Jia Yueting’s fake and real moves: Is LeTV’s investment in Coolpad worth it?

Recently, LeEco's subsidiary announced that it would invest 2.19 billion yuan in Coolpad. Not only were the parties involved shocked by the news, but the industry was also in an uproar. The reason is simple. LeEco has already entered the smartphone market with its own brand of mobile phones, and it was quite high-profile. So why did it invest in Coolpad so soon after launching its own brand of mobile phones? It is worth noting that from the perspective of the shareholding ratio after investing in Coolpad, the difference between it and Coolpad's largest shareholder is only 2%. In this regard, some industry analysts said that the possibility of LeEco acquiring Coolpad in the future cannot be ruled out. So what is LeEco's intention in investing in Coolpad this time?

The industry knows that the timing for LeTV to enter the smartphone market is already fiercely competitive and a red ocean. It seems difficult to find opportunities to attack except for price wars. This is probably why LeTV announced the BOM (mobile phone cost price) and talked about the ecosystem when it released its own brand mobile phones. Even so, most people in the industry (including us) are not very optimistic about LeTV's strategy. After all, even if LeTV sells mobile phones at cost price or even at a loss, it is difficult to truly reach the level required by LeTV's so-called ecosystem. I am afraid that Jia Leting, the CEO of LeTV who is good at capital operation, knows this very well. Therefore, we believe that the significance of LeTV's early release of its own brand mobile phones is to inform the outside world and the capital market that LeTV wants to enter the smartphone market and grasp the most important entrance to LeTV's ecosystem.

Since it is selling mobile phones at a loss, it naturally needs financial support. After releasing its ecological strategy, LeTV quickly completed its first round of financing, with investors including Yizhuang International Investment, Haidilao and Haitong Securities, with a financing amount of US$450 million. The industry also has doubts about this financing, that is, whether the money raised will be wasted, especially since one of the financing parties is Haidilao (an outsider) who has nothing to do with the mobile Internet industry. At this time, LeTV (including LeTV's strategy) still gives the industry a very empty feeling. But what happened later was even more unexpected. Jia Leting pledged 6% of his LeTV shares to Oriental Securities. This move once again triggered speculation and concerns about LeTV's future in the industry, but later Jia Leting said that the pledged funds would be used for LeTV's future development. This practice not only showed the outside world and the capital market that LeTV needed financial support, but also showed LeTV's determination to go all out for its so-called ecological strategy, which not only appeased the previous financiers, but also pushed up LeTV's stock price.

As mentioned above, LeEco is well aware of the difficulty of achieving the scale of smartphones that LeEco ecosystem needs at this time, which LeEco must have noticed from the initial launch of LeEco smartphones. This difficulty is not only reflected in the price war, but also in the fact that even at cost price, it is difficult to achieve the scale recognized by the industry and capital market. Losing money is okay, but losing money and not being able to achieve scale in the short term, that is, losing money and not making money is the most terrible and failure. Therefore, LeEco needs smartphones, an important part of its strategy, to achieve scale in the short term, otherwise no matter how good the pie is, it is at best just a pie in the sky (for itself, the industry and the capital market). That is why LeEco has come up with the strange move of investing in Coolpad.

If the aforementioned LeEco's release of its own brand of mobile phones, financing, and Jia Leting's pledge of his own LeEco shares to invest in LeEco were more to show LeEco's strategy and determination to the capital market and attracted great attention from the industry and the capital market, LeEco's investment in Coolpad this time is more substantial. Although Coolpad's mobile phone business has been declining in the fierce market competition, a lean camel is bigger than a horse, and the annual shipment volume of tens of millions is enough to instantly lay a solid foundation for LeEco's previously seemingly empty strategy.

What is important is that Coolpad had a certain brand influence in the industry and had made some achievements in overseas markets. If LeTV invested in Coolpad, or even cooperated with Coolpad Dashen in the future, similar to 360's previous acquisition and establishment of QiKu, and took Coolpad under its own control, LeTV would not only have a foothold in the domestic smart phone market (although it is in the second camp), but also be at least as good as Xiaomi, which it had been competing with before, in overseas markets, and even be ahead, which would add a lot of chips to its future competition with Xiaomi. In addition, since the characteristics and channels of LeTV's own brand mobile phones were more similar to those of Internet brand mobile phones, after investing in Coolpad, LeTV will fight on two fronts with Coolpad mobile phones (traditional mobile phone brand) and its own LeTV brand (Internet mobile phone), at least surpassing Xiaomi and 360 in marketing and publicity. After all, Xiaomi and 360's QiKu are mainly based on e-commerce channels.

Based on the above simple analysis, we believe that LeTV's investment in Coolpad is an important part of LeTV's entire ecological strategy combining the virtual and the real. Especially when the industry has questioned in the early stage that LeTV's ecosystem is more virtual than real, this move will inevitably increase the real elements of LeTV, thereby increasing the credibility of its own strategy in the industry and the capital market and continuing to gain favor and financing from the capital market. From this point of view, LeTV's investment in Coolpad is quite worthwhile (regardless of whether from a virtual or real perspective). Of course, whether it can achieve immediate results in the end depends on what LeTV does next.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.