Alibaba and Tencent suspended a deal to buy iQIYI stake

Both Alibaba Group Holdings and Tencent Holdings have held separate talks with Baidu to acquire a controlling stake in live video streaming service iQIYI, but the talks have been postponed with little hope of resuming soon after they rejected Baidu’s $20 billion valuation of iQIYI.

The two companies face intense scrutiny by Chinese antitrust watchdogs, given that both companies have their own video streaming services.

Tencent, which was the first to take an interest in buying iQIYI, said it was worth half the value that Baidu had mentioned, and several sources said that Chinese giant ByteDance is considering the possibility of acquiring a controlling stake in iQIYI, but Baidu, which holds 90% of the shareholders’ election rights in the company, will not. iQIYI, considers ByteDance as one of the buyers due to the long-standing enmities between them in the Chinese online advertising market.

iQIYI has a capital of 16.4 billion dollars, so that Baidu’s share, which represents 56.2%, is equal to 9.2 billion dollars, but the last quarterly results of iQIYI showed a decrease in revenues and subscribers, thus losing the company’s shares equivalent to a fifth of its value during the past two weeks.

With losing half of the company’s cash and holdings in the past nine months to 3.16 billion yuan ($481 million), the company plans to raise at least $1 billion in revenue in the coming months.

According to 2019 statistics, Tencent video service was ranked first in the Chinese market for live video streaming services with an estimated reach of 45%, followed by iQIYI with 43% and Youku service by Alibaba with 27%.

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