Jia Yueting, the co-founder and head of Le Holdings Co Ltd. (also known as LeEco and formerly as LeTV), unveiled a concept smart car in April 2016, according to an April 20, 2016 Reuters article. Critics offered praise, calling the car, “Chinese Tesla.” Surprisingly, the concept smart car never went into production. Earlier this year, Le Holdings grabbed widespread attention among Chinese stock investors for the dramatic plunge of its stock price after it resumed trading following a nine-month suspension. 

As the only video website company listed on China’s Shenzhen stock market, Le Holdings’ financial data was once very decent; the stock once hit 179.03 yuan per share and kept its high position of 50 yuan for a long time, according to data from Sina. However, since 2016, Le Holdings has shown various signs of mismanagement, including failed investment, financial reporting fraud and illegal asset transfer. Nevada State Treasurer Dan Schwarzer stated in a Nov. 15, 2016 interview with Reuters, “This is a Ponzi scheme. You have a new company that has never built a car, building a new plant in the middle of the desert, financed by a mysterious Chinese billionaire. At some point, as with Bernie Madoff, the game ends.” Soon after, Le Holdings started the suspension of public trading on April 17, 2017. The session lasted until Jan. 24.

At his peak, Jia was seen as a business leader in the technology sector of China, and according to a Dec. 13, 2017 New York Times article, “he charged into businesses as varied as smartphones, electric cars and sports broadcasting, vowing to challenge giants like Apple and Tesla.” But it did not last long. Jia became trapped by massive debts and flew to California, leaving his company’s stocks suspended and all his debts behind, according to the same New York Times article. Later, he was noticed and named by the Chinese Securities Regulatory Commission and urged to fly back to resolve his debt issues. 

After a nine-month wait, as soon as the trading resumed, the stock price dropped over 10 percent daily for 13 consecutive days, from 30.68 yuan, to only 4.34 yuan, until the stock rebounded on Feb. 8, according to Sina. So, what were the causes of this collapse? 

First, a series of investments run by Jia turned out to be financial failures. Le Holdings invested more than 4 billion yuan. in YiDao, a car service company similar to Uber,   However, YiDao quickly failed under the fierce and aggressive market competition from its competitors DiDi and ShenZhou, backed by Tencent and Lenovo respectively. Later, Jia started promoting his electric smart car, in which he invested more than 20 billion yuan. Sadly, it never came into fruition, and thus the market is not expecting returns from the investment of Jia and Le Holdings. 

Secondly, according to an Oct. 31, 2017 article in Caijing Magazine, 10 officials working for the Chinese Securities Regulatory Commission have been under investigation for suspected involvement in the corporate fraud on financial data. The Central Television of China also covered the story of Le Holdings in a 30-minute special television program, alleging the astonishing disappearance of more than 7 billion yuan from the company’s account. Under pressure and expectating that Jia might be sued for economic crime, the investors in the market had no choice but to sell the shares they held as soon as they got the chance. 

What’s more, Le Holdings’ stocks were suspended from public trading for more than nine months. The reasons given by the company varied from expecting major disclosure to being forced to suspend. The long-lasting suspension of its stock blocked the investors from trading their stocks freely so as to stabilize the stock price, but it was an indirect proof of the public image of Le Holdings’ hardship in management and strategic adjustments, as well as paying dividends and working on its stock price. 

Last but not least, Le Holdings’ business has been expanded beyond the company's ability to bear. Jia started his company as a video streaming portal but quickly expanded it to a multinational conglomerate, selling products from wine to cloud service, from smartphones to smart cars. Similar to the extensive investment in its smart car, it is rare for these projects to be profitable in the long-term . Despite that, Jia kept investing in new programs by borrowing money. No wonder that Le Holdings is called a “Ponzi scheme” by Dan Schwarzer.

How the tale of Le Holdings will end is yet to be seen. Jia and his company’s fall is a cautionary tale for China, where firms can soar and fall at the same dizzying speed. Jia was once pictured as an ambitious and promising leader for Le Holdings. Being ambitious and having a vision is good. There is no problem with that. But as he carries insufficient management capability for his splendid and extensive vision, it turns out to be extremely dangerous and risky for all following him.

 —Editor’s note: An earlier version of this article was incorrect and did not contain Feng's content.