* Sunac shares drop as much as 10 percent to 2-week low
* Sunac investing more than half its market value in LeEco
* LeEco founder has said company facing financial obstacles
* LeEco to invest funds in smartphones, non-listed entities,
(Adds comments from Sunday conference, updates share movement)
HONG KONG, Jan 16 Sunac China Holdings
shares plunged as much as 10 percent on Monday, after the
property developer announced plans to invest $2.2 billion in
cash-strapped Chinese technology conglomerate LeEco.
Sunac on Friday said it would invest 15.04 billion yuan
($2.2 billion) in the TVs-to-electric cars group LeEco, in its
first investment outside its core assets, but the move stoked
worries about its liquidity given the amount was equivalent to
more than half of Sunac's market value.
Sunac President Wang Mengde, however, sought to allay
worries in a news conference on Sunday, saying: "Our investment
this time is equivalent to about one or two of our property
project investments and it won't affect our property expansions
in future years."
Shares in Sunac, worth around HK$28 billion, dropped to as
much as HK$6.56, the lowest since Jan. 3, and were down almost 8
percent at HK$6.72 by 0641 GMT. The benchmark Hang Seng Index
was down only 1 percent.
Sunac, which has been seeking investment opportunities
linked with China's technological innovation, said it will
finance some of the investment through loans.
For cash-strapped LeEco, which has rapidly expanded into
electric and driverless vehicles, television and smartphones as
well as film production, the latest round of funding will help
ease its liquidity crunch.
Apart from Sunac, LeEco also attracted 1.8 billion yuan
investment from Le Ran Investment and Hua Insurance.
From the new funds, LeEco's listed unit Leshi Internet
Information and its holding subsidiaries will
receive 7.1 billion yuan, LeEco said.
But some observers remain lukewarm about LeEco's prospects
to resolve its cash problem in the longer-term, given the firm
has not fully launched some product offerings yet, nor has it
made large sums of money from its ever-expanding operations.
"The current capital infusion will not permanently solve
LeEco's problems," said Neil Shah, research director of
"Rather LeEco will need to prudently spend the investment to
keep the ball rolling and focus on selling its offerings to
build a tighter ecosystem of content, devices, and users to
realize some return on investment," Shah said.
At a press conference on Sunday in Beijing, LeEco founder
and Chairman Jia Yueting said LeEco's new investments will focus
mainly on the company's businesses outside of its car segment.
"About 10 billion yuan of funding will completely be
invested in LeEco's non-listed entities, including for
globalization, the smartphone business, as well as the many
($1 = 6.8937 Chinese yuan renminbi)
(Reporting by Jess Macy Yu and Clare Jim in Hong Kong,
additional reporting by Catherine Cadell in Beijing; Editing by
Miyoung Kim and Himani Sarkar)