Baiduoperator of the dominant search engine in China, would have put up for sale its entire stake in iQiyi, the second largest conventional video streaming platform in the country. IQiyi has nearly 100 million subscribers, almost all of them in mainland China.

The sale plan was revealed in an exclusive report by Reuters news agency. He said Baidu had set a target price of $7 billion for the company. Baidu currently owns 53% of iQiyi’s capital and controls more than 90% of the company’s voting rights. Baidu and IQiyi shares are traded in ADR form on the US stock exchange NASDAQ.

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IQiyi said, “This is purely a market rumour,” in a statement emailed to Variety.

Founded in 2009, IQiyi was one of the first companies in China to replace DVD stores and internet cafes where Chinese consumers got many movies at the turn of the century and successfully provide subscribers with an easy way to recurring monthly payments without a credit card. It also offers ad-supported levels, games, and other services.

Aided in its early years by integration with Baidu’s search capability, iQiyi has withstood competition from Tencent Video and Alibaba’s Youku (formerly Youku Tudou) and was at one time China’s leading online video player.

Nonetheless, iQiyi has given investors a bumpy ride. In 2016, when iQiyi was still a private company, the company’s founder Gong Yu and Baidu boss Robin Li have been criticized for trying to make it private too cheap. The valuation was then $2.8 billion. Two years later, it was valued at $13 billion. from an IPO in which ADRs were sold at $18 each.

Since its IPO, iQiyi has repeatedly approached the market for additional funding, while fail to achieve stable profitability. Worse still, the COVID-19 crisis helped Tencent overtake iQiyi in terms of conventional subscribers and gummed up iQiyi’s content supply pipelines, causing some of its customers to flee. The company has curtailed its staff and slowed its breakthrough into international markets.

In response, iQiyi shares fell from a high of $27.77 in 2021 to $1.86 last year.

With shares at $4.67 at Tuesday’s close, the company is valued at $3.74. Reuters calculates that the $7 billion price sought by Baidu equates to a per-share valuation of $8.13.

China’s conventional streaming market is ripe for consolidation. But it’s unclear how it will pass the official rally. Neither Tencent Video nor Youku are consistently profitable, their previous attempt to buy iQiyi reportedly being rebuffed by Baidu. Now, Chinese regulators have turned cold on the tech giants and may not allow them to swallow the competition by making heavy acquisitions.

Meanwhile, streaming platforms such as Tiktok (known as Douyin in China) and Kuaishou, entertainment specialist Bilibili, and live streaming and gaming companies, such as Douyu and Huya , successfully compete with mainstream streamers for consumer eyeballs.

Reuters reported that China Telecon-backed streamer Migu TV was among the likely bidders. It also named Hong Kong-based private equity firm PAG as a potential buyer.

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