Baidu Inc’s (百度) iQiyi (愛奇藝) is targeting a US initial public offering (IPO) as soon as next year that could value China’s most popular video streaming service at more than US$8 billion, two people familiar with the matter said.
The company controlled by search giant Baidu is about to kick off negotiations with banks and deal arrangers and is shooting for a valuation of as much as US$10 billion, the people said, asking not to be named because the matter is private.
Baidu wants to continue holding a controlling stake in iQiyi upon the IPO via dual-class shares, the people said.
Photo: Reuters
However, the IPO process is in its early stages and the final valuation could change.
iQiyi, the only Chinese service that licenses shows from Netflix Inc, needs to build up its war chest as it battles rival platforms run by Alibaba Group Holding Ltd (阿里巴巴) and Tencent Holdings Ltd (騰訊).
Baidu, which is also investing heavily in artificial intelligence (AI) and autonomous vehicles, needs to buy and create more content to sustain its lead among online video platforms based on time spent.
At US$10 billion, iQiyi is to be valued at a fraction of Netflix’s valuation, but would surpass listed Chinese rival Leshi Internet Information & Technology Corp (樂視).
Its IPO would come after Baidu founder and chairman Robin Li (李彥宏) last year scrapped plans to buy control of iQiyi at an estimated US$2.8 billion enterprise value, failing to reach an agreement on price and deal structure.
That proposed transaction drew criticism from shareholder Acacia Partners LP, which said that the price was too low, citing research at the time valuing the business at US$5.8 billion.
Baidu yesterday declined to comment.
Quality video is key to keeping users and raising advertising revenue from about 30 million paying subscribers.
Tencent and Alibaba have both said they are committed to spending more for content: Tencent, for instance, has splurged on Game of Thrones and National Basketball Association broadcasts, while Baidu is slashing spending on peripheral services from food delivery to travel to make room for its growing AI and content outlays.
iQiyi in June said it is in talks to share more data and revenue with partners, including Alphabet Inc’s Google, to bolster its platform. Many Google services that distribute content, such as YouTube, remain blocked in China, reducing the US company’s ability to expand in the country.
iQiyi is already a partner to Netflix, which had been looking for a way to enter China to help build a global audience for its growing library of exclusive shows.
Netflix surpassed 100 million subscribers without the benefit of viewers in the world’s most populous nation, where government censors limit the types of content available — its show BoJack Horseman got pulled after just two days.
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