Tencent and JD.com will invest in LeEco

19/04/2018

 

These internet giants will invest in LeEco to complement their content and online retail strategies

 

Tencent and JD.com have decided to invest in LeEco, an entertainment television production unit. This choice was made to follow a strategy of expanding contents and online sales strategies. In detail, the two technology giants, according to a document filed to Shenzhen Stock Exchange on Wednesday by the unit’s parent company Le.com, have invested 300 million yuan (US$48 million) apiece to each receive a 2.5554 per cent stake.

Le.com, known legally as Leshi Internet Information and Technology Corp., Beijing, is a Chinese technology company, and one of the largest online video companies in China. It is headquartered in Chaoyang District, Beijing. Le.com’s video streaming service currently offers over 100,000 episodes of TV dramas and over 5,000 movie titles

Regarding the management of LeEco, with new revenues and with the entry of Tencent and JD.com, Le.com will remain the biggest shareholder of the unit with a 33 per cent stake.

To understand where the financial problems of Le.com are born, we must go back to the bad financial choices. Le.com encountered cash-flow problems in late 2016 stemming from an over-expansion of its business into smartphones, sports entertainment and even electric cars. Furthermore, last month Sun Hongbin, chairman of the country’s fourth largest developer Sunac China, after committing more than 16 billion yuan in investments and loans, stepped down after he refused to make further financial commitments.

 

Therefore, the new funding will ease the company’s tight cash flow situation and help reactivate LeEco’s TV making business.

 

The advantages for JD.com and for Tencent will obviously be remarkable. According to a JD.com spokesman, for example, the investment will accelerate JD’s online sales done via TV screens. Just think JD.com launched last year the JD Smart Screen Alliance, which allows smart TV owners to buy directly watching TV.

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