The 44 year old Jia Yueting wants to create music as a huge business empire, from the Chinese LETV has at the same time with the US technology giant Netflix, Tesla plus apple to compete.
Follow this vision, Jia Yueting quickly the company will own streaming media portal expansion from a video for a multinational group, or what he called a "shared ecosystem", the sale of products is calculated from the cloud to the TV, intelligent mobile phone to electric cars and so on. In January 2016, the company will own the name from "LETV (LeTV)" to "LeEco" - LeEco Le Ecosystem (abbreviation: LETV ecological system) to reflect its founder's global ambitions.
The move didn't work, and the company turned into a multi billion dollar quagmire that affected China as a wholeNegotiable securitiesMarket.
Suffer a disastrous decline
As the former employees and outside experts told CNBC, in fact, it is the ambition of Jia Yueting, he and others called "shared ecosystem", eventually lead to too far ahead of this planet once dazzling stars fall technology.
In both domestic and international, the aspiring companies have to fall from the altar, largely because it is too dependent on debt for the increasing number of projects and blood transfusion, most of these projects can not achieve success.
These former music employees are not allowed to be named so as not to damage their reputation. One of the former music staff pointed out that when she reflect on some of the company's project, it was found that this is a gamble.
The former ambassador to the United States in the music office work of women to CNBC said: "Jia Yueting is the company's strategy has been very advanced, but the need to strictly implement the extreme success of these strategies."
She said: "for ordinary companies or employees, perfect execution strategy is very rare, not to mention a company that is experiencing such a rapid expansion of the company."
By the end of 2016, the company had experienced rapid expansion, and its structure became highly complex. In order to ecosystem, users can build a closed-loop system to watch exclusive content through the music application, while the content of their own hardware by LETV (from the mobile phone to play music as intelligent vehicles) - quickly set up 15 subsidiaries and 68 Affiliated Companies.
In addition, although the music still largely by the customer knowledge, and its service until December 2016 in order to obtain widely in the United States, but this did not stop the company set up the headquarters of the United states.
In June 2016, YAHOO acquired the company is located in California city of Santa Clara (Santa Clara) about 300 acres of land, and claimed 12 thousand employees from the local recruitment plan, the goal is to establish its global headquarters in Silicon Valley. In contrast, according to the report earlier this year, Facebook in Menlo Park, California (Menlo Park) headquarters has only 9000 employees, and Google in the California mountain view headquarters employs about 20 thousand employees.
Another former music employee pointed out, "you can be optimistic, but don't exaggerate."." He worked at the company's Hongkong office last year.
The former employee, who requested anonymity, said in an interview with CNBC phone: "other companies are laughing at us.". How can your employees jump from 200 to 10000 in 2018? It's bigger than Facebook!"
The insider said he was disappointed in the company and was upset about the future of music. He quit his job last year.
He also said: "music is a hierarchy of companies, but the top executives do not understand the market outside China.". He (Jia Yueting) wanted to do a lot, but his knowledge structure was not enough to support his idea. In addition, the recruitment of music as the talent is not very strong, nor is it very talented. What can money do? Money can't solve strategic problems, money can't buy talent."
But in music, even money is slowly becoming a problem.
When the local media in Silicon Valley were scrambling to report the new comer's active expansion plan in the region, investors began to worry about the health of the financial sector.
Turn on the red light
Beginning in 2016, China's domestic media and Sina, micro-blog, and the United StatestencentWeChat and other social media posts, began to point out that music listed subsidiaries in Shenzhen released red light.
This subsidiary company -- LETV information technology (Beijing) Limited by Share Ltd (Leshi Internet Information)
And the same year, its revenue increased by only 8 billion 930 million yuan, so in 2016, LETV revenue growth in nearly 60% from the increase in accounts receivable.
At the same time, the company said operating cash flow was negative 1 billion 70 million yuan in 2016, down 221.97% from the previous year.
Obviously, with the surge in accounts receivable and cash flow plummeted, the music as the cash has been exhausted.
A former music employee said, "I heard someone calling the doorbell of India office. There's an advertising company asking for payment, but we don't have the money to pay."
In addition, LETV LETV and related party transactions soared, which has aroused widespread suspicion that LETV may use financial skills to exaggerate their own sales data.
