iQIYI Shares Trade Lower On Reports Of Possible Stake Sale

Baidu, Inc BIDU is exploring selling its controlling stake in iQIYI, Inc IQ at a potential valuation of ~$7 billion, Reuters reports.
Baidu, which owns 53% of iQIYI and holds over 90% of its shareholder voting rights, looks to sell all its holdings in China's Netflix, Inc NFLX counterpart.
Baidu's targeted valuation of $7 billion represents a price of ~$8.13 per share, implying a 74% premium on its June 14 close of $4.67.
The sudden divestment plan comes after Baidu deemed iQIYI a non-core asset.
Baidu seeks to sharpen its focus on developing its capital-intensive artificial intelligence and autonomous driving units.
The stake sale plan worth ~$50 billion by market value comes amid a domestic regulatory crackdown since late 2020 on firms from technology, private education, and other sectors, which battered their shares and forced some to scale back expansion in non-core areas. Baidu and iQIYI reported lackluster results in Q1.
The iQIYI stake attracted interest from multiple financial sponsors and state-owned companies, including PAG and China Mobile.
Baidu has reportedly engaged Bank of America to work on the potential sale.
iQIYI called this report "pure market rumor" in an emailed statement to Reuters.
Price Action: IQ shares traded lower by 4.28% at $4.47 in the premarket on the last check Wednesday.
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