Treating Music and Music: Crisis, Roots and Outcomes

"LeTV is my life!" On December 23, Leighton's chairman and CEO Jia Yueting wrote in a micro-blog.

According to LeTV's official statement, Jia Yueting is suffering from thymomas and she should be in a hospital ward in Beijing at this time. LeTV.com is headquartered in Beijing's Hongcheng Xintai Building, near the Chaoyang Park on the East Fourth Ring Road. It is not far from major hospitals like Concordia and Tongren. But even so close, the hero-style figure who founded and led LeTV Can't go back easily.

He left overseas in early June and returned to Beijing at the end of November. Until now, Jia Yueting has lived behind the scenes for as long as six months. In this six-year period, LeTV has experienced multiple challenges such as regulatory turmoil, political rumors, and capital crisis. With the help of the media, some of the mystery of LeTV was gradually revealed, but more secrets are still under water.

In the days when Jia Yueting was not in attendance, LeTV’s management made every effort to create a kind of “everything normal” appearance. Unfortunately, things are not moving in an optimistic direction.

On December 22, LeTV.com shares fell below the limit. On December 23, it fell by nearly 3% to close at 29.23 yuan, which was only 0.03 yuan higher than the issue price of the 2010 IPO. With the news that the plan was being investigated, the discussion about the future of Let's go is all over again. What kind of crisis does LeTV face, and what are its root causes? Netease science and technology through a lot of interviews and finishing work, trying to show its true context.

Triple crisis

Supervision, politics, and capital are three big mountains facing LeTV.

The Letv crisis began with a regulatory turmoil. In June of this year, the State Administration of Press, Publication, Radio, Film and Television, the regulator of the Internet TV industry, issued a ban and continuously regulated industry behavior. In the past, LeTV, who was the most high profile performer, took the brunt of it. As a result, the LeTV box ceased to be sold and has not recovered.

As an effective means to capture the TV stock market, the box has low cost and flexible use, and it is in line with LeTV's concept of content charging. Being off the shelf means that LeTV’s business model has lost a large number of potential user groups, and its prospects are bound to be greatly reduced. Outside of the box, LeTV’s TV business has not yet received the same treatment, but it does not mean that the SARFT will adopt two sets of regulatory standards on both the box and TV end products. In the future, it is entirely possible to extend the scope of supervision to television. At that time, LeTV will have to carry out a lot of rectification work. It remains to be seen to what extent the business model of profitable free content of hardware can be launched.

LeTV’s P/E ratio was once as high as 100 times. The price-earnings ratio represents the investor's preference for his future. The copyright and content are the past of LeTV. The internet TV business is the future of LeTV. The success of the promotion is a matter of success or failure. The current situation is that LeTV has been unable to withstand the slightest torment of the policy. Once the bad news strikes, it is likely to fall short of success.

Earlier, media reports such as “Finance”, Caixin, and Chai have combed the intertwined relationship between Jia Yueting and the completion of the order and Huijin Cube. According to public reports, besides being suspected of having a gray operation during the development of LeTV, Jia Yueting may also be one of the early partners of Huijin Cube.

The equity of Beijing Jinjiesen Technology Co., Ltd., an early investor in Huijin Cube, was anchored in Jia Yueting’s high school classmate Jia Yunlong. However, in a recent interview with the media, Jia Yunlong claimed that he was unaware of this, and said that he had once borrowed an ID card from Jia Yueting; if the holding status was established, Jia Yueting would be involved in the completion of the order.

According to reports, the order is currently being investigated. The Huijin Cube, which was completed by the chairman, has been involved in seven companies including Letv.com in the past few years, and has helped them successfully go public. There are more than a billion profits from the media statistics bank. If Jia Yueting is indeed one of the early partners of Huijin Cube, the involvement will be far beyond LeTV and the situation will be even more complicated. As the soul of LeTV, Jia Yueting has been “hidden” for a long time. In the future, if “bad news” is reported, LeTV’s management and investors may be in a state of panic.

