LeEco's 16.8 billion yuan financing is far from enough to spend its business and has difficulty supporting an 80-fold valuation

"To save the huge ecosystem, 16.8 billion yuan is not enough, but with LeTV's current share price, Jia Yueting's room for mobility is already very narrow."

Original title: It

has been two months since LeEco's unsolved strategic investors were introduced. LeEco and its controller Jia Yueting seem to have received 16.8 billion yuan in funding, but in fact they are far from as well as expected: only one panel supplier for the TV business is left, the arrears in the supply chain of the mobile phone business have not yet been repaid, and the sports business has terminated many copyright projects that it was proud of.

"To save the huge ecosystem, 16.8 billion yuan is not enough, but with LeTV's current share price, Jia Yueting's room for mobility is already very narrow." A private equity person in Shanghai who is familiar with LeEco's business said. This is indeed the case. With stock prices falling frequently, LeEco's previous approach of "unlisted business finance nurtures listed companies, and listed company financing feeds back unlisted business" has become difficult to maintain.

What worries the market even more is the side effects of abandoning and isolating various non-listed businesses in order to ensure the safety of Le.com's performance. Jia Yueting's continued external expansion of his business has brought huge imagination to LeTV's valuation, with a price-to-earnings ratio of more than 400 times. Today, the only businesses that may be related to listed companies for a long time are LeTV Pictures and LeTV Zhixin. Whether these businesses can support the current P/E ratio of 80 times remains to be seen, and the decline in LeTV's valuation may trigger a new round of chain reactions.

Where did the money go?

Two months ago, Jia Yueting and others took out a small share of their shares to introduce a total of 16.8 billion yuan in funds from Sunac and others. The issue of LeEco's capital chain that the market is concerned about seems to have come to an end. However, the news about LeEco's lack of money has not dissipated, but has become increasingly intense: first, LeEco Sports gave up the broadcasting rights of major football events such as the AFC Champions League, World preliminaries and the Super League, in part because it was even unable to pay the recently expired installments. Payment; then, LeEco Holdings announced that it would sell its 50% stake in Longshi Investment, which is operating the LeEco headquarters building project; Since then, Le.com gave up control of its subsidiary LeE-commerce and spun it out of the consolidated statement.

Why is LeEco still "stretched" despite the huge amount of funds raised? Jia Yueting, who is good at spending small money to do big things, where did he spend his money?

After careful review, it is not difficult to find that for LeEco and Jia Yueting, this money is far from enough to ensure the smooth operation of the entire ecosystem. In particular, they are still facing huge equity pledge pressure, and the funds that can be left and operated flexibly in the end are far less than they seem so much.

According to the aid plan disclosed on January 14, Jia Yueting transferred his shares in LeTV, LeTV Zhixin introduced war investment, and LeTV Holdings transferred its equity in LeTV Pictures, involving a total of 16.8 billion yuan. Among them, Jia Yueting personally cashed out of LeTV. com was 6.041 billion yuan, and he obtained 1.05 billion yuan through LeTV Holdings 'transfer of equity in LeTV Pictures. In addition, Xinle Assets obtained 2.64824 billion yuan from transferring part of LeTV Zhixin's equity to Sunac. It can be calculated that Jia Yueting can obtain approximately 9.7 billion yuan in funds in this round of financing.

The problem is that this money cannot be used casually. The announcement showed that 3 billion yuan of this amount "should be used preferentially to cancel the pledge of the underlying shares" and Sunac "has the right to supervise the use of the funds." In fact, this is also the most urgent problem for Jia Yueting. According to previous disclosures, before the transaction, a total of 571 million shares of Le.com held by Jia Yueting were pledged. Based on the timing of its pledge, the warning line for this equity pledge should be around 31 yuan/share, while Le.com's latest share price is 31.71 yuan.

"Since the stock price has reached a relatively low level, the first thing Jia Yueting has to do when he gets Sunac's money is to cover the position, or release the deposit first, and then re-pledge it at the latest price." Some market sources told reporters.

How can I spend it?

What can I do with the rest of the money? For Jia Yueting's "seven major ecosystems" and his big dream of "surpassing Apple", it is really too few.

According to the previous plan, only 2.302 billion yuan of the 16.8 billion yuan entered the body of listed companies, less than half of the amount of monetary funds on the account announced in LeE.com's 2016 third quarterly report. And LeTV really needs the money. Data shows that since 2011, its asset-liability ratio has gradually increased. At the time of the 2015 annual report, this figure had reached 77.53%.

This situation is inseparable from LeTV's main "copyright" business. It has always invested heavily in purchasing copyright, and its intangible assets on its books have gradually expanded.

For non-listed businesses, even if LeEco is not considered, LeEco Zhixin, LeEco Mobile, and LeEco Sports are all money-burning machines.

