* 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, units (Adds comments from Sunday conference, updates share movement)
HONG KONG, Jan 16 (Reuters) - 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 Counterpoint Research.
“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 subsidiaries.” ($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)