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Losses Little Changed at China’s iQiyi as Shares Touch All-Time Lows

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iQiyi, China’s second largest generalist subscription video platform, weighed in with net losses of RMB1.40 billion ($216 million) in the second quarter of 2021, compared with losses of RMB1.44 billion ($222 million) in the April to June period in 2020.

Revenues also improved fractionally, from RMB7.41 billion last time to RMB7.61 billion ($1.17 billion). Net subscriptions increased to 105.2 million (excluding trial memberships) as of June 30, 2021, compared with 104.9 reported in the same slot last year when the company said that 99.4% were paying members.

The company congratulated itself on achieving subscription growth in a normally quiet quarter, helped by the appeal of its original drama series, and on delivering a fifth successive quarter in which losses were reduced on a year-on-year basis.

“We continued to lead the market across multiple operating metrics. We also saw encouraging momentum from our iQIYI Lite app targeting lower-tier cities in China and from our overseas expansion. We are still in the early stage of industrialization in video production, and we are continuing to drive industry evolution to achieve long-term growth,” said founder, director and CEO, Gong Yu.

More worrying is the increasingly hostile regulatory environment for China’s tech companies. As it has become clear that mainland Chinese authorities are prepared to clip the wings even of the country’s brightest private-sector companies, valuations of tech firms have come under pressure. It has also indicated its displeasure with those companies that have shares listed on foreign stock exchanges.

In just a few weeks in March, iQiyi shares (traded in ADR form on the U.S.’s NASDAQ exchange) slumped from $28.97 to just $16.66. That compared with an $18 price for the stock at the time of its IPO in March 2018.

The share price has since sunk further. On Wednesday, ahead of the results, they closed down 3.9% at $10.12. At these levels, many shareholders will be nursing substantial losses. The price also makes it less likely that the convertible bonds issued in the past two years to replenish debt, will be converted into equity.

The company’s parent, Baidu also announced its quarterly results on Thursday. Previously known for its position as China’s dominant search engine, the group is today on of China’s leading AI companies.

Baidu announced a 20% increase in year-on year revenues, which hit RMB31.4 billion ($4.87 billion). But it plunged from profits to net losses of RMB583 million ($90 million), weighed down by RMB3.1 billion ($79 million) of investment holding losses. The largest component of that was the mark-to-market loss on its holding of shares in Kuaishou Technology, another video entertainment company.

Kuaishou shares were offered at HK$115 apiece in a Hong Kong IPO in February, doubled on their first day, and reached a peak of HK$417.8. On Thursday, trading closed at HK$84.1, a drop of 79% from their peak, and a loss of 27% compared with the IPO.

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