(Chinese Version)

　　Recently, Le Young’s founder and Jia Yueting’s wife Gan Wei together with her team held a 2017 strategic press conference in Seoul, South Korea, announcing that Le Young has completed it’s new round of financing and that its valuation has hit ¥1.2 billion. Le Young is only founded less than two years ago.

　　This piece of news is supposed to be exiting for the company, yet, it drew the attention of the regulator.

　　On February 24th, Shenzhen Stock Exchange issued a regulation letter (To LeTV Information Technology Beijing Limited’s Holder Jia Yueting and His Spouse Gan Wei). The regulation letter points out that Le Young’s main business is the production and distribution of online TV series, which is similar to listed company’s subsidiary Flower Film & Media. It creates horizontal competition, says the letter.

　　The listed company here is Jia Yueting’s LeTV. And Le Young is founded by Gan Wei, Jia’s wife.

　　The letter states that according to the listed company’s reply, Le Young (originally named as Lexiangxingtiandi Film and Meida limited) was founded in June 2015 and changed its name to Le Young in September. At that time, Ren Yong held 56% of the company’s shares while Gan Wei had 16% and Weixing Film had 86%. In December 2016, Gan Wei held 86% of the shares and became Le Young’s actual holder. In February 2017, Le Young had a capital increase and Gan Wei then held 92.07% of Le Young’s stocks.

　　Shenzhen Stock Exchange believes that Jia Yueting and Gan Wei’s actions violated relevant regulations and demands for adjustments. The stock exchange also demands them to give out solutions to the horizontal competition and fulfil their obligations, reveal relevant information and never make the same mistakes.

　　From TMTPost’s knowledge, the Regulation on Listed Company has clearly stated that a natural person and his or her families and relatives are persons acting in concert. When there is a horizontal competition and the controlling holder and actual controller have a close relationship, there might be interest tunneling, which will pose challenges to the standard operation of the stock market and the market regulation. That’s why Shenzhen Stock Exchange is taking the event very seriously.

　　Previously, TMTPost’s founder Zhao Hejuan had written an article and pointed out that connected transaction is the nature of LeEco's bogus boom. It’s apparent that LeEco’s connected transactions are starting to surface since this event. TMTPost also learned that there are three ways to solve horizontal competition:

　　1. Sign a share-holding entrustment agreement to transfer out the shares

　　2. Transfer the main business that creates horizontal competition to other companies. In other words, sell it to other companies. However, this approach is mainly used when dealing with non-performing asset. Le Young’s recent production Go Princess Go had been a hit show and the company also has had other popular TV shows. That said, Le Young is a company in its rapid growth period and it’s very unlikely it would be sold out.

　　3. Asset restructure: integrating the asset of the main business that creates horizontal competition into the listed company.

　　The three approaches mentioned above have their own advantages and disadvantages. In principle, the second and third approach are the most effective. But LeTV still has a lot of issues in its plate, such as the acquisition of Le Vision Pictures. Therefore, the company would suffer a lot of pressure from the second and third approach. However, the development of this event is strongly influenced by just how strict the regulation will be. Perhaps signing a share-holding entrustment agreement will be enough to end this for Jia Yueting and Gan Wei.

　　Anyhow, LeEco’s connected transaction will slowly emerge from the surface and reveal to us the stories behind.

　　…………………………………

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　　Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.