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Baidu (BIDU) to List its Video Streaming Site iQiyi.com
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Chinese search giant Baidu, Inc. (BIDU - Free Report) is reportedly gearing up for an initial public offering (IPO) to list its video-streaming site iQiyi.com. Year-to-date, the stock has underperformed the Zacks Internet-Services Industry. It has lost 13.8% as against the industry’s gain of 3.5%.
The Wall Street Journal reported that the IPO could value iQiyi at up to $5 billion and will take place either in the U.S. or Hong Kong next year. The company has been valued at $5.8 billion by Shanghai market-research firm 86Research.
Though the exact amount is unknown, it is rumored that the IPO could raise about $1 billion. The company is also considering issuing convertible bonds or similar instruments to raise additional funds from investors.
The Story So Far
Founded in 2010, iQiyi’s streaming service has more than 20 million subscribers. The company’s global partner list includes big names such as 21st Century Fox (FOX - Free Report) , Lions Gate Entertainment (LGF.A - Free Report) and Paramount Pictures.
But what has been disturbing Baidu, which holds more than 80% of iQiyi’s stake, is its poor performance. Baidu became a majority stakeholder in the loss making iQiyi.com in 2012. In February this year, a consortium led by Baidu Chairman and CEO Robin Yanhong Li and iQiyi founder and CEO Yu Gong tried to buy iQiyi and offered $2.3 billion.
The offer was criticized by Baidu’s investor group for being too low. One of the investors Acacia Partners LLC compared the offer price with $4.8 billion valuation of iQiyi competitor Youku Tudou that Alibaba (BABA - Free Report) acquired in 2015. The offer was finally withdrawn.
To Conclude
The move makes sense as despite being popular iQiyi.com hasn’t been able to reap profits. This weighs on the company’s high margin search business. We believe that it’s a good decision on Baidu’s part to get rid of the loss making subsidiary and collect a sizable amount in the process.
If the IPO matches the company’s expectations, it will justify investors’ decision to oppose the previous deal and benefit them.
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Baidu (BIDU) to List its Video Streaming Site iQiyi.com
Chinese search giant Baidu, Inc. (BIDU - Free Report) is reportedly gearing up for an initial public offering (IPO) to list its video-streaming site iQiyi.com. Year-to-date, the stock has underperformed the Zacks Internet-Services Industry. It has lost 13.8% as against the industry’s gain of 3.5%.
The Wall Street Journal reported that the IPO could value iQiyi at up to $5 billion and will take place either in the U.S. or Hong Kong next year. The company has been valued at $5.8 billion by Shanghai market-research firm 86Research.
Though the exact amount is unknown, it is rumored that the IPO could raise about $1 billion. The company is also considering issuing convertible bonds or similar instruments to raise additional funds from investors.
The Story So Far
Founded in 2010, iQiyi’s streaming service has more than 20 million subscribers. The company’s global partner list includes big names such as 21st Century Fox (FOX - Free Report) , Lions Gate Entertainment (LGF.A - Free Report) and Paramount Pictures.
But what has been disturbing Baidu, which holds more than 80% of iQiyi’s stake, is its poor performance. Baidu became a majority stakeholder in the loss making iQiyi.com in 2012. In February this year, a consortium led by Baidu Chairman and CEO Robin Yanhong Li and iQiyi founder and CEO Yu Gong tried to buy iQiyi and offered $2.3 billion.
BAIDU INC Net Income (TTM)
BAIDU INC Net Income (TTM) | BAIDU INC Quote
The offer was criticized by Baidu’s investor group for being too low. One of the investors Acacia Partners LLC compared the offer price with $4.8 billion valuation of iQiyi competitor Youku Tudou that Alibaba (BABA - Free Report) acquired in 2015. The offer was finally withdrawn.
To Conclude
The move makes sense as despite being popular iQiyi.com hasn’t been able to reap profits. This weighs on the company’s high margin search business. We believe that it’s a good decision on Baidu’s part to get rid of the loss making subsidiary and collect a sizable amount in the process.
If the IPO matches the company’s expectations, it will justify investors’ decision to oppose the previous deal and benefit them.
Zacks Rank
Baidu currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>