IQIYI Stock Slides under SEC Investigations, Q2 Earnings
On Aug. 14, 2020, Chinese Baidu-backed video streaming service iQIYI announced its unaudited financial report for the second quarter ended June 30, 2020. IQiyi disclosed in its financial report that the company is under investigation by the US Securities and Exchange Commission (SEC). The company’s shares tumbled as much as 19% after disclosing the probe.
In April, short seller Wolfpack Research released a report accusing iQIYI of inflating user numbers and revenue. The SEC required iQIYI to provide certain financial data and operating data since Jan. 1, 2018, as well as other information involved in the short selling report.
IQIYI responded on its official Weibo account: “IQIYI has been actively cooperating with all regular inquiries and investigations by the SEC. At the same time, we have also hired professional consultants to conduct independent internal reviews.”
The financial report shows that in the second quarter of 2020, iQIYI‘s total revenue reached 7.4 billion yuan (approximately $1 billion), a year-on-year increase of 4%. As of the end of the second quarter, iQIYI‘s subscription members reached 105 million. The company also reported a net loss of RMB 1.4 billion (approximately $204.1 million) a year-on-year loss compared with the same period last year.
“Under the volatile macro environment, we still achieved quarterly performance growth, with our total revenue increasing by 4% year-on-year,” said Gong Yu, founder and CEO of iQIYI. ” The pandemic has had a tremendous impact on our business, resulting in abnormal user behavior, data fluctuations and unprecedented challenges. Nevertheless, with our abundant copyrights, excellent content and powerful technology, the company has further consolidated its market leadership.”
IQIYI‘s online advertising service revenue was RMB 1.6 billion, a 4% increase from the previous quarter. As of June 30, 2020, iQiyi’s had 104.9 million subscribers, an increase of 4% compared to 100.5 million as of June 30, 2019. As of June 30, 2020, the number of iQIYI‘s paying subscription members accounted for 99.4% of the total number of subscribers.
Baidu Inc., the Chinese internet giant that owns iQIYI’s quarterly revenue, shrank 1% and its projections suggest sales could slide again, as shown by its financial results released Friday.