Cash-strapped Chinese tech firm LeEco secured a $2.2 billion investment from a group led by property developer Sunac China Holdings, but shares in the rescuer plunged yesterday on news of the deal. Hong Kong-listed Sunac said Friday it would plough 15.04 billion yuan into the sprawling LeEco empire, which has interests in various sectors including self-driving cars, smartphones, film making, and TV-set manufacturing. Its diverse ventures pit the company against Apple, Netflix, and Tesla and homegrown Chinese champions Baidu, Tencent, and Alibaba.
But the company's relentless expansion has put a strain on its cash flow, and in November billionaire founder Jia Yueting told employees the company grew too quickly and was short of funds. Shares in its Shenzhen-listed LeShi affiliate dived more than 36 percent last year and in December were suspended from trading before restarting Monday. It ended down 1.12 percent at 35.40 yuan in Shenzhen. The deal will make Sunac the second-largest shareholder of LeEco, with 8.61 percent equity in LeShi Internet, 15 percent in LeShi Pictures, and 33.5 percent in the TV unit Leshi Zhixin, Sunac said in an announcement to the Hong Kong stock exchange. But shares in Sunac plunged as much as 10 percent in Hong Kong yesterday before paring the losses to end 7.96 percent lower at HK$6.71.
At an event Sunday in Beijing, Jia was full of optimism, declaring that "though the road is bumpy, our dream is getting closer". The deal takes Sunac far outside its primary business in buying and developing property. Sunac last year struck the largest number of deals in China, being involved in 13 deals totaling $4.2 billion, according to Bloomberg News.