The confidence crisis caused by financial fraud may affect more companies preparing to go public.
Editor’s note: This article is from “Interface News” .
Reporter | Xiao Fang
Edit | Song Jianan
After Rui Xing exposed 2.2 billion yuan in financial fraud, another Chinese stock iqiyi was shorted again.
The short agency Wolfpack released a report on April 7 that iQiyi exaggerated its 2019 revenue by 8 billion to 13 billion yuan, or 27% -44%, and exaggerated the number of users by 42% -60%. It also exaggerates the costs it pays for content, other assets, and acquisitions, and “burns fake money” to hide fraud from auditors and investors.
After the short report was released, iQiyi responded that its cited data and conclusions were seriously inaccurate and inconsistent with the actual situation. “As a responsible listed company, all financial and operational data we disclose are true and consistent The SEC requires that we resolutely deny all false accusations and retain the legal prosecution power. “
The US stock market opened that day, iQiyi’s share price fell sharply by more than 14%, but then rebounded in a shock. As of Tuesday’s close, iQiyi shares rose 3.22%.
Short-selling report suspected hot spots of Ruixing
Wolfpack’s short iQiyi report titled “IQIYI: The Netflix Of China? Good Luckin.” (Iqiyi: China’s Netflix? Good Luckin), seems to be interested in iQiyi and recently exposed financial The fraudulent Ruixing is connected, but the accusation of iQiyi in the report has nothing to do with Ruixing.
Compared to Ruixing ’s detailed short-selling report, Wolfpack ’s many allegations against iQiyi cannot stand up to scrutