China's LeEco to sell Silicon Valley site

An electric concept vehicle by LeEco displayed during a tech show in Las Vegas, Nevada, earlier this year. The Chinese firm, which grew from a Netflix-like video website to an empire spanning consumer electronics and electric cars within 13 years, is
An electric concept vehicle by LeEco displayed during a tech show in Las Vegas, Nevada, earlier this year. The Chinese firm, which grew from a Netflix-like video website to an empire spanning consumer electronics and electric cars within 13 years, is struggling to support its expansion plans.PHOTO: REUTERS

Sale of its US property is tech group's latest bid to ride out cash crunch

HONG KONG • Chinese technology conglomerate LeEco is looking to sell a 19ha US Silicon Valley property less than a year after buying it from Yahoo, sources said, in its latest effort to ride out a cash crunch.

LeEco, one of China's most ambitious companies, which grew from a Netflix-like video website to a business empire spanning consumer electronics and cars within 13 years, is struggling to support its goals that include beating Mr Elon Musk's Tesla Motors in premium electric vehicle making.

LeEco founder and chief executive Jia Yueting admitted in a letter to staff in November that the firm is facing a "big company disease" and battling a cash crunch after expanding at an unprecedented rate.

But less than a month prior to the letter, Mr Jia had outlined plans to build its United States headquarters at the Silicon Valley site.

"This property will be an EcoCity that houses 12,000 employees," the billionaire said at the time.

Now cash-strapped and struggling to repay a pile of debts to suppliers and business partners, LeEco plans to sell the US site for US$10 million (S$14 million) more than what the firm paid for it in June last year, to little-known Chinese developer Genzon Group for US$260 million , said a source.

Sources in and outside the company said the workforce has been downsized across LeEco's operations in the US, with some estimating the number has at least halved in its Silicon Valley office alone.

Mr Jia said in October that LeEco US employs "more than 500".

LeEco was cited by Chinese media as saying in May last year that the company has 1,000 employees in the US, including research personnel for its "super car".

LeEco has seen headcount reduction in various units of its business in China since its financial problems deepened. The company said earlier this month that it has also cut almost 80 per cent of its workforce in India.

Mr Jia in January said LeEco's financing problems would be solved in three to four months, before the firm got a much-needed capital injection of US$2.2 billion from property developer Sunac China Holdings. But the Sunac investment was for LeEco's entertainment units and not its car-making business, which analysts said is very expensive to sustain.

LeEco is developing luxury electric vehicles with Faraday Future in the US, a start-up Mr Jia funds and controls. However, the outlook remains unclear after Faraday said it is scaling back production plans at a factory it has yet to build in Nevada.

Shares of LeEco's flagship unit, Leshi Internet Information and Technology Corp Beijing, have plunged around 25 per cent over the past five months.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 18, 2017, with the headline 'China's LeEco to sell Silicon Valley site'. Print Edition | Subscribe