In 2016, LETV reported that sales with related parties reached 11 billion 780 million yuan, an increase of 655% over the previous year, accounting for more than half of the company's total revenue.
As investors worry about the risk of music cash flow problems, investors began to sell LETVshares. By the end of 2016, the company's share price plummeted 55% from its peak in 2015, and fell by another 14.3% in 2017. Subsequently, the company called for suspension.
"I know the company may face cash flow problems last year (2016) and around July," recalls the former employee of the Hongkong based music office. I heard someone press the doorbell of India office, and there's an advertising company asking for payment, but we don't have the money to pay."
LETV spokesman declined to comment on issues of financial mismanagement, fraud and suspected comment cash shortage etc..
At the end of 2016, Jia Yueting acknowledged that the company was facing serious financial difficulties. Soon after, as the music gets worse, it caused a series of Domino effect: the company to stop the electric vehicle in Nevada manufacturing plant project; disclosure of the sale of the company based in Silicon Valley, and plans to lay off hundreds of people; the abolition of American television maker Vizio acquisition, causing the latter to sue for compensation LETV the $100 million fee the buyer to terminate the contract.
LETV prosecution does not fulfill the debt and other negative news is increasing on the occasion of the supplier, a Shanghai court ruled in July 3rd this year, China Merchants Bank Chinese owed by a loan in default, and freeze LETV and Jia Yueting holdings of 1 billion 240 million yuan worth of assets.
A few days later, Jia Yueting resigned as chairman, including LETV all positions, and said he will instead focus on creating music as its future automotive subsidiary, Faraday (Faraday Future), which is a potential rival tesla.
By a series of lawsuits and the reputation of the case, LETV was handed over to a new management team, Chinese real estate developer SUNAC China chairman Sun Hongbin was appointed as the new chairman of letv.
Earlier this year, Sun Hongbin invested $2 billion 400 million in music, in exchange for shares in the company's core television and film business.
The fall of music is a lesson for Chinese regulators. Recently, Chinese regulators have begun to pay close attention to the so-called "shared ecosystem" and to crack down on suspicious related party transactions.
At the beginning of October, Chinese newspaper "twenty-first Century economic report" quoted insiders as saying that Chinese Commission began requiring more disclosure of listed companies, to reduce the related party transactions.
According to the report, some sources said that China Securities Regulatory Commission has begun to tighten the supervision over the technology companies with complex corporate structure or a number of related parties.
The source told the "twenty-first Century economic report": "the risk of LETV exposed to the entire market have been learned, regulators have begun to take the so-called" shared ecosystem "in the name of the related party transaction investigation."
This trend can be seen from the latest ban issued by the China Securities Regulatory commission. This year 10 month, Chinese Commission prohibited 5 Insurance Company and the parent company to conduct financial transactions, including HNA Group, the life insurance.
China Commission also tightened the initial public offering (IPO) approval process, requiring IPO companies to follow more stringent capital requirements and accounting standards, information disclosure rules. China Securities Regulatory Commission released data show that as of the end of the third quarter of this year, IPO approval pass rate was 80.99%, down by nearly 10 percentage points compared to 90.96% in 2016.
The fourth quarter, the Commission on the approval of IPO China seems to start the implementation of more stringent standards: since the end of September this year, the new Chinese Commission issued the Audit Committee since he took office, IPO approval rate dropped to only 56%. According to Reuters, in November 7th, the Committee approved only one of six IPO applications, creating the lowest one-day rate of IPO since 2015.
"A recent tightening of compliance auditing has become more stringent," a source told a CNBC brokerage firm in Beijing."
He added: "the overall approval rate of IPO has dropped to its lowest level in the last 10 years." He asked for anonymity because of professional reasons.
Music as the future
At present, music is still at the center of the storm.
It is said that Jia Yueting resigned after staying in the United States, he has remained relatively silent, which makes the domestic debt holders and LETV employees do not know where he is, what time to return.
Last month, a Chinese science and technology news media reported that Jia Yueting intended to apply for Faraday's future bankruptcy in the United States, and then sell it to U.S. investors.
Music spokesman denied rumors about Faraday's bankruptcy in the future.
But whether Jia Yueting continue low-key act, or by Faraday coming back, one thing is clear: "sharing ecosystem" used to be a symbol of Chinese global expansion and the multinational enterprise group, is now a risky word. (Liu Chun)