Chinese streaming giant iQIYI eyes Hong Kong listing

iQIYI is like the Chinese version of Netflix.

Chinese streaming giant iQIYI eyes Hong Kong listing
The logo for Chinese streaming platform iQiyi Inc., is displayed on a screen during the company's initial public offering (IPO) at the Nasdaq Market Site in New York City, U.S., March 29, 2018. Reuters/Brendan McDermid

The backstory: iQIYI is like the Chinese version of Netflix. It’s all about streaming TV series and movies to its subscribers, just like Netflix does. Now, when it comes to streaming in China, iQIYI, Tencent and Alibaba's Youku are the big shots. They've been trying to follow in Netflix's footsteps by pouring loads of money into getting content and making their own original programming. But it hasn't been smooth sailing for iQIYI. The company, which is backed by Baidu, ended up facing financial losses and got caught up in a price war the streaming giant couldn't keep up with.

More recently: In 2018, iQIYI made quite a splash by going public in the US and raking in about US$2.3 billion for its initial public offering (IPO). But here's the twist: it's actually managed to lose nearly US$5 billion in net income since then.

Now, fast forward to 2021. iQIYI had its sights set on a listing in Hong Kong, but it's been working out the nitty-gritty details for a while now, and things had kind of stalled. The truth is another IPO might not be a walk in the park for the company. You know why? Because its value has taken a major nosedive, plummeting a jaw-dropping 70% since its US debut in 2018.

The development: The company is now thinking about reviving its plan to launch an IPO in Hong Kong. Why? Well, it's actually doing pretty well financially and has reversed some of those earlier losses. It wants to attract new investors to fund its shows and use AI to compete with the likes of Tencent and Alibaba. According to CEO Gong Yu, its financial turnaround can be attributed to smart spending and offering content that appeals to a wider audience. He's super confident about iQIYI’s growth prospects, especially as China's economy bounces back from the impact of COVID. In fact, he boldly predicts double-digit growth, just like the financial experts are saying.

Now, let's talk about profitability. iQIYI hasn't had the best track record in that department. It's only managed to turn a profit a few times in its quarterly reports. But this fiscal year might be a game-changer for iQIYI . Believe it or not, it's projected to make its first annual profit in six years this year.

Key comments:

“Profit is of course our No. 1 target, but that doesn’t mean we will give up our market share,” said iQIYI CEO Gong Yu to Bloomberg. “Investors have yet to show full confidence in Chinese tech stocks or realize their long-term growth values. They are more short-term focused.”

“We have positive cash flows, so we don’t actually need to raise more money,” said iQIYI Chief Executive Officer Gong Yu to Bloomberg.

“iQIYI  embodies the culture of Silicon Valley and culture of Hollywood. We really put an emphasis on technology development. More than half of our employees work in the technical side. We have invested in AI significantly. More than 60% of our patent submissions this year were related AI,” said Wang Xuepu, vice president of iQIYI, in Mandarin at a conference held by CNBC.