iQIYI Shares Trade Lower On Reports Of Possible Stake Sale

  • Baidu, Inc BIDU is exploring selling its controlling stake in iQIYI, Inc IQ at a potential valuation of ~$7 billion, Reuters reports.
  • Baidu, which owns 53% of iQIYI and holds over 90% of its shareholder voting rights, looks to sell all its holdings in China's Netflix, Inc NFLX counterpart.
  • Baidu's targeted valuation of $7 billion represents a price of ~$8.13 per share, implying a 74% premium on its June 14 close of $4.67.
  • The sudden divestment plan comes after Baidu deemed iQIYI a non-core asset. 
  • Baidu seeks to sharpen its focus on developing its capital-intensive artificial intelligence and autonomous driving units.
  • The stake sale plan worth ~$50 billion by market value comes amid a domestic regulatory crackdown since late 2020 on firms from technology, private education, and other sectors, which battered their shares and forced some to scale back expansion in non-core areas. Baidu and iQIYI reported lackluster results in Q1.
  • The iQIYI stake attracted interest from multiple financial sponsors and state-owned companies, including PAG and China Mobile.
  • Baidu has reportedly engaged Bank of America to work on the potential sale.
  • iQIYI called this report "pure market rumor" in an emailed statement to Reuters.
  • Price Action: IQ shares traded lower by 4.28% at $4.47 in the premarket on the last check Wednesday.
  • Photo via Wikimedia Commons

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