Chinese online video platform iQiyi Inc is facing accusations of fabricating its revenue and number of paid users by carrying out fraudulent and inflating financial practices
A research firm, Wolfpack Research which claims to be an activist research and due-diligence firm alleged iQiyi of being in fraudulent practices even before its stock market listing in 2018 and remained stick to those practices since its inception, according to research firm’s report released on Tuesday.
iQiyi opposed the content of the report and said that contents of the report are erroneous, containing non-provable statements and bearing false interpretation and conclusions.
The Chinese streaming giant spun off from country’s search engine giant Baidu in 2018 with an IPO raising $2.2 billion for the streaming company. Baidu still is in possession of 56% share in iQiyi, a company that become the leading online video platform in the country and often quoted as “Netflix of China”.
The release of said report though impacted the iQiyi’s trading on the day bringing its stock price down by 13% to session lowest, but the drop remained for a while and it closed the U.S. stock trading with an increase of 3% after going through a volatile session.
Wolfpack Research accused that iQiyi showed 8 billion yuan ($1.13 billion) to 13 billion yuan ($1.98 billion), or 27% to 44% more revenue from what it has actually generated in 2019.
For inflating the revenue generated, iQiyi overstated its number of users by 42% to 60% as well as inflated its prices paid for content, expenses and other acquisitions and assets to spend fake cash to conceal the fraudulent activity from its investors and auditors, accused the research firm in its report.
Wolfpack said that to compile the report, it did not stick to a single source but used multiple sources including publically available data, a former employee of the streaming company, information gathered from surveys and private sources like advertisement companies doing business with iQiyi.