SEC Investigates iQIYI, China's Netflix Equivalent

Allegations of Inflated User Numbers and Sales
Stock Price Plummets 19% in After-Hours Trading

[Asia Economy Beijing=Special Correspondent Jo Young-shin] iQIYI (愛奇藝), a video streaming company known as the Chinese version of Netflix, has revealed that it is under investigation by the U.S. Securities and Exchange Commission (SEC).

According to Jeil Jaegyeong on the 14th, iQIYI stated that the SEC has launched an investigation into issues raised in a report by short-selling firm Wolfpack Research and has requested financial data since January 2018.

Wolfpack Research released a report in April alleging that iQIYI had inflated its user numbers and revenue.

iQIYI, which is listed on the U.S. stock market, disclosed the SEC investigation along with its earnings announcement on the 13th (local time), after which its stock price plunged 19% in after-hours trading.

Chinese largest search engine Baidu (百度) owns 56% of iQIYI's shares.

Baidu continued to experience a decline in sales due to sluggish advertising sales. Baidu's second-quarter revenue was 26 billion yuan, down 1% compared to the same period last year. Compared to the 7% revenue drop in the first quarter caused by the impact of the novel coronavirus disease (COVID-19), the decline has narrowed.

On the other hand, net profit increased by 48% to 3.6 billion yuan.

Li Yanhong (李彦宏), Baidu's Chief Executive Officer (CEO), said, "As COVID-19 is brought under control in China, Baidu's business is steadily recovering."