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Baidu’s iQiyi said to have filed for $1 billion US IPO
China’s popular video streaming service, iQiyi, has filed confidentially for US IPO according to IFR. Sources familiar with the plans said the company is looking to raise $1 billion by the end of Q1 or early Q2 of 2018. iQiyi has not commented on their plans for IPO.
Rumors of iQiyi’s IPO have been circulating since the end of last year. In September, Bloomberg reported that iQiyi was taking its IPO to the US, which could value the video streaming service at over $8 billion. And in October 2017, IFR also reported that iQiyi had picked three banks—Bank of America, Credit Suisse and Goldman Sachs—to help manage the deal.
iQiyi is a Netflix-like video streaming service currently controlled by search giant Baidu, who became the firm’s largest shareholder in 2012. In 2013, Baidu acquired PPS—another popular video streaming platform in China—for $370 million, merging the two video streaming services. After the merger, iQiyi began to expand into areas such as self-produced content, exclusive online broadcasting, and variety shows.
iQiyi had a glamorous year in 2017. In February 2017, iQiyi raised a record-breaking $1.53 billion in investment. And in April, it became the only Chinese service that licenses shows from Netflix.
According to Baidu, the video streaming platform had 481 million monthly active users as of the end of 2016, and it is believed to have since increased its paid service to more than 60 million subscribers.
iQiyi’s valuation has always been in the spotlight. In 2016, Baidu planned to buy a controlling stake in iQiyi at an estimated valuation of $2.8 billion, but the deal eventually fell through when Baidu shareholder Acacia Partners pointed out in an open letter to Baidu CEO Robin Li that the streaming service could be valued up to $5.8 billion.
China’s online market for video content has grown fast. As high-quality and original content (and willingness to pay) is on the rise, it inevitably requires a considerable amount of investment. Losses are not uncommon to video streaming services like iQiyi and its rivals Alibaba’s Yoku and Tencent Video. However, the prospects seem optimistic.
“Assuming its video content cost reached 10 billion yuan … we expect iQiyi’s operating loss to narrow down from 2.4 billion yuan in 2016 to 1.6 billion yuan in 2017, before approaching break-even in 2018,” Jefferies Equity Analyst Karen Chan said in a recent report.