Founder's Deeds Do Not Saddle It With USD1.6 Billion Buyback Duty, LeTV Says
Xu Wei
DATE:  May 17 2019
/ SOURCE:  yicai
Founder's Deeds Do Not Saddle It With USD1.6 Billion Buyback Duty, LeTV Says Founder's Deeds Do Not Saddle It With USD1.6 Billion Buyback Duty, LeTV Says

(Yicai Global) May 16 -- Its ex-chairman Jia Yueting is responsible for the share buyback by LeSports, and LeTV should not be held to account for cases spawned by the personal acts of its fugitive founder.

A staffer with Beijing-based Leshi Internet Information and Technology -- LeTV for short -- said this to online media The Paper, which reported it yesterday.

Investors filed arbitration cases against Lele Interactive Sports Culture Development after it failed to list last year, and against its original shareholders, including LeTV, demanding they repurchase the shares these investors bought. The Beijing Arbitration Commission that heard the case ordered LeTV to repurchase the shares for up to CNY11 billion (USD1.6 billion), LeTV announced yesterday.

LeSports, which spun off from LeTV in 2014, closed it's a-round financing with a valuation of CNY2.8 billion in May 2015. It then completed its CNY7.8 billion B-round one year later and gained a valuation of CNY20.5 billion.

LeSports' agreed with the B-round investors that if it failed to list before Dec. 31, 2018, its original shareholders, including LeTV, Jia-controlled Lele Interactive and Beijing Pengyi Asset Management Center, had to buyback all the investors' shares in cash at an agreed price and pay in full within two months upon their written request.

LeSports was nearly paralyzed and had no hope of going public as its parent LeEco became mired in a financial meltdown and Jia went to California to promote an electric vehicle brand there, and has not returned, though he is under a court order to do so. These investors have sought the buyback since last year, and 14 shareholders have thus far filed arbitration cases against the listed company.

Shenzhen Qianhai Situo Fund Investment Partnership filed asked the BAC to direct LeTV, Lele Interactive and Pengyi Asset to cough up the repurchase amount, and the panel returned an adverse final award against LeTV, per the announcement.

The BAC ruled that it supports all claims by LeSports shareholder Qianhai Situ, and that LeTV and the other respondents must pay CNY132 million for the buyback, per the announcement.

The is the first court ruling for such cases, the other 13 cases are still pending, but the maximum liability for redemption will be CNY11 billion if the listed company loses al these cases, the announcement said.

"Jia guaranteed LeSports without asking permission from other shareholders during his tenure, and the financing amount exceeded CNY10 billion," a LeTV staffer said.

"The company will have no power to revive if over CNY10 billion in debt suddenly materializes out of thin air. Bankruptcy reorganization, asset restructuring and debt restructuring will lose any basis for their implementation. Liquidation will become the sole resort, and all efforts made before will have been in vain."

LeTV has not fulfilled the procedures for approval, review and signing, in accordance with relevant laws and regulations, and so to saddle it with the buyback liability LeSports supposedly assumed in the funding round is unfair, and the legal effect of the supposed pledge is thus dubious, LeTV had previously announced.

Editor: Ben Armour

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Keywords:   LeEco,Leshi,Jia Yueting