04 January 2017

Baidu’s video site seeks billion dollar IPO

Baidu’s iQiyi is planning a USD 1,000 million listing, the Wall Street Journal (WSJ) reported last month, as the online search giant sets its eyes on China’s booming video on demand industry. The IPO, which may take place in either the US or Hong Kong next year, could value the video platform at up to USD 5,000 million, according to the newspaper. This is well in excess of the USD 2,800 million offered by Baidu’s co-founder Robin Li and iQiyi’s chief executive Gong Yu earlier to buy an 80.5 per cent stake in iQiyi. Their proposal was later terminated as it failed to satisfy Baidu’s shareholders, which included hedge fund Acacia Partners. In addition to the IPO, iQiyi is reportedly looking to raise funds via a pre-initial public offering transaction by issuing convertible bonds or other similar securities. According to Reuters, however, Baidu denied reports of such deals being in the pipeline.

Often called the “Netflix of China”, iQiyi is currently the most popular online video service in the country, having surpassed Youku, Gigaom reported. The Baidu unit distributes films by major companies, including Paramount Pictures and 21st Century Fox, and also invests heavily in its own content. Just two months ago, it injected around CNY 400 million in Hangzhou Fanfan Animation Culture Art, a cartoon producer. 

Nasdaq-listed Baidu, which earns its revenues from paid advertisements, suffered a major blow to its reputation last year when cancer patient Wei Zexi died after undergoing an experimental therapy listed on its search engine. Baidu was accused of selling its listings to companies without verifying their claims, which many saw as false advertising. This provoked public outcry and prompted an investigation into the company by the Chinese government. The Cyberspace Administration of China subsequently introduced new restrictions on search engine results to safeguard public interests, which hurt Baidu’s short term profitability. Nevertheless, with the number of Chinese viewers who are willing to pay for content expected to increase, Baidu still enjoys enormous growth potential by tapping into the video on demand sector, Danny Vena of the Motley Fool posited.

Baidu has also in the past year invested generously in other areas within the technology sector. Among the most notable deals completed last year was its investment in Uber Technologies, according to Zephyr, the M&A database published by Bureau van Dijk. Baidu, alongside other subscribers, including Microsoft and Hillhouse Capital Management, collectively injected around USD 5,000 million in the online taxi booking company.

© Zephyr