If the crisis at the regulatory level and the political level is not yet in sight, and it is not controlled by music, it can only be fatal, and the crisis at the capital level is imminent and thorny. Jia Yueting currently holds 44.21% of the shares of LeTV. In order to meet the strong fund demand of LeTV Group's business, Jia Yueting pledged 73.36% of his shares.

A securities industry source told Netease Technology that the pledge rate for the GEM stocks this year is about 40%. According to LeTV’s announcement, Jia Yueting’s timing for pledges of stocks is usually at a time when stock prices are high. If calculated on the basis of 40 yuan, Jia Yueting’s pledged actual amount of each stock is about 16 yuan. In accordance with the provisions of 135% of the CSRC as a warning line and 120% as a closing line, when LeTV's stock price drops to 21.6 yuan, it must add a pledge, and when it falls to 19.2 yuan, brokers and banks will force a liquidation. . By then, a large number of stocks will enter the secondary market, and LeTV's share price will continue to collapse. Jia Yueting will therefore lose control of the company.

In recognition of this crisis, LeTV announced in August this year that it plans to raise 4.5 billion yuan in non-public offerings, but there is no clear progress in this financing. Prior to the arrival of this "help money", LeTV must stabilize the stock price. In order to strengthen investor confidence, LeTV has told stories such as eco-agriculture, new energy vehicles, smart toys, and internationalization in the past few months. It also provided Jiayinfang with interest-free loans to the company and management collectively increased holdings. Investors have expressed their attitude, even at the expense of "cutting meat" and wanting to be listed separately into the listed companies.

There are problems in all aspects of business, founders and company operations. This can not help but ask questions: Where are the root causes of these crises? How does LeTV go to this day?

One source

As we all know, before wading in the Internet TV industry, LeTV was a little-known website. Although it holds a large amount of copyright and is the first to achieve profitability, the enterprises listed on this GEM are in the eyes of Youku, Tudou and Sohu. Inconspicuous. The advantages in terms of license plates, industry resources, etc. did not make LeTV's meaningful success. Until then, the introduction of boxes and TVs gave the company a star-studded sense of stardom.

The announcement shows that from 2013 onwards, Jia Yueting began to frequently pledge his own shares, reflecting the extreme desire of LeTV for funds under the influence of television business. It is undeniable that LeTV, which focuses on Internet TV business, has a preconceived and good brand. Its content and hardware quality have also been highly recognized by the market. The business model is highly sought after. However, as the so-called calf is hard to pull the cart, LeTV's foundation in the past is too small, and the future will have to do too much.

Different from the expansion path of BAT, Xiaomi, 360 and other companies, LeTV does not have a core business that can help it to attack and retreat. The lack of access to GEM refinancing channels and the preference of domestic stock markets for “listening to stories” have determined LeTV's expansion from that of China’s stock-based companies—a story based on story-raising funds and capital. As the business line becomes wider and wider, more and more funds are needed. If there is no new money to enter, the old business may not be able to progress.

This is where LeTV loses control and cannot stop. After slamming into the external crisis of supervision, politics, etc., many investors fled in desperation and the weakness of funds became increasingly prominent.

All in all, the accumulation of music in the past would have been unable to carry Jia Yueting's lofty ideals, and the faster he would go after forcing the road, the greater the risk of derailment.

Two outcomes

Although LeTV’s capital crisis has intensified, industry experts generally believe that banks and securities companies that are on the same boat as LeTV will not let them sink easily. Because once the stock price fell to the closing line, it means that these institutional investors have done their best and suffered heavy losses.

In other words, the real crisis of LeTV is at the business and founder level. An expert told Netease Technology that as the situation further evolved, if there were even worse circumstances that led institutional investors to support the market, Jia Yueting and its core management team would most likely face the situation of “retreat behind the scenes”.

Of course, if Jia Yueting’s personal crisis can be resolved in time, it will be a better result for LeTV.

In any case, after the storm, LeTV needs a comprehensive reform, forgetting the resource advantages that had depended on it in the past, returning to the attitude that a public company should have, and maintaining a sound and transparent development, forgetting “subversion” and recognizing itself.

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