Shares of Nasdaq-listed iQIYI, dubbed China’s Netflix, plunge as SEC probes alleged inflation of revenues, subscriber numbers
- The video streaming firm’s shares plunged 18 per cent after hours, as it revealed the US financial regulator has launched a probe into allegations made by a short-seller
- iQIYI predicts net income in the third quarter will drop as much as 6 per cent year over year
The Securities and Exchange Commission (SEC) is seeking financial and operating records dating back to the start of 2018, as well as “documents related to certain acquisitions and investments that were identified in a report issued by short-seller firm Wolfpack Research in April 2020,” iQIYI said on Thursday as it disclosed its second-quarter financial results.
Baidu narrows revenue drop in second quarter, CEO optimistic on second half
The Xiamen-based firm was struck off from the Nasdaq exchange in June, and is now entangled in a restructuring process.
iQIYI said it has hired professional advisers to conduct an internal review into some of the main allegations in the Wolfpack Report. It is trying to determine if manufacturing orders, revenue or expenses had been inflated, iQIYI said.
Shares of the Nasdaq-listed company plunged 18 per cent on Thursday in the extended trading session, after it closed 2.4 per cent lower at US$21.68.
The company predicted net revenue in the third quarter will come in somewhere between flat and a 6 per cent decline year over year, in a range between 6.96 billion yuan and 7.4 billion yuan.
In the second quarter, ended June 30, operating losses narrowed by 600 million yuan to 1.3 billion yuan from a year earlier, while total revenue rose 4 per cent to 7.4 billion yuan.
The number of subscribers increased 4 per cent on the year to 104.9 million. But online advertising services revenue plummeted 28 per cent to 1.6 billion yuan because of the challenging macroeconomic environment in China.