Le.com on the Brink of Delisting, CEO Jia Yueting Under Investigation

LeEco founder Jia Yueting is being scrutinized by Chinese securities regulators and Leshi is on the edge of delisting.

On the evening of April 29, Chinese video streaming company Le.com posted an announcement on its website, saying that the company and its major shareholder and founder, Jia Yueting, have received a “Notice of Investigation” from China Securities Regulatory Commission (CSRC) on the afternoon of April 26, 2019 and April 29, 2019 respectively.

According to the notice, Jia is suspected of unlawful disclosure of information, which prompted CSRC to launch an investigation into Jia and his company. Le.com, or Leshi, has stated that both Jia and LeTV will actively cooperate with the investigation and fulfill the information disclosure obligations in strict accordance with the regulatory requirements.

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Three days ago, Leshi “stopped trading” on the Shenzhen Stock Exchange. According to the regulations, a decision on whether Leshi will delist will be made within 15 trading days after the suspension. Many are already speculating that the delisting is not far off but a simple matter of time.

The Shenzhen board-listed company reported total unaudited debt of R12 billion (around $1.8 billion) in 2018, of which RMB 3.4 billion is owed to its suppliers. It also warned that it would be forced to delist after a year “if its 2019 annual report fails to meet regulatory demands,” (our translation) according to a notice released Monday.

Since the start of this month, Leshi’s secretary of the board has already warned Jia that the company’s public listing is at risk of being suspended if it records negative net assets in its audited 2018 financial results. As of now, Jia has not made an official response to this matter.

As of April 19, 2019, Jia holds 92.1 million shares of the company, accounting for 23.10 percent of the company’s total shares, of which 85.7 million shares have already been pledged. Jia’s 92.1 million shares have been frozen by the judicial department of a court in Beijing.

LeTV has stated that the pledge and freeze on Jia’s shares may lead to the risk of a change in the person in charge of the company.

According to the latest quarterly report released by LeTV, its total revenue in 2019 was 129 million yuan, a big dip of 70.54 percent compared with 437 million yuan in the same period of last year.

The company’s annual report in 2018 recorded a revenue of 1.558 billion yuan, down 77.83 percent year-on-year. Its net profit loss was 4.096 billion yuan, a loss of 13.878 billion yuan in the same period last year.

As of March 31, LeTV has over 257,200 investors, an increase of 80,000 from the end of 2017.

Featured photo credit to REUTERS/Jason Lee