IQiyi Stock Drops 4% After Baidu Files to Sell $259 Million Stake
The stock of China's popular content streaming platform fell 4 percent Friday after a report that Baidu seeks to sell 7.2 million of iQiyi's American depositary shares.
The stock of iQiyi Inc. (Nasdaq: IQ) fell more than 4 percent Friday after its major shareholder, China's top search engine, Baidu Inc. (Nasdaq: BIDU), registered to lower its stake in the company by $259 million.
Baidu has filed to sell 7.2 million American depositary shares if iQiyi today, according to a report by Seeking Alpha. In response, the shares of China's popular entertainment streaming platform fell to $29.92 per share, down $1.27, then lost an additional 17 cents after the bell.
The stock of iQiyi closed down 4 percent Friday, then lost an additional 17 cents after-hours, falling to $29.70 per share.
IQiyi, dubbed the "Netflix of China," began trading publicly on the Nasdaq at the end of March, selling 125 million shares at $18 per share. Its stock rose consistently until the company reached its peak of $46.23 per share on June 19. Since then, iQiyi saw its shares slide, dropping 35 percent overall to today's closing price.
Following the IPO, Baidu took voting control of more than 93 percent of the company, according to iQiyi's prospectus filed March 29. Nearly 36.9 million Class B ordinary shares would go to Baidu no later than March 31, iQiyi reported.
In the same filing, iQiyi said that Baidu has provided the entertainment company with "technology, infrastructure and financial support" since 2010, but that it expects to rely less on Baidu's financial support after the IPO. In a recent backing, Baidu issued to iQiyi a five-year interest-free loan of $99.9 million in January. At the same time, Baidu's obligation to provide user traffic support to iQiyi was terminated, according to the prospectus.
Baidu's chairman and chief executive officer, Robin Li, together with several other top managers of Baidu, serve on the board of iQiyi. In February 2016, the founder and chief executive officer of iQiyi, Yu Gong, who gave an interview to CapitalWatch in May, offered to acquire iQiyi from Baidu, which held an 80.5 percent stake in the streaming service at the time. The bid, proposed jointly with Li, valued iQiyi, at $2.8 billion. Later that year, Li and Gong withdrew their offer.
The market value of iQiyi as of Friday was nearly $22.4 billion.