Chinese streaming platform iQiyi denies Baidu selling its stake in the company

Earlier today, a Reuters report saying that Baidu, China’s search engine giant, is looking to sell all of its iQiyi stakes, rattled the market. Baidu, which owns 53% of iQIYI and holds more than 90% of its shareholder voting rights, wants to sell iQiyi at a target valuation of USD 7 billion, amounting to USD 8.13 per share compared with its latest closing price of USD 4.67, according to Reuters citing two people familiar with the matter.

iQiyi is one of China’s most popular video streaming platforms, with a focus on VR content, and has its own VR headsets. In the first quarter of 2022, iQiyi achieved quarterly revenue of RMB 7.277 billion, down 8.7% year on year. The company’s non-GAAP net profit was RMB 162 million, marking the first time iQiyi achieves quarterly profit. In the same period last year, iQiyi had a net loss of RMB 1.020 billion.

The divestment plan is in its early stages, and has drawn interest from Hong Kong-based private equity firm PAG, China’s state-owned telecom company China Mobile, according to Reuters. Neither of the two has commented on the matter.

Shortly after Reuter’s post, iQiyi responded via Chinese finance media Yicai, denying the news. “The information is untrue and is purely rumour,” says iQiyi, whose stock fell 4.7% after the news, while Baidu rose 4% in premarket trading on Wednesday.

Long video streaming platforms in China including iQiyi have long struggled to deliver profit. Platforms’ operation costs run high due to ghastly production costs for variety shows and TV dramas, while advertising revenue is declining since the rapidly-growing short-video platforms are becoming advertisers’ new favorites. In addition, users often object platforms to raising subscription fees or charging pay-per-view fees for hit titles, making platforms difficult to grow on that front.

Baidu, which started off as a search engine and internet services company, has since grown into a tech giant, with its prominent AI, autonomous driving, and cloud businesses. Video streaming and entertainment are not considered Baidu’s core business.

iQiyi, known as China’s Netflix, went public on Nasdaq in 2018, and its market value has fallen from a peak of more than $30 billion in June 2018 to around $4 billion now.