Major Financing Changes Are in the Pipeline at LeSports, CEO Says

Liu Jia / Yicai

2016-12-08

(Yicai Global) Dec. 8 -- The internet sports firm owned by Leshi Holdings that is laying off 10 percent of its workforce amid reports about cash flow problems at its parent company plans to make public in the next one to two months major changes in funding, especially financing, LeSports CEO Lei Zhenjian told Yicai Global.

Leshi Internet Information & Technology Corp. [SHE:300104], Leshi Holdings' listed arm, will never offer lending to LeSports, which has its own funding plans, Lei said in an interview. LeSports had always intended to downsize its workforce by 8 to 10 percent since being set up in 2014, he added.

The cash crunch at Leshi Holdings has taken 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.

"The adjustment just coincided with some troubles encountered by the whole of Leshi Holdings," Lei said. "At the moment, I need to make sure that my team is strong enough."

The ambitious internet sports company has plans to expand its personnel to more than 1,500 by 2017.

Lei noted that in the past two years he has been focusing on market share and user base, but after completing round-B financing this year, he found that many fundamental aspects had not been effectively improved through rapid business growth. “This is unsustainable,” he said.

"LeSports will always be a ‘bloodsucker’ when it comes to content on the top tier,” Lei said. “In 2017, however, we'll restrain ourselves from investing irrationally in products or content that come at an extremely high premium. Transaction prices will be determined based on the business model, where the priority is ‘gains and losses.’"

According to Lei, LeSports hopes to garner large numbers of users through media, and create new business drivers accordingly, which is a significant reason for the company to set up the new media, online and offline business and sports consumer goods divisions recently.

He told Yicai Global that the company has set different objectives for the three core businesses mentioned above in 2017. For media operations, the negative gross margin will be kept between 30 and 50 percent and net profits are expected for the offline commerce and consumer goods divisions.