White knight's departure adds to Leshi woes

Property tycoon Sun Hongbin steps down as chairman of troubled internet company

Chinese property tycoon Sun Hongbin has resigned as chairman of Leshi Internet Information & Technology Corp, the listed arm of Chinese internet company LeE-co, adding to the uncertainty surrounding the debt-laden company.

After only eight months as chairman, Sun will also leave the board of Leshi, and Liu Shuqing, the company's general manager, will serve as acting chairwoman before the board picks a new candidate, Leshi said in an announcement on Wednesday.

Leshi shares were suspended on Wednesday afternoon, after rising sharply earlier this week. The stock has been volatile since resuming trading on Jan 24 after a nine-month suspension.

"Sun's departure means he has almost given up an attempt to rescue Leshi in the short term. It is easy for Sun to gain back the loss from other businesses and it is not necessary for him to trap himself in Leshi's cash crunch," said Shen Meng, a director of boutique investment bank Chanson& Co.

"We don't exclude the possibility that Leshi will introduce new investors and new capital will be injected into the company."

Under extreme conditions, it is possible that Leshi will be involved in lawsuits due to debt problems, and finally delist from the stock market, Shen added.

Founded in 2004, LeEco started as a video-streaming service provider, akin to Netflix Inc, but grew rapidly into a tech heavyweight with a presence in smartphones, TVs, cloud computing, sports and electric cars.

Leshi made a profit of more than 550 million yuan ($87 million) in 2016, but struggled along with its parent company LeEco last year.

Sun, who was also chairman of Sunac China Holdings Ltd, took charge of the heavily indebted company in July last year and his company has injected $2.2 billion into Leshi.

Leshi reported a net loss of $1.84 billion last year, a sharp drop of 2,192 percent compared with the previous year. It attributed its operational loss to the financial strain of related parties, liquidity issues and rising financing costs. LeEco's founder Jia Yueting remains the largest shareholder in Leshi, holding 1.024 billion shares, which account for 25.67 percent of the total, even though he has resigned from all his positions at Leshi due to unpaid debts and the financial crisis.

Jia is now focusing on LeEco's automobile unit and struggling to raise capital to fund a US-based electric car startup Faraday Future.