Video streaming giant iQiyi raises US$1.5b in convertible notes issue

PUBLISHED : Tuesday, 21 February, 2017, 9:17pm
UPDATED : Wednesday, 22 February, 2017, 6:31am

Chinese video streaming market leader iQiyi, a subsidiary of internet search giant Baidu, has raised US$1.5 billion from its issue of convertible notes to a group of investors.

Nasdaq-listed Baidu led the fund-raising with its US$300 million investment, iQiyi said on Tuesday.

Other major participants in the notes issue include Hillhouse Capital, Boyu Capital, Run Liang Tai Fund, IDG Capital, Everbright-IDG Industrial Fund and Sequoia Capital.

“Over the past several years Baidu has given great support to iQiyi in terms of both capital and traffic flow,” iQiyi founder and chief executive Yu Gong said in a statement.

He said the company is focused on becoming “a world-class entertainment company, leveraging Baidu’s artificial intelligence technology and content ecosystem”.

Proceeds from the convertible notes issue are expected to be used for upgrading iQiyi’s intellectual property ecosystem and accelerate IP-related businesses, such as subscriptions to its services.

The announcement of a successful convertible bonds issue has come after months of speculation that iQiyi was considering a public offering in Hong Kong or the United States to raise US$1 billion.

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“The firm is currently leading the online video market [in China] in terms of both market share and paying subscribers,” Jefferies equity analyst Karen Chan said in a recent report.

The closest competitors of iQiyi are Youku Tudou, a subsidiary of e-commerce giant Alibaba Group, and Tencent Holdings’ Tencent Video. Alibaba owns the South China Morning Post.

It is estimated that iQiyi’s revenue reached 10.6 billion yuan last year, representing 15 per cent of Baidu’s total revenue, Chan said.

“Assuming its video content cost reached 10 billion yuan ... we expect iQiyi’s operating loss to narrow down from 2.4 billion yuan in 2016 to 1.6 billion yuan in 2017, before approaching break-even in 2018,” she said.

In December, iQiyi’s mobile app had 481 million monthly active users and recorded a total 5.6 billion hours spent on it by those users, according to iResearch.

“iQiyi has been a great asset and an important part of the Baidu ecosystem,” Baidu chairman and chief executive Robin Li Yanhong said in a statement. “We look forward to supporting its further growth and enhancing the company’s initiatives through artificial intelligence technology.”