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November 27, 2020
5 minutes read

Tencent, Alibaba Pause IQiyi Buy Talks

The Chinese tech giants Tencent and Alibaba have each held separate talks to buy a controlling stake in the publicly-traded Chinese…

The Chinese tech giants Tencent and Alibaba have each held separate talks to buy a controlling stake in the publicly-traded Chinese streaming service iQiyi which is controlled by Baidu but happens to have now suspended their talks, Reuters reports.

It’s said that both Tencent and Alibaba have balked at the acquisition due to Baidu’s demand for a valuation of around $20 billion for iQiyi and increasing antitrust scrutiny from Chinese regulators. Another Chinese tech giant, the TikTok owner ByteDance, is now considering the possibility of acquiring iQiyi, it’s said.

iQiyi is an online streaming service for the Chinese market and one of the biggest in the country. It’s China’s equivalent of Netflix, whereas it was launched ten years ago by the Chinese search engine giant and Google-equivalent Baidu. Baidu took iQiyi public in 2018 and still retains a controlling stake of 56.2% in the company.

Over the years, iQiyi has grown to be the second-biggest player in China’s video streaming market but has racked up losses over time and never broken even in its ten-year history. The company is also being investigated by the US Securities and Exchange Commission after the short-seller Wolfpack Research issued a report that accused iQiyi of inflating its numbers this April.

Given iQiyi’s history of losses and now an investigation from the SEC, it’s likely that it may have also contributed to Alibaba and Tencent’s backing-away from a deal to acquire a controlling stake in the company.

Photo: Tencent President Martin Lau by World Economic Forum, licensed under Creative Commons

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