When Zeng Liqing co-founder of Tencent Group Holdings Ltd. [HK: 0700] said July 16 that LeEco was “evidently a Ponzi scheme,” not only did he enunciate what many were already beginning to believe, but also sounded the death knell to and simultaneously delivered the eulogy for Jia Yueting’s group, a Le-prefixed conglomerate of shape-shifting companies all spawned by what had long been touted as the vision of one man, a vision which now seems with hindsight more like illusion -- even willful delusion verging on deceit.
The cracks started appearing in the facades of Jia’s “many mansions” some months ago as more and more Le-companies became unable to meet their current obligations. Push came to shove when a court froze USD27 million (CNY182 million) of Jia’s assets earlier this month. Right afterwards, he abdicated as Le-chairman, whereupon his increasingly-frantic creditors started camping out in the lobby of LeEco’s Beijing headquarters. “Bankrupts disappear,” as Baron Danglars noted in The Count of Monte Cristo, and Jia has now done just that, absconding to the US, ostensibly to devote his not-inconsiderable energies to developing the new-energy Faraday Future concept car so near to his heart, but then concepts have always been near to Jia Yueting’s heart, and have arguably always been his only real stock-in-trade, concepts neatly packaged as PowerPoint slides. An important factor that led to the LeEco crisis was the exclusive emphasis on expansion, rather than operation. Like the Ottoman Empire before him, as long as Jia’s polity kept expanding all was well, but as soon as expansion stopped, contraction set in as its structural flaws manifested themselves, and utter collapse soon ensued when triggered by a catalyzing event. “The era of translating concepts into high value is now over,” was columnist Xu Yunfeng’s take on the Le-crisis.
This cautionary tale prompts the question: at what point does a Jia Yueting or a Bernie Madoff cross an invisible line of no-return, a Rubicon which morphs a paragon into a pariah?
Jia’s stateside whereabouts are currently unknown. His companies are falling like dominoes. He himself is probably holed up in one of the many luxury residences he is said to own in the US, but these can be traced. He is apparently not yet a wanted man -- legally, at least, but will probably be held to account for many Le-debts.
He might thus be well-advised to inquire as to whether Ted Kachinsky’s old cabin in Montana is vacant.Keywords: LEECO, TENCENT