Iqiyi is empty by the agency

Short body Wolfpack Research released a report up to 37, accusing iQIYI allegedly inflated revenue and overstated the number of users by means of accounting. The agency believes that iQIYI its 2019 revenue exaggerated about 80-130 billion (27% -44%), which reports to the SEC deferred revenue in 2015, 2016 and 2017 were overstated up 261.7 percent, 165.5 percent and 86.2 percent.

In addition, the short-seller Muddy Waters also expressed help Wolfpack Research survey iQIYI up to one year, and the stock has been short on social media.

April 8, issued a statement iQIYI responded that the company has to understand and reviewed the report that it contains a lot of errors, unsubstantiated statements and the iQIYI misleading conclusions and interpret relevant.

The company said: “As a responsible listed company, all of our financial and operational data disclosed are true, we comply with SEC requirements for all false accusations, denied, and legal action to retain power..”

IQIYI founder and CEO Gong Yu in response to short report, “Thank you for the trust and support, an honest man, working sense.” Am that day, he had expressed strong “prevails over evil, see who won last . “

The following is the Wolfpack Research report content excerpt:

Our research shows, takes stock iQIYI fraud as early as 2018 initial public offering, and continues to this day. IQIYI not true legally-growth businesses to reach expectations. We estimate iQIYI its 2019 revenue exaggerated about 80-130 billion yuan or 27% -44%.

IQIYI by exaggerating the number of users of about 42% -60% to do this. Then, to make cash on the book disappeared, iQIYI also overstated its costs (for the price paid by copyright, assets and the purchase price, etc.), to hide fraud to auditors and investors.

In the period October 2019 to November, we iQIYI Chinese target population of 1563 people conducted face to face survey found that about 31.9% of iQIYI users to access through them with membership iQIYI partners love Fantastic Art VIP content. IQIYI these members belong to the income of its partners all included in the book, share and partner as an expense recorded. This makes it possible to exaggerate iQIYI income and expenses at the same time.

We also won the China credit report iQIYI all VIEs and WFOE since 2015. Compared with the prospectus iQIYI, we found that the SEC deferred revenue reported in 2015, 2016 and 2017 were overstated 261.7%, 165.5% and 86.2%. Deferred revenue is an item on the balance sheet, is generated when the future delivery of services to customers pay in advance. Because iQIYI subscribers are prepaid, so most of its revenue is deferred revenue. These exaggerating income before listing so that income after iQIYI listed continue to be exaggerated.

An example iQIYI accounting fraud of the most shocking is exaggerated non-monetary transactions (copyright exchange). The trading income by internal iQIYI Authorized Content valuation and discretion. In other words, iQIYI management can effectively confer any value they want for these transactions, thus providing an opportunity to easily overstated revenue. According episode highest valuation of the non-exclusive copyright of participation acquired content iQIYI former employees, the company needs all the Chinese film and television production company of the total number of TV series about 3.9 times and about 3.2 times, respectively, in 2018 and in order to 2019 realization of trading income reported.

IQIYI is a mature company. This month it is 10 years old, but has 10 years of consecutive losses. The age difference is that iQIYI loss is rapidly accelerating. 2019, iQIYI loss of 10.3 billion yuan, more than 1.2 billion yuan more than in 2018. At the same time, pay subscriber growth in the fourth quarter of only 0.7%, the lowest level ever. IQIYI advertising revenue fell by 15% in 2019, but gross margin is still negative. For us, given the large number of fraud we have already discussed, so even these terrible loss meaningless. However, if we talk so much you can not give rise to concern and vigilance, we can only say I wish you “good luck.”