LeEco admits to problems in suppy chain and cash

Jia Yueting, co-founder and head of Le Holdings Co Ltd, also known as LeEco and formerly as LeTV, uses a computer on a staff's seat as he poses for a photo after a Reuters interview at LeEco headquarters in Beijing,picture taken April 22, 2016.[Photo/Agencies]

Chinese technology company LeEco founder Jia Yueting released an internal letter to his employees, indirectly admitting some of the rumors about supply chain and capital issues that caused the company's shares to plummet, China Securities Journal reported.

Jia talked for the first time about what he thought about the overly rapid growth of the company in the letter, dated Sunday.

"There is a problem with LeEco's growth pace and organizational capacities," Jia said, adding that the company's global expansion had gone too far despite limited capital and resources.

He said management should take responsibility for that, and volunteered to accept an annual salary of one yuan from now on.

Jia revealed that the company spent lots of money (about 10 billion yuan) on the LeSEE car in its early stage. LeEco unveiled the all-electric concept supercar LeSEE, a rival to Tesla's Model S in April.

On Nov 2, shares of Leshi Internet Information and Technology, which went public in 2010, fell nearly 7.5 percent on rumors that LeEco defaulted on payment for suppliers.

Over the last three trading days, its shares have plummeted 10.42 percent, with market value evaporating over 9 billion yuan.

Jia also announced in the letter that the company has entered the second phase of ecological strategy: oriented by operation, LeEco will focus on the current ecological and regional market, as well as high quality and sustainable development.

Jia said LeEco will embark on supply chain optimization to form an ecological alliance with upstream and downstream manufacturers, reduce expenses and intensify cost control and operations in a bid to ensure the ecological operational cash flow is positive and sees fast growth.

Founded in 2004, LeEco started as a video-streaming service provider akin to Netflix Inc, but it rapidly grew into a tech heavyweight with presence in smartphones, TVs and most recently, the sports industry.

Shares of the Shenzhen-listed Leshi Internet Information and Technology opened at 5 percent down on Monday.