China

LeEco Reportedly Plans Large-Scale Layoffs Following Cash Crunch

Summary:

  • Due to an internal financial crisis and other issues, Chinese multinational conglomerate LeEco has reportedly formulated a large-scale layoff plan, according to Tencent Tech.
  • The number of employees in LeEco’s Market Brand Center will be cut by 70%; the number of the group’s sales personnel will be cut by 50%; the number of employees in Leshi Internet Information & Technology Corp. (300104.SZ) will be cut by 10%.; and the number of employees in LeSport, the group’s  online sport event broadcasting unit, will be cut from 700 to 200.
  • No layoff plans have yet been formulated for Le Vision Pictures, LeEco’s  film production unit, or Leshi Zhixin, the television manufacturer under LeEco.

Why It Matters:

  • Recently, LeEco revealed a cash crunch and the company has also been suffering from negative news, including a profit decline and management resignations. LeEco’s publicly traded unit, Leshi Internet Information & Technology Corp., posted a net profit of RMB 555 million for 2016, down 3.19% from the previous year. It was the first time in six years that Leshi had posted a decline in net profit.
  • LeEco introduced several measures in response to the crisis, including selling its real estate properties in Beijing to raise money, spinning-off poorly-performed units, and so on.
  • In January, Chinese real estate developer Sunac China Holdings and other investors invested RMB 16.8 billion in LeEco. However, it seems as though the money cannot prevent LeEco from falling into a huge capital hole.