Taking LeEco Zhixin as an example, the funds that actually flowed into its body were approximately 4.83 billion yuan. In 2015, LeEco Zhixin's operating income reached 8.693 billion yuan, but in terms of profit, it was a net loss of 731 million yuan. Referring to the industry forecast that LeEco's Super TV sales in 2016 are expected to double year-on-year, LeEco Zhixin's revenue in 2016 may expand to more than 16 billion yuan. However, due to the short time for price increases for some of its products, supply chain prices are stable and rising., its net profit indicator for 2016 is not difficult to imagine.

In an environment where home appliances as a whole are facing rising prices of raw materials, 4.83 billion yuan in cash is particularly important for LeEco's innovation. The reporter learned from people familiar with the matter that the number of OEM manufacturers of LeTV has been reduced from the previous three to one, and the withdrawal of the other two is largely due to LeTV's failure to make timely payments. As for the only remaining agent company, LeEco Zhixin has still used all its credit lines, that is, only LeEco Zhixin pays will the agent company provide products, and the payment within the credit line is still in a "delinquent" state.

LeEco's mobile phone business, which has no financial support at all, continues its previous "delinquent" status. The reporter learned that at that time, LeTV Mobile had proposed multiple solutions, including debt-to-loan lending, debt-to-equity swaps and 12-month installments. At present, only Truly Electronics appears on LeEco Zhixin's shareholder list, and the remaining parties have not accepted this condition.

"At that time, many suppliers agreed to pay in installments, but after LeTV's mobile phone paid the first installment, it stopped paying, and most of the purchase was still in arrears." A supplier person who declined to be named told reporters that its current strategy for LeTV's mobile phones is to "provide a batch of goods with a sum of money" and will not increase the amount of arrears.

As for LeSports, it has continuously abandoned many copyright projects that it is proud of, which is enough to show its financial dilemma.

What is the valuation?

The still tight capital chain is undoubtedly an important constraint affecting LeEco's business development. Not to mention that Jia Yueting's shareholding in LeE.com is not high at present. In addition, the company just completed a fixed increase in August 2016, and wants to make another big investment in the short term. The difficulty of financing is imaginable. On the other hand, Sunac boss Sun Hongbin does not support using funds for businesses other than LeTV, LeTV Zhixin, and LeTV Pictures. LeTV's imagination with the help of the model of "non-listed business finance nurturing listed companies" also greatly discounted.

Looking back on LeTV's growth history, LeTV has attracted the attention of the market with its fast-growing video website business and continuous in vitro ecology. Its price-to-earnings ratio once exceeded 400 times, but it still remains at a high level of 80 times.

In fact, it is Le.com's ultra-high valuation level that allows Jia Yueting and others to have enough room to move around, either pledge or reduce their holdings, and use the funds obtained for in vitro ecology, which in turn enhances the valuation of listed companies. Space. This newspaper published an article "Starting the LeEco Capital Chain" on November 9, 2016, stating that LeE.com is almost the core cornerstone of LeEco's financing system. With Le.com, it has the financing ability as a listed company, Jia Yueting and others can move funds, and it has higher financing possibilities for the business of non-listed companies.

Today, except LeTV, LeTV Zhixin, and LeTV Pictures, all other businesses are out of business. For funds that are optimistic about their imagination, LeTV (including LeTV Zhixin and LeTV Pictures, which have plans to go public) should return to its original valuation status.

"The three businesses of LeTV, LeTV Zhixin, and LeTV Pictures are all mature businesses. If they are separated, they can find suitable corresponding targets in the market. It is not difficult to estimate." Some analysts believe that, first of all, LeEco Zhixin belongs to the Internet TV business. With all major TV manufacturers already connected to the Internet, its annual sales volume of 6 million to 8 million is only equivalent to that of medium-sized TV makers. Referring to the price-to-earnings ratios of TCL Group and Hisense Electric of less than 20 times, LeEco Zhixin's valuation can be imagined. Secondly, LeTV Pictures is a mature film and television production company, and the P/E ratio of such companies in A-shares is only more than 30 times. The most difficult thing to measure is LeTV. Compared with its counterparts, Youku Tudou, iQiyi, and Tencent Video, they are not currently listed. However, we can refer to the US$2.8 billion paid by iQiyi when it was planned to be privatized and the US$4.8 billion paid for Youku Tudou when Alibaba acquired it.

"What needs to be noted is LeTV's current related business with LeTV Zhixin." Its further analysis pointed out that due to the large number of LeTV member items being packaged during LeTV sales, LeTV's business has grown significantly. LeTV Zhixin and LeTV's e-commerce, which is responsible for sales, have suffered significant losses. Once the TV business is fully included in the listed company, its consolidated report data will be offset to produce real data.

Editor: Nancy