi Holding) from tanking. Tuesday, they saw its stock price drop 7.9% by the time the markets closed. The closing price landed at 35.80 yuan ($5.20) per share, and this drop resulted in 6 billion yuan ($869.5 million) disappearing from the company’s market capitalization.
This is bad in an of itself, but when we consider its shares had traded at 80 yuan ($11.59) in May 2015, we can see how much worse things really have been for the company. It’s unclear if the recent expansion LeEco has been making is to blame for this decrease, or if they were planning on this all along. What is known, is that LeEco is currently undergoing a restructuring plan to prevent this from getting any worse. We’ll have to wait and see if things improve over time.
Source: The Wall Street Journal
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