Alibaba Group Holding Ltd (NYSE: BABA) was reportedly in discussions with Baidu (NASDAQ: BIDU) to buy a controlling stake in iQIYI Inc (NASDAQ: IQ), a video streaming service. However, the negotiations did not reach any results after Baidu valued iQIYI at nearly $20 billion.
Tencent Holdings Ltd also reportedly held discussions with Baidu to acquire a majority stake in iQIYI. But those discussions also failed to produce any results due to the high valuation set by Baidu.
iQIYI is considered as a Netflix of China. It is listed on Nasdaq with a market value of $16.148 billion as per its stock’s previous closing price. Baidu holds a 56.2 percent stake in the firms that translates to a value of about $9.2 billion.
However, Tencent reportedly thinks the video streaming service is about half of what Baidu is demanding.
iQIYI holds second place in the Chinese video streaming market. Though, it has not been able to turn a profit in recent years. It reported weak revenue and dropping subscribers in its latest quarterly financial report last week. Its shares went down following the third-quarter results.
Moreover, the U.S. Securities and Exchange Commission (SEC) is investigating iQIYI after Wolfpack Research accused the online video platform of inflating numbers. However, the firm has refused the report released by Wolfpack, saying it internally reviewed the allegations but found no proof as claimed by the report.
iQIYI shares have been on a roller-coaster ride since the start of 2020. The stock started the year at a price of around $19 and saw many ups and downs in the subsequent months. It touched a low price of around $15 in May and a high price of nearly $28 earlier this month. Overall, its share price has increased around 4 percent so far this year.
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