Alibaba, Tencent circle iQIYI
November 27, 2020
China’s Alibaba and Tencent groups have each held separate talks with Baidu about acquiring video streaming service iQIYI, according to Reuters. But reports say negotiations have stalled on a valuation of around $20 billion (€16.7bn) by Baidu.
Both companies, which have their own video streaming services, are also nervous of heightened scrutiny from China’s antitrust regulators.
TikTok owner ByteDance is also said to be looking at the possibility of acquiring a controlling stake in iQIYI.
Know as China’s Netflix, the Nasdaq-listed iQIYI has a market capitalisation of $16.4 billion, which values Baidu’s 56.2 per cent stake at about $9.2 billion.
While it is the No. 2 player in China’s video streaming market, cash-burning iQIYI has yet to break even in its 10-year history. Its latest quarterly earnings showed drops in revenue and subscribers, punishing its shares which have lost nearly a fifth of their value in the last two weeks. It is also being investigated by the US Securities and Exchange Commission after a by short-seller Wolfpack Research accused iQIYI of inflating numbers. iQIYI said an internal review has found no proof of Wolfpack’s claims.
Baidu’s interest in selling its stake in iQIYI comes on the back of a shift in focus to developing artificial intelligence and autonomous driving – areas which require heavy upfront investment.
Tencent Video was ranked the top player in China’s video streaming market with a penetration rate of 45 per cent at the end of 2019, followed by iQIYI with 43 per cent and Alibaba’s Youku with 27 per cent, according to BlueCatData.
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