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For Video-Streaming Site Baidu Plans $1 Billion IPO

For Video-Streaming Site Baidu Plans $1 Billion IPO
An initial public offering that could value the unit at up to $5 billion was being planned by Chinese internet giant Baidu Inc. for its video-streaming site, the media reported quoting people familiar with the matter.
The sources reportedly said that next year, Baidu is considering listing iQiyi in either Hong Kong or the U.S. Although the size and timing of that fundraising wasn’t clear, to raise funds from investors before the IPO, the company is planning to issue a convertible bond or similar instrument, the people said.
While the exact amount remains fluid and terms could change as the company negotiates with prospective investors, the sources reportedly said that iQiyi is expected to raise about $1 billion through the IPO.
It planned to invest as much as 10 billion yuan ($1.4 billion) to buy and produce content in the coming year, iQiyi said at its annual marketing conference in Shanghai in October.
A spokeswoman for iQiyi declined to comment.
The Chinese search giant’s chief executive Robin Li earlier tried to buy the unit earlier this year for $2.3 billion and the plans come after that aborted attempt.
While many considered Mr. Li’s bid a low-ball offer, Baidu’s shareholders have pushed the search giant’s management to improve the profitability of its video and on-demand units.
Compared to the buyout in February by a consortium led by Mr. Li, which also included iQiyi founder and CEO Yu Gong, the IPO, which is expected to value iQiyi at between $4 billion and $5 billion, is likely to be seen as a better deal for Baidu shareholders.
It was dropped in July after the two sides failed to reach an agreement on the deal structure and purchase price and some investors criticized it as a sweetheart deal for Mr. Li to profit at the expense of Baidu’s investors.
New York hedge fund and Baidu investor Acacia Partners LLC, which wrote an open letter to Mr. Li criticizing the low sale price, were included among those investors. compared with a $4.8 billion valuation for Youku Tudou, the rival video platform that Chinese e-commerce giant Alibaba Group Holding Ltd. bought in 2015, Acacia said the offer valued iQiyi at $2.8 billion.
iQiyi is valued at $5.8 billion by Shanghai market-research firm 86Research. $7.4 billion and $4.7 billion are the values for a rival business run by Chinese internet behemoth Tencent Holdings Ltd. and Youku respectively by the firm.
According to data-analytics firm App Annie, particularly in China, where it is forecast to become a $5 billion market by the end of 2017, live streaming has seen rapid revenue growth in Asia.
Up from 10 million in December 2015 and five million in May 2015, iQiyi, which was founded in 2010, said in June that the number of paid subscribers to its streaming service had surpassed 20 million. Paramount Pictures, 21st Century Fox Inc. and Lions Gate Entertainment Corp., which provide the company with content, are among its global partners.

Christopher J. Mitchell

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