HONG KONG • Baidu's iQiyi is targeting an initial public offering (IPO) in the United States as soon as next year that could value China's most popular Netflix-style streaming video service at more than US$8 billion (S$10.8 billion), two people familiar with the matter said.
The company controlled by search giant Baidu is about to kick off negotiations with banks and deal arrangers and is shooting for a valuation of as much as US$10 billion, the sources said, asking not to be named because the matter is private.
Baidu wants to continue holding a controlling stake in iQiyi upon the IPO via dual-class shares, they added. The IPO process however is in its early stages and the final valuation could change.
iQiyi, the only Chinese service that licenses shows from Netflix, needs to build up its war chest as it battles rival platforms run by Alibaba Group Holding and Tencent Holdings.
Baidu, which is also investing heavily in artificial intelligence (AI) and autonomous vehicles, needs to buy and create more content to sustain its lead among online video platforms, based on time spent.
At US$10 billion, iQiyi will be valued at a fraction of Netflix's but surpasses listed Chinese rival Leshi Internet Information and Technology Corp. Its IPO would come after Baidu founder and chairman Robin Li scrapped plans last year to buy control of iQiyi at an estimated US$2.8 billion enterprise value after failing to reach an agreement on price and deal structure.
That proposed transaction drew criticism from shareholder Acacia Partners, which argued the price was too low and cited research at the time valuing the business at US$5.8 billion. Baidu declined to comment yesterday.
Quality video is key to keeping users and raising advertising revenue from some 30 million-plus paying subscribers. Tencent and Alibaba have said they are committed to spending more for content. Tencent, for instance, has splurged on Game of Thrones and National Basketball Association broadcasts.
Meanwhile, Baidu is slashing spending on peripheral services, from food delivery to travel, to make room for its growing AI and content outlays.
iQiyi said in June it was in talks to share more data and revenue with partners, including Alphabet's Google, to bolster its platform. Many Google services that distribute content, such as YouTube, remain blocked in China, reducing the US company's ability to expand in the country.
iQiyi is already a partner to Netflix, which had been looking for a way to enter China to help build a global audience.