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China’s Baidu Confirms U.S. IPO for Its iQIYI Streaming Platform

Chinese Internet giant Baidu has confirmed plans to float its streaming-video subsidiary, iQIYI, in the U.S. But the company has not specified which exchange it will choose to list the popular platform, which claims half a billion monthly active users.

Baidu said Wednesday that it had filed a draft prospectus with the U.S. Securities and Exchange Commission for the IPO and listing of iQIYI shares. Baidu, which has itself been listed on NASDAQ since 2005. saw its shares jump 1.8% to $225.50 on the news.

Baidu said it expects to remain iQIYI’s majority shareholder. It currently controls 80.5% of the company. But neither Baidu nor iQIYI disclosed other details of the expected listing – such as the timing of the flotation, the amount of fresh capital to be raised, or the proportion of the company to be sold.

Financial industry sources have previously reported that the company aims to raise $1 billion and achieve an initial valuation of $8 billion to $10 billion.

iQIYI is among the leaders in China’s streaming market, which is vast, fast-growing and protected from competition from global video groups including Netflix and Amazon.

The company claims more than 500 million monthly active users for its free-to-use, ad-supported basic version, and even higher numbers of downloads for its app. At other times, iQIYI has reported more than 50 million paying subscribers, though it is not clear whether its methodology for counting paying users is comparable with other companies. Major rivals in China include Tencent Video and Youku (formerly Youku Tudou) which was acquired by Alibaba two years ago.

All three of the top Chinese video platforms are believed to be loss-making – which rules out a listing on a mainland Chinese stock exchange – and consider themselves still to be in a development stage. They are investing heavily in acquired content, increasingly backing original programming and spending heavily on marketing and bandwidth.

iQIYI ranks top “in terms of average time spent,” said Baidu founder Robin Li on an earnings call Wednesday, following publication of its 2017 results. “We’re No. 1 in terms of number of paying subscribers, and we are No. 1 in terms of profitability, although it’s not profitable yet. But we lost a lot less than the competition,”

The company quoted data from iResearch showing that average daily user numbers for iQIYI’s PC and mobile apps reached 76 million and 158 million, respectively, in December 2017. Monthly time spent on iQIYI’s mobile app grew to 408 billion minutes, 32% higher than December 2016.

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