(Yicai Global) July 25 -- Jia Yueting, founder of internet company LeEco, remains the villain of the piece to many creditors who maintain that LeEco must make good on its debts, notwithstanding that Jia has resigned all his duties in Leshi Internet Information and Technology Corp. [SHE:300104].

Jia Yueting has held a string of conferences themed 'disruption,' 'ecology,' and 'dream' in the past two years, and this has allowed LeEco to expand and grow rapidly despite misgivings. In China, home to many wealthy investors, any dream can find backing if it finds sufficient supporters. It is just under such a context that Leshi Internet Information and Technology has become the largest company listed on ChiNext, with a market cap once approaching USD30 billion (CNY200 billion).

However, China Merchants Bank (CMB) applied for preservation of assets against LeEco with a court on July 4, as Leview Mobile, an affiliate of LeEco, was in arrears with its loan interest and failed to pay the interest thereon despite repeated collection demands. The court ordered deposits in the name of Jia Yueting, his wife Gan Wei, and three LeEco subsidiaries frozen and the sealing and seizure of other assets. LeEco was reportedly in wage arrears on July 10. Leshi Internet Information and Technology disclosed its 2017 semiannual earnings report on July 14, saying that the net loss attributed to its shareholders was from CNY630 million to CNY640 million in the first half, compared to net profit of CNY280 million the year before.

Jia Yueting extricated himself from this melee forthwith, announcing his resignation as chairman and renouncing all other titles in Leshi Internet Information and Technology on July 6 and hightailing it for foreign shores. He said that, after staying in Hong Kong for two or three days, he would fly to the United States to focus on production of the new energy vehicle Faraday Future (FF) and clear all debts as soon as possible.

Whether Jia Yueting will manage to successfully make cars or even achieve a turnaround is uncertain, but it is a foregone conclusion that a LeEco crisis has erupted. Many believe bystanders should not pour oil on the flames of LeEco's failure in the winner-take-all market. Reviewing LeEco's flop, that of a dream-themed entrepreneurial venture, is advisable to avoid another descent into the same trap, however.

An important factor that led to the LeEco crisis was the exclusive emphasis on expansion, rather than operation. The entire LeEco system currently can be divided into three sub-systems, including the listed company Leshi Internet Information and Technology Corp., unlisted shareholding platforms at home and abroad, and LeSEE, covering seven ecological segments i.e. internet, content, mobile phones, big screen, sports, auto and finance, in which nearly 100 complex affiliates are involved. "Any of the seven ecological segments of LeEco is indispensable," Jia Yueting previously said.

In fact, proper operation of any segment is very difficult. LeEco ran seven segments and all have failed. Its mobile phone segment tapped into the market with low prices and perks and large-scale store openings, but lack of after-sales service and unique features have leached its mobile phone business of any real current value.

LeEco now confronts demands for workers' wages and funds due to suppliers and to service bank loans, as well as shareholders' losses. Some would say LeEco must admit defeat. Whether Jia Yueting violated the law during the period (defrauding investors) is immaterial. Even if he did not, he is still liable to banks and investors. What about employee salaries and payables to suppliers, though? 

LeEco suppliers gathered outside the venue to demand repayment of loans at an extraordinary general meeting of the company on July 17. LeEco vendors mobbed the lobby of the LeEco Building to demand payment. Some brought tents and camped out overnight to wait for Jia Yueting. LeEco owed some CNY7 million to a creditor from Chengdu in China's southwestern Sichuan province, mainly for decoration of a store. The debt was to have been paid last September. This creditor had to sell his car and pledge his house to pay his workers and company suppliers. He had no choice but to ty to collect money at the LeEco Building.

Jia Yueting's dream, described in his PowerPoint presentations, won some support from investors, but these suppliers just gained some orders from LeEco and many of them did not even focus on his dream. These businesses have collapsed, while Jia has fled to the United States. A dream built on the pain of others must shatter.

No matter how this internet company is later defined, LeEco's crisis has overshadowed 'disruption,' 'dream' and 'ecosystem.' New entrepreneurs who grandstand via PowerPoint presentations in this manner will raise some eyebrows. The era of translating concepts into high value is now over.

Indeed, only a bold few may dare now to emphasize their 'dream' at any inaugural event after Jia Yueting.