Liu Jia / Yicai2016-12-07
(Yicai Global) Dec. 7 -- LeSports, the ambitious internet sports firm owned by Leshi Holdings, plans to let go 10 percent of its workforce amid reports about cash flow problems at its parent company, an insider told Yicai Global. LeSports has about 1,000 employees.
Apart from downsizing, the company also said it has optimized its organizational structure and business strategy, hoping to drive a shift toward intensive management and profitability from expensive business expansion. LeSports Eco v1.0 is an ecosystem around media resources, while LeSports Eco v2.0 involves building an ecosystem and providing relevant services based on a portal for sports consumers, founder and CEO Lei Zhenjian said yesterday.
The cash crunch at Leshi Holdings started to take its toll on other business lines, including LeSports. Leshi secured USD600 million in investment from Chinese companies after billionaire founder and chief executive Jia Yueting wrote an internal company letter to employees on Nov. 6, admitting that the tech company faced a cash crunch.
In the past, listed arm Leshi Internet Information & Technology Corp. [SHE:300104] provided funding to sustain the growth of various business units through expensive business expansions, but such a development model may not work in the future.
According to last year’s annual report, Leshi Internet conducted transactions with more than 10 related parties totaling CNY2.71 billion (USD393.4 million), marking a more than 30-fold increase year-on-year. Furthermore, it accrued receivables of around CNY570 million with related parties in the form of prepayments and accounts receivable in 2015. Money was also channeled to affiliates through debt and equity investments.
Leshi Internet closed 7.85 percent lower at CNY35.80 yesterday after falling as much as 9 percent.