The capital chain is the basis of the entire "LesVision Building." The music's crumbling empire is rooted in this.
Beginning in the second half of 2016, LeTV's fragile nerves for the capital chain began to emerge. In September, the US automotive media Automotive News exposed that FF company had owed contractors Aecom’s $21 million in construction money, which was seen as a sign of LeTV’s ecological financial crisis.
The earliest domestic financial explosion was LeTV. In August 2016, the market began to hear rumors that LeTV's mobile phone supply chain had a funding problem. In November, LeTV's mobile phone suppliers were exposed to the fact that about 10 billion yuan of funds were not received, and suppliers were unable to pull banners to collect debts.
A few days later, Jia Yueting took the initiative to blew up the capital chain crisis, and more than 5,000 characters said that LeTV's expansion was too rapid, and the capital chain and financing capacity did not keep up with the rapid expansion of capital requirements. Jia Yueting said in the letter that “in recent months, the sudden increase in pressure on the supply chain, coupled with the financial issues that have always been associated with the development of LeEco, has led to tight supply and has had a significant impact on the continued development of the mobile phone business.”
Here are a few signals: First, as LeTV, it has never been easy. Second, LeTV’s financing capacity could not satisfy Jia Yueting’s ambitions. Third, if LeTV wanted to survive, it had to shrink strategically.
In January 2017, Sun Hongbin rescued LeTV, LeTV Zhixin and LeTV, with a revenue of RMB 15 billion, and was regarded as a “white knight” by LeTV.
Looking back now, the White Knights did not solve the music dilemma. After 15 billion yuan in repayment of the financial institutions' due bills, LeTV's pending payment bills began to piling up, which was compounded by the easy access to defaulted drivers by LeEco in April. The flow of funds was difficult, and internal conflicts triggered a public opinion crisis. In June, LeTV was unable to repay the funds in a debt purchase 2 years ago, triggering the financial institution to run, and the assets of Jia Yueting and its three companies were frozen by the court. Jia Yueting’s external financing channels were sealed up.
In January 2018, Sun Hongbin's efforts to inject LeTV into LeTV was lost. LeTV was a foregone conclusion. For Jia Yueting, the biggest consequence was the cash outflow and the previous pledge. LeTV.com shares faced with the "explosion" risk, capital flow stagnation.
How hard is it for LeTV? Netease Clearstream Studios statistics found that the LeTV system has directly and indirectly financed, including Jia Yueting’s equity pledge financing and high-level cash funds in the secondary market, totaling as much as RMB 85 billion. LeTV announced that its investment in the next few years will be more than 100 billion yuan. Huge financial exposure has caused LeTV to stagnate in various ecological businesses.
LeTV's own hematopoietic capabilities, which are most capable of performing internal "r&S" supplies for LeTV Building, have long been problematic.
The data that best reflects the true profitability of a company is operating profit (total operating revenue & mdash; total operating cost, without considering changes in fair value, net income from operating investments, etc.). LeTV's operating profit has declined significantly since 2013. . LeTV.com disclosed financial reports over the years. The 2013-2016 four-year operating profit was 2.5 billion yuan, 0.5 billion yuan, -0.1 billion yuan, and -3.7 billion yuan respectively.
"Looking at his own lack of hematopoiesis, and relying entirely on capital to expand his business, this constitutes a major contradiction, LeTV's financial system is very fragile, once the external environment changes, leading to cash flow shortages, the tragedy is prone to happen." "Gang Haoming, chief analyst at Shenwan Hongyuan Securities Research Institute, said to the Netease ClearFlow Studio.
The root of the LeTV system is fragile. Why is it possible to set off a rampage in the capital market?
Extreme “ Negative Profits ”
As LeTV, the creator of the new video streaming media, was preceded by Youku, Tudou, and Sohu video, and then followed by BAT.com.net.com.com.cn, a humble beginning to rely on the reselling content copyright of LeTV, in 2012. In September, he declared that "subversion of traditional TV" and its entry into smart TVs. In the following three years, emulating the “content+hardware” model of Apple not only opened the door to Internet TV, but also quickly became the trump card of LeTV.com and enjoyed the paradigm of eco-learning.
LeTV adopts the “negative profit marketing” strategy and is also the most basic mode of music as a result of its eco-communication: selling LeTVs at a low price, bundling LeTV members, or sports members, converting LeTV hardware buyers into LeTV.com users. This is considered to be the future's most promising and imaginative business model in the age of Internet users.
