Daily Management Review

Chinese analog of Netflix is aiming at $ 8 billion-worth IPO


iQiyi service, owned by Baidu Inc., plans to conduct an IPO in the US in 2018. When posted, the cost of the most popular in China streaming service similar to Netflix, can be estimated at more than $ 8 billion, according to Bloomberg, citing two informed sources.

The company controlled by search giant Baidu is going to start negotiations with banks and deal organizers and is aiming at a valuation of $ 10 billion, the agency's interlocutors assert. Baidu wants to keep a controlling stake in iQiyi after holding an IPO through double-class shares. However, the IPO process is still at the initial stage, and the final evaluation may change.

iQiyi needs a safety cushion, while the service faces competition from platforms owned by Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Baidu, which also invests heavily in artificial intelligence and autonomous vehicles, needs to buy and create more content to maintain its leadership among online video platforms.

Assessed at $ 10 billion, iQiyi will be valued as a share in Netflix, but will surpass the Chinese competitor Leshi Internet Information & Technology Corp., whose shares are traded on the exchange. The IPO can be carrieв out after Baidu’s founder and chairman of the board of directors Robin Lee last year abandoned plans to buy a controlling stake in iQiyi when assessing value of the company at $ 2.8 billion, not having reached an agreement on the price and structure of the deal. This proposed transaction aroused criticism from Acacia Partners LP, a shareholder who argued that the price was too low, and cited studies that then valued the business at $ 5.8 billion.

Quality of the video is a key factor for retaining users and increasing advertising revenue. Tencent and Alibaba said that they intend to spend more money on the content. Tencent, for example, buys "Game of Thrones" and broadcasts NBA matches. Meanwhile, Baidu reduces cost of peripheral services - from food delivery to travel.

IQiyi said in June that it is negotiating to share additional data and revenues with partners, including Google, to support its platform. Many Google services that distribute content, such as YouTube, remain blocked in China, which reduces ability of the American company to expand its presence in the country.

source: bloomberg.com

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