LeEco will be selling its Silicon Valley property less than a year after buying it – another sign that the Chinese tech conglomerate and its electric car subsidiaries face an unstable financial future.
In initially buying the 49-acre property from Yahoo, Inc, LeEco was looking to establish a strong foothold in the U.S. to market its LeSee and to support its Faraday Future electric luxury carmaker subsidiary, along with expanding its tech industry presence in Silicon Valley.
Billionaire founder and CEO Jia Yueting had sent a letter to staff in November admitting LeEco was facing a “big company disease” and was battling a cash crunch after plunging into corporate growth at a rapid pace.
The previous month, the company had made a big splash hosting its official U.S. launch at the Palace of Fine Arts in San Francisco. Jia told the audience the Silicon Valley headquarters would house 12,000 employees.
The cash-strapped company is now making a deal to sell the property to Chinese developer Genzon Group for $260 million, $10 million more than what the company paid for it last June. Genzon did confirm to Reuters that it’s been in talks to buy the site.
The Chinese conglomerate has become a powerhouse in its home market since starting up 13 years ago through a Netflix-like video website and consumer electronics. On the car front, the company has taken an aggressive stance to compete with Tesla and major automaker luxury brands.
Sources inside and outside the company have said that the workforce for LeEco US has been downsized and that may continue. Last May, the company said it had 1,000 employees in the U.S., some of which were engaged in research and development for its electric supercar. In October, Jia said the U.S. division employs “more than 500.”
LeEco has also cut employees at some of its business units in China, and said earlier this month it had cuts nearly 80 percent of its employees in India.
Jia hoped to stabilize the company’s financial condition, and in January pledged the company would see that happen in three-to-four months. The conglomerate was able to secure a $2.2 billion capital injection from property developer Sunac China Holdings.
However, that was only for its entertainment companies, and not for its automotive business. That’s a very capital-intensive business to be in, as analysts point out, and which LeEco continues to discover.
Jia has kept watch over the Faraday Future subsidiary, which he helped fund. Faraday has faced its own wave of challenges. Top executives started leaving in late 2016, and inside sources warned that the company’s future is in peril.
Recently, the luxury electric car startup said it would have to scale back the size and production volume of its plant that it still has to build in North Las Vegas, Nev. Faraday also faces an audit, along with Tesla, from the state of Nevada over tax credits and financial assistance that were provided to get the electric carmakers to set up factories and employ workers.