$145 million in value lost in a single day: investors are still worried about LeEco

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On Tuesday, as rumors of layoffs at Chinese tech giant LeEco spread, investors once again hit the dislike button. By market close, the stock had dropped nearly eight percent, shedding about US$0.45 of per share value in a single day. The company, which is listed on the Shenzhen Stock Exchange, ended the day at US$5.21 per share. The drop caused LeEco’s total valuation to shed US$145 million.

Any company is bound to have a rough day in the markets with rumors of layoffs flying, but LeEco’s Tuesday number is just the latest drop in what’s looking more and more like a long-term trend. Over the summer, its per-share value nearly reached US$8, and at the beginning of November, the value was still well above US$6. But then came news of a serious cash crunch. And although later in the month the company announced a new US$600 million round, that clearly wasn’t enough to assuage investors’ concerns.

The drop isn’t likely to continue today, but nor is it likely that shares will soar back up and regain the value that was lost on Tuesday.

The worst case scenario for LeEco is that on a broad scale investors are beginning to lose faith in the company. Having just moved into the US and with an ambitious self-driving car project still far down the pipeline, LeEco has plenty of avenues for future growth, but it’s unlikely to be able to realize its aspirations – especially in the self-driving car market – without continued access to outside capital. And while venture investors will be more likely to take a risk on LeEco’s long-term future prospects than the day traders playing the Shenzhen stock market, there’s only so much value the company can shed before even VCs start looking at it sideways.

Tech in Asia contacted LeEco for comment on this story, and will update it if we hear back.

This piece contains opinions.

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