From the point of view of sales figures, LeTV is far more than almost the same time starting smart TV, not only more than the millet known as hardware, but also far beyond the storm and Li Weigang dominated the micro-whale. According to public information, in 2014, LeTV recorded sales of 1.5 million, 3 million, and 6 million units respectively; in 2016, TV sales of LeTV were nearly 6 times that of Xiaomi TV.
However, LeTV’s “Graduation” results in a diametrically opposite effect on LeTV and LeTV.
The reason why LeTV’s sales are much higher than its competitors is its low price. The sales of television hardware led to a large amount of advertising and membership income for LeTV, which improved the performance of listed companies and boosted the valuation of listed companies. In 2014, LeTV's terminal revenue was RMB 2.7 billion, an increase of 443% year-on-year, of which content payment services and advertising distribution business was RMB 3.1 billion, which doubled year-on-year.
The improvement of performance superimposed on the A-share market. LeTV's stock rose far more than the increase in the Shanghai index. In the first half of 2015, LeTV.com's share price rose from RMB 4.2/share at the beginning of the year to RMB 44.72/share (after ex-rights), an increase of 965%, and the market value increased to RMB 160 billion.
However, this low-cost marketing strategy led hardware companies to “look new” and “empty” sales, but lost a lot over four years. The net profit loss in 2014 was 390 million yuan, and the loss in 2015 was 730 million yuan, and the net profit loss in 2016 was 650 million yuan.
LeTV’s competitor Xiaomi co-founder and Wang TV’s Wang Chuan, the person in charge of the TV, had done an open attack on this kind of “negative profit management”: “The loss of the listed company was covered by the losses of the hardware subsidiary. The hardware is free. Loss in the hardware of the subsidiary, the member is a listed company, the membership fee income accounted for in the listed company, sports membership fee accounting in the sports company, so use the loss of the hardware company to do the performance of listed companies and sports companies. ”
LeTV made new negative profit management, and also polished the net profit data of LeTV. Levision Zhixin is a non-wholly-owned subsidiary of LeTV. According to the 2015 financial report, LeTV.com holds 58.55% of LeTV’s new shares. With this equity setting, LeTV’s new loss data cannot be completely included in the listing. The company also has a few shareholders to bear.
The direct result of this is that listed companies not only obtain a large amount of advertising revenue through the negative profit management model, but also retain some of their losses in vitro through adjustments in accounting statements.
The success of TV enabled LeTV to rapidly expand this model to other eco-hardware — mobile phones. In order to quickly occupy the overseas market, LeEco mobile phone in 2015 spent huge sums of money to acquire the Hong Kong mobile phone company Coolpad, and in the same year in September to enter the Indian market, recruiting and buying at a sharp discount to dump mobile phones, television. Will low sales lead to company losses?
"Looking at mobile phones was originally to enter the market with low-cost sales, mainly selling content and services." "Landscape as a mobile music insider to the NetEase clear stream studio."
However, LeTV not only failed to help LeSco's eco-friendly business model, but it was exposed by the media that its debt to suppliers was as high as 10 billion, making it the first domino of the LeEre Empire collapse. In addition, the LeTV Sports Funding Chain, which has been madly purchasing a large number of tournaments, has also been broken. This kind of synchronous multi-service "subsidy" dragged LeTV's "blood supply capacity", triggering the music as the ecological crisis of credit, and even affect Le Le ecological fine assets.
When Le Shi, the new president of the company, felt that LeTV was teetering on LeSport Building, LeTV's low-cost marketing model was too extreme. In 2017, LeTV would be profitable.
Under the multi-service profit-sharing marketing model, LeTV’s inflow of funds from various ecological sources mainly relies on financing.
In a short period of three years, the LeSco system has a financing scale of over 75.0 billion yuan, of which the listed company's financing scale is around 34.3 billion yuan, of which the IPO issuance financing is 730 million yuan, twice the fixed-income financing is 6.03 billion yuan, and the bond financing 25.3. 100 million yuan. Indirect financing of 25 billion yuan through financial institutions.
However, Jia Yueting’s personal cash flow and equity pledges in the capital market have negatively affected LeTV’s ability to attract gold in the capital market.
In the first half of 2015, when LeTV.com's stock rose madly, Jia Yueting cut 35.24 million shares and cashed in 2.5 billion yuan in June, 3 days. In October, Jia Yueting also transferred the shares in the hands of the company at a price of RMB 32 per share to the investment partnership of Shenzhen Xingen, the next generation of subversive technology and acquisition fund D&C Fund (XinGen Capital GP), with RMB 3.2 billion in cash.
On October 26, 2015, Jia Yueting pledged 78% of the shares (5.1 billion shares) in his hands. If the share pledge rate is 40%, and the average price of LeTV's stocks is RMB 40 per share in October, Jia Yueting pledged to raise at least RMB 8 billion.
This means that Jia Yueting’s personal capital was increased by 13.7 billion yuan through major transactions, agreement transfer plans, and equity pledge financing in May-October 2015.
The equity pledge is a common financing method for the Jia Yueting family. During the three years from April 2013 to October 2015, the Jia Yueting family pledged 38 shares of LeTV.
This ultimately affects the listed company's stock price. In June 2015, 1,000 shares fell sharply and supervision tightened. Traditionally, relying on acquisitions and reorganizations to do high valuations, equity pledge financing, especially for listed companies whose performance has stalled and relied on stories to adjust profits, have been intercepted. After October 2015, LeTV.com's equity pledge data was not announced again. LeTV's ability to attract gold in the capital market has been greatly reduced.
It is not easy for non-listed companies that are still in the concept of the product to raise funds in the primary market, and LeTV has almost exhausted all financing methods.
NetEase Qingliu Studio found out based on public information that, in terms of financing methods, the LeTV system is basically based on the idea that the listed company’s equity and good assets are used as collateral to use various means of financing: internal loans, equity pledges, assets Mortgage, cash + equity considerations, convertible bonds, etc., while promising large shareholders high interest repurchase, frenzied financing.
As of July 2017, LeTV Mobile, TV, Film, Sports, Automotive, Cloud and other public financing amounted to 31.3 billion yuan, of which the financing book had clear protection clauses. Jia Yueting repurchased as a major shareholder with high interest rates or Jia Yueting. Holding shares or other assets in your hands as a pledge.
The Netease Clearing Studio inquires national industrial and commercial information and discovered that LeTV Sports, LeTV New, LeTV Automotive and Real Estate (Levision Building, Shimao Engineering III Project, etc.) were all pledged by shareholder Levision. In addition, in July 2016, the Beijing Pengyi Asset Management Center, formed by LeSports Sports Executives, pledged the LeTV Sports shares held in its hands to Shenzhen Yingda Capital to obtain a fund of RMB 59.43 million.
“The general discount rate of listed companies’ equity pledges is 30-60%, while it is difficult for non-listed companies to pledge, and the pledge rate is even lower, 10-20%. "The above private equity agency told Netease Qingliu Studio."
Overwhelming the last “look and straw” of LeTV's financial capital chain is the interest default of the 2.75 billion Hong Kong dollars that Lelo Mobile (Hong Kong) Co. obtained from the China Merchants Bank 2 years ago.
The loan was mainly used by Lefeng Mobile to acquire Coolpad Group (17.9% of the company's equity). This loan was mortgaged in the form of “cash+equity” and a letter of guarantee was issued by the domestic Shanghai Merchants Bank. Foreign currency loans.
In the financing of LeTV’s acquisition of TCL Multimedia by Levision’s new Hong Kong subsidiary in March 2016, the above-mentioned “Insurance Foreign Loan” was also used in the form of Shenzhen LeightVision M&A Fund (XinGen Partnership), including LeTV.com, Jia Yueting et al. promised to repurchase 15% of the annual interest for three years and make up the difference.
LeTV’s car financing plan also contains the temptation of high interest returns. According to a FF Global Pre-A round of financing plan that NetEase Qingliu Studio learned from investors, this financing is US$ 5-10 billion, mainly using convertible bonds, and the interest rate is 12%. If FF Global completes A round of US$500 million financing, the debt must be converted into equity at 80% of A round of financing. If the Series A financing is not completed within 18 months, the major shareholder will pay the principal and interest in a lump sum in cash.
An investment bank analyst said that the general private equity market's fund repurchase rate is about 8%. This high interest rate repurchase promise and equity pledge not only increases financing costs, but also increases LeTV’s financial risk. Looking back, this type of financing has also become the "Lesso crisis" outbreak "Introduction" & rdquo;.
Intra- and in-person related transactions
LeTV received a large amount of financing, and the investors were criticized for the complexity of related party transactions. Through the LeTV system and other affiliates controlled by Jia Yueting, funds were borrowed and transferred.
Sun Hongbin has been working hard to clear up the complicated connected transactions between LeTV.com and Jia Yueting's LeTV Holdings. According to the large-scale disclosure of related party transactions in the 2016 annual report, Jia Yueting and other subsidiaries had RMB 5.38 billion in guarantee financing for LeTV. Listed companies purchased (commodities or services) up to RMB 8 billion from related parties and sold RMB 11.75 billion. Yuan, which also formed a related receivable of 4.8 billion yuan.
This also means that the inflow of related parties to LeTV in 2016 was as high as 11.8 billion yuan, of which 4.8 billion were still outstanding.
"Lexvision Holdings's other companies have entered profits into listed companies through a large number of related-party transactions, and have assumed losses on their own, thereby realizing cash through listed companies. "Huang Lichong, founder of the International Vertical Strategy Management Group, analyzes the Netease ClearFlow Studio.
Associating the risk of receivables, Sun Hongbin, chairman of LeTV, repented afterwards and made a “misjudgment” that the debt owed by a related party to a listed company could not be effectively repaid.
At Sun Hongbin, Jia Yueting's non-elevision line has always been stupid with listed companies' arrears. Until January 19, 2018, LeTV.com announced a large number of related receivables and prepayments formed since 2016 by the company through the management of Jia Yueting's related parties' sales of goods, provision of services and other business operations, and the payment of disbursements. As of November 30, 2017, the balance of the related arrears of listed companies to listed companies reached 7.53 billion yuan (unaudited).
The announcement also disclosed that the aforesaid related arrears involving more than 50 related parties, including 2.583 billion yuan of Le Vision Intelligent Terminal Technology Co., Ltd., LeTV Mobile Intelligence Information Technology (Beijing) Co., Ltd. 993 million yuan, and Le Vision Electronic Commerce (Beijing) Co., Ltd. 566 million yuan, 486 million yuan for Levision (Beijing) Co., Ltd., and 441 million yuan for LeEco Mobile E-commerce (Beijing) Co., Ltd.
However, this data was objected to by LeTV Holdings, claiming that the number of LeTV.com's debts was a unilateral announcement confirmed by LeTV Holdings and the debt team. It was actually only 6 billion yuan.
The borrowing of related funds also led to corporate management conflicts and exacerbated the crisis of LeTV’s fund public opinion.
In April 2017, Yi Zhou, founder of the company, had problems with the capital chain because LeTV Holdings misappropriated its 1.3 billion loan. Leshi Holding and Yizhi explained in a subsequent joint statement that the loan was originally a Leighton Building collateral, and in November 2016, a joint loan of RMB 1.4 billion was made for LeTV and EasyLink. The two sides explicitly agreed that 100 million yuan will be used for easy access and 1.3 billion yuan will be used for LeEco's ecology. In addition, LeTV has invested nearly 4 billion yuan and a large amount of ecological resources to support easy development.
LeTV Ecological claimed that the amount of foreign investment has accumulated as much as 150 billion yuan, far exceeding the total financing of 75 billion yuan.
Many industry figures vividly compared the internal funding of the company group to "10 bottles of two lids" and "ten bottles of 7 lids". If the latter is the case, it will be possible to make up for the funding gap through the use of funds, and if it is the former, deep magic will not be able to be used. LeTV belongs to the former.
In January 2017, a few months after Sun Hongbin’s rescue of 15 billion yuan in funds to repay financial loans, the bills of maturity of LeSports's major suppliers came to an end, and the new borrowing and financing channels were exposed to financial problems. Unsustainable. In July, a bank run broke out and the court repeatedly frozen Jay Leung Ting and all the assets in his hands. Many LeTV investors included Xingen Capital, which publicly supported LeTV and Jia Yueting on multiple occasions. As the second largest shareholder of LeTV, it slashed its holdings in the first quarter of 2017.
“Reflecting the music crisis in the eco-system, the lesson for us is: First, the company’s founders must be calm and rational in their strategic judgments, and should not expand blindly. Second, social recognition of capital expansion itself has no problems. The single prerequisite is to transfer It is a high-quality asset rather than a conceptual non-performing asset. Third, the company's high-speed expansion needs to pay great attention to cash flow, especially relying on operating cash flow. The story of relying solely on investment financing to drive cash flow is easily punctured. “ Gui Haoming said.