LeEco wanted too much too fast and now it is running out of money

LeEco is going through a rough patch

Chinese technology giant LeEco has recently extended its presence in the United States by announcing with bells and whistles a bunch of “disruptive smartphones”, among other things. During the US launch, LeEco exuded enthusiasm and confidence in relation to the future, but in reality things aren’t so rosy for the company.

According to recent information, the Chinese device maker which sells anything from handsets, electric cars and bicycles to smart TVs, is facing some severe cash flow problems.

The core problem is that LeEco has branched into so many directions so fast, that it essentially ran out of money. Earlier this year the company announced it was planning to make a substantial investment in Faraday Future and Aston Martin. Shortly after LeEco even showcased its first electric car dubbed LeSEE.

leeco-leseeWhat’s more LeEco spend a whopping $1.5 billion on the LeSee car concept, an all-electric car concept meant to compete with Tesla’s Model S.

Back in July, LeEco announced it was buying US TV marker Vizio for the hefty sum of $2 billion. It also envisioned a future where their $1.8 billion worth EV factory would be capable of releasing 400,000 electric cars per year.

With so many threads spreading out into the world, LeEco appears to be in over its head. The company’s co-founder Jia Yueting sent an extensive letter to company employees in which he admitted candidly that the company has ran out of cash. The letter which was obtained by Bloomberg reads:

We blindly sped ahead, and our cash demand ballooned. We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited.

In a bid to gain his employees’ forgiveness, Jia has pledged to slash his salary to only 1 yaun / 15 cents. Jia’s estimated net worth is around $6 billion, so that won’t be a problem for him. The same can’t be said for LeEco employees, who are probably praying they won’t end up without a job.

leeco2Jia’s letter doesn’t exactly come as a surprise. Investors have already started to question whether LeEco will manage to maintain itself afloat. For example’s LeEco smart TV’s subsidiary Leshi Internet Information & Technology shares decreased with 7.5% due to rumors that the company was unable to pay its suppliers.  Stock further slumped to 4.7% after Jia’s letter was sent out.

Not only LeEco is affected, but also its collaborators. LeEco partner, Coolpad which is in charge of assembling its phones saw its shares tumble with 17%, thus reaching a three-year low.

leeco-umax85-4k-tvIn order to reverse the collapse, LeEco is looking to enforce some drastic measures in order to facilitate as much cost-cutting as possible. On top of that, the company aims to regroup and refocus on existing product lines like phones and TVs, which will hopefully produce enough cash flow to keep the company from going bankrupt.

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