According to a recent report from Reuters, Tencent wants to take over as the majority shareholder of iQIYI. Both companies focus on offering entertainment in China. Tencent offers a wide variety of entertainment, while iQIYI focuses on video streaming.
Sources close to the matter claim that Tencent wants to take a majority stake in iQIYI to reduce competition. That would allow it to boost up its own streaming service during a time when more people are consuming content online due to the novel coronavirus and ad revenue is down.
The report claims that Tencent is reaching out to Baidu (NASDAQ:BIDU) to acquire its stake in the company. Baidu is currently the largest shareholder of IQ stock with 56.2% of shares and 92.7% of voting rights. Considering that, it makes sense that Tencent would seek it out to obtain shares of IQ stock.
IQIYI and Tencent’s video streaming services are comparable in size. Both have roughly 110 million paid subscribers to their platforms. However, Tencent also has its fingers in the social media and video game industries as well. The company wants to take over entertainment in China and one less video streaming service would help it achieve that goal.
It’s currently unclear how large of a stake Tencent wants in iQIYI, or if it’s reached out to the company about the possible share acquisition.
IQ stock was up 24.4%, TCEHY stock was up 2.2% and BIDU stock was up 6.3% as of Tuesday afternoon.