Online Video Site iQiyi Files for New York IPO

Baidu.com Inc. confirmed that its iQiyi online video unit has filed for a potential New York listing, as the search leader’s own operations posted solid quarterly revenue growth that marked the completion of its rebound from an earlier scandal.

Media reports last month said that iQiyi, one of China’s leading online video sites, had made confidential filings for an IPO to raise up to $1 billion in the U.S., though the company didn’t comment at that time. Baidu, the video operator’s controlling shareholder, broke that silence on Tuesday, confirming that iQiyi had submitted a draft registration for a potential New York listing to the U.S. Securities and Exchange Commission (SEC).

“The proposed IPO is expected to commence as capital markets conditions permit and is subject to iQiyi’s public filing of the registration statement with the SEC,” Baidu said. “Baidu expects to remain iQiyi’s controlling shareholder after the completion of the proposed IPO.”

Such a listing has been discussed for years, and would make iQiyi the largest of China’s online video sites to be separately listed. Former industry leader Youku Tudou was previously listed in New York, but later privatized after being purchased by e-commerce giant Alibaba Group Holding Ltd. China’s major video operators offer a popular alternative to traditional TV, but have faced difficulty finding a business model that can provide profits on a sustained basis.

In September 2016, iQiyi told Caixin the company could become profitable as early as this year, as cutthroat competition starts to ease and consolidation continues in the sector.

Baidu disclosed the iQiyi IPO plan as it posted results that showed revenue for its own operations grew 29% to 23.6 billion yuan ($3.6 billion) in the final three months of 2017. It forecast similar growth for the current quarter. The company posted a profit of 4.2 billion yuan during the last three months of 2017, roughly the same as a year earlier.

The return to solid revenue growth followed a period of contraction after a 2016 scandal involving misleading advertisements on Baidu’s core search site. That scandal forced the company to become more transparent and also to limit the volume of ads on its site, dealing a blow to the business. The company finally returned to revenue growth in the first quarter of last year.

Baidu’s shares jumped 5% in after-hours trading on Tuesday after the results came out, nearing an all-time high and extending a 1.8% rise during the regular trading session.

Contact reporter Yang Ge (geyang@caixin.com)