Video streaming company to use IPO proceeds for market expansion

Chinese online video streaming service provider iQiyi.com, a unit of online search giant Baidu Inc, on Tuesday filed for an initial public offering in the United States to raise up to $1.5 billion.

The Beijing-based company, which is reportedly valued at $15 billion, has applied to list on the Nasdaq exchange under the symbol "IQ", it said in a filing with US Securities and Exchange Commission.

Baidu currently holds nearly 70 percent of the shares in iQiyi and will continue to remain its controlling shareholder, iQiyi said in the IPO filing.

According to the company, it plans to use half the net proceeds from this offering to expand and reinforce its content offerings. Other funds will be spent to back the technology development and the operation.

"The video streaming sector has become hotly contested in China, and key participants need to invest lots of money to fuel the future development and then can take larger shares of the market," Ma Shicong, an analyst at Beijing-based internet consultancy Analysys, said in an earlier interview with China Daily.

Founded in 2010, the company has reported losses for years, and in 2017 it posted a net loss of 3.74 billion yuan ($591 million), compared with 3.07 billion yuan in 2016.

However, iQiyi reported continuous growth in its revenues, which hit 17.4 billion yuan last year, a significant jump of 54.6 percent over the previous year.

A key driver behind iQiyi's revenue growth is the subscription fees for the online video streaming services. Revenue from the subscription fees accounted for 37.6 percent of the total in 2017, compared to an 18.7 percent share in 2015.

The Netflix-like company had more than 50 million subscribers by the end of last year, and it had around 126 million daily active mobile users during the last quarter of 2017, the company said.

Ma said that with the rapidly rising video streaming market, three major Chinese internet giants - Baidu Inc, Alibaba Group Holding Ltd and Tencent Holdings Ltd, collectively known as BAT - are ramping up their efforts to invest in the entertainment units, betting big on the booming domestic market.

According to statistics from market researcher QuestMobile, iQiyi took the top spot in the domestic online video industry, attaining 463 million monthly active users in December last year. And its arch rivals Tencent Video and Alibaba-backed Youku Tudou Inc ranked in the second and third place on the list, respectively, reporting 458 million and 374 million monthly active users respectively.

"Major tech giants all aim to boost the future development of the video streaming arms to be at the forefront in the Chinese entertainment market. The competition in the sector will become fiercer," Ma added.