You will be redirected back to your article in seconds

Baidu Criticized Over Proposed iQIYI Sale

Institutional investor, Acacia Partners has criticized a proposal by Baidu, China’s leading online search company, to sell-off market-leading online video unit iQIYI.

Acacia, a U.S. hedge fund which owns a $430 million stake in Baidu, this week published a letter querying the February proposal which would see iQIYI sold for $2.8 billion to a bid consortium comprising Baidu founder Robin Li Yanhong and iQIYI founder Gong Yu. Acacia said that a sale of iQIYI would damage the reputation of Baidu, and also that the buyout proposal is “far too low.”

iQIYI was founded in 2010. Baidu has owned 80.5% of iQIYI since 2012, when it bought in to the company. Gong holds the outstanding minority.

Acacia’s letter, of which Variety has a copy, was dated Monday. It was circulated to media on Tuesday.

Baidu, which has its shares listed on NASDAQ, responded on its Chinese social media platform Tuesday, saying that it “upholds the highest standards of corporate governance and has established a special committee made up of independent directors to evaluate the iQiyi transaction.” JP Morgan is advising the committee.

Acacia said that Baidu has recently made investments in iQIYI that would be lost to Baidu if the sale goes ahead. These amounted to “a big donation by Baidu shareholders to future iQiyi shareholders… This strikes us as particularly disappointing, as Baidu shareholders will never see the benefits of this investment if you privatize our subsidiary.”

“The short-term improvement to Baidu’s earnings produced by iQiyi’s sale is trivial compared to the potential long-term value created for Baidu shareholders by owning iQiyi within Baidu,” it said.

The Chinese online video sector is highly competitive and competition for content has kept all of the major operators as loss makers. But they have quickly become highly influential media companies, often replacing conventional TV as the most watched video platform for many users, and have built colossal audiences. As major media players, they hold out the prospect of riches after either a period of consolidation or period of rights price stability. Earlier this year Alibaba paid $4.8 billion to buy up roughly 80% of Youku Tudou, which also makes claims to be the market leader.

Other significant platforms are backed by Alibaba, Tencent, LeEco, Sohu and a nationwide electronics retailer.

iQIYI recently claimed 20 million paying subscribers which would make it by far the leader in the segment. It also recently quoted April statistics from iResearch showing that 295 million people access iQIYI via its mobile app, and 360 million people use iQIYI via personal computers.

Independent financial research firm 86Research issued a report on May 2 valuing iQIYI at $5.8 billion.

Acacia’s letter also hit directly at Li. “”It is better for Baidu to be regarded as a key institution, not the extension of the pocketbook of one man,” the letter said.

Li has come under fire Baidu has emerged as the front runner to buy Silvio Berlusconi’s majority stake in Italian soccer club AC Milan. The price is understood to be in the region of Euros400 million and was reported Monday by Chinese media as $437 million.

One investment analyst this week described it as a “rich man’s folly” and “waste of money..” He argued that European soccer clubs are loss makers, unlike American football clubs.

Earlier media reports of the AC Milan purchase suggested that Li personally was leading the acquisition. Now it appears that Baidu is the buyer.

More Biz

  • Hollywood celebrated the individuals redefining "on-screen

    Media Access Awards Honors Individuals Increasing Representation for Disabilities

    Hollywood celebrated individuals redefining “on-screen representation for the disability community” with the Media Access Awards, in partnership with Easterseals, at the Beverly Hilton Thursday. Norman Lear and Jimmy Kimmel kicked off the event, which featured Camryn Manheim, CJ Jones, Coby Bird and “The Peanut Butter Falcon” actors Zack Gottsagen and John Hawkes presenting awards along [...]

  • 'Roxanne' Singer Arizona Zervas Signs With

    'Roxanne' Singer Arizona Zervas Signs With Columbia

    Hotly tipped singer-songwriter Arizona Zervas, whose viral hit “Roxanne” is in the top 40 of the Billboard Hot 100,  has signed with Columbia, Variety has confirmed. Since the release of the track on Oct. 10, “Roxanne” has reached nearly 50 million streams on Spotify. The single topped Spotify U.S. top tracks chart for an uninterrupted [...]

  • Jax Media at Variety New Leaders

    Jax Media Accepts Variety's Creative Leadership Award at New Leaders Cocktail Party

    This year’s Variety New Leaders event, presented by City National Bank, honored innovative visionaries in entertainment. The cocktail party was hosted on a chilly Thursday night in Lower Manhattan’s Jimmy Rooftop Bar at the James Hotel. Patrick McCarthy, senior VP and head of marketing for City National Bank, kicked off the event highlighting the new [...]

  • taylor swift, scott borchetta and scooter

    Rage Against the Big Machine: What's Driving the Taylor Swift Showdown

    The latest Taylor Swift-Scooter Braun-Scott Borchetta kerfuffle involves the sort of music business minutiae that doesn’t commonly interest the general public — in fact, it’s probably safe to say that untold thousands if not millions of people are suddenly familiar with the concept of re-recording old masters. But in blasting Braun on social media and [...]

  • Redbox

    Redbox Settles Disney Suit, Agrees Not to Sell Download Codes

    Redbox has settled its litigation with Disney, agreeing not to resell codes that allow customers to download movies. Redbox has traditionally offered DVDs for rent through its distinctive kiosks. In October 2017, the company also began offering download codes at a considerable discount compared to the price on iTunes, Amazon or other services. Redbox did [...]

  • Shari Redstone: ViacomCBS 'Can Compete With

    Shari Redstone: ViacomCBS 'Can Compete With the Best of Them'

    Shari Redstone is emphatic: ViacomCBS has plenty of resources and the scale to compete in the new world order for media giants. “We absolutely have enough scale,” Redstone said Friday morning during her Q&A held as part of the Paley Center for Media’s International Council Summit in New York. “We have an incredible library. We [...]

  • Taylor Swift

    Taylor Swift Denies Big Machine's Claims Over Song Use, 'Millions' in Debt

    In the latest salvo in a rapidly evolving media battle that has evolved over the past 15 hours, Taylor Swift refuted Big Machine Records’ claim that the company did not try to block her from using material from her early albums, which are owned by the label, in forthcoming television specials. Swift had leveled those [...]

More From Our Brands

Access exclusive content