Chinese internet entrepreneur Jia Yueting has defied orders from regulators to return home and help a listed technology company he founded resolve crushing debt, saying he needed to stay in the U.S. to work on his electric car startup.
In his first official response to the directive from China’s securities regulator, Jia said via his official Weibo social media account that he needed to oversee Faraday & Future Inc. His brother Jia Yuemin and wife Gan Wei have been empowered to handle affairs with the Shenzhen-listed firm, Leshi Internet Information & Technology Corp.
The outspoken founder of Leshi expanded aggressively from the Netflix-like service into smartphones and automobiles before coming under increased criticism from authorities. The China Securities Regulatory Commission issued an order in December for him to return by the end of 2017, saying Jia and his sister failed to provide loans to Leshi as promised. The Shenzhen Stock Exchange last week also censured Jia for reneging on that pledge.
Now Leshi and LeEco, the closely held tech giant he helped create, are struggling to pay suppliers and lenders, which has led to Chinese courts seizing and freezing his assets. Jia said in his Weibo post he would work with Leshi to resolve its issues and apologized for his companies’ debt crisis. He said his brother met with regulators in person on Dec. 29 to discuss the matter.
“I’m deeply sorry and I blame myself for the huge negative impact the debt crisis of LeEco has brought,” he wrote. “The financing of U.S.-based (Faraday & Future) has made great progress and there is immense work that requires me to guarantee on-time mass production and delivery of FF 91 EV,” he said, referring to the startup’s prototype model.
Leshi said in a filing Tuesday that it hasn’t resolved its debt problems with closely held entities associated with Jia. The company also announced plans for a unit to buy LeEco’s online business Lemall.com for 92.9 million yuan ($14.31 million), and raise about 3 billion yuan ($462.03 million) for its smart TV unit in financing that values the division at about 12 billion yuan ($1.85 billion).
“Up to now, the parties haven’t come to a substantial, executable solution to its overall debt issues,” Leshi said in one of several filings to the Shenzhen exchange. “The listed firm will continue to do its utmost to engage Jia Yueting and the non-listed affiliated companies to reach resolution.”
Leshi Internet remains the largest listed vehicle in Jia’s LeEco empire but has been suspended from trade since April. The success of Jia’s forays into video-streaming encouraged LeEco to expand into new businesses, during which Jia borrowed heavily against equity in Leshi.
In his Weibo post on Tuesday, Jia placed much of the blame for LeEco’s subsequent cash-flow problems on a single late payment in July, which he said led to the freezing of his assets and triggered a cascade of early loan recalls. He also cited “false and malicious” reports that led to problems with creditors and suppliers.
With assistance from Yan Zhang and Qi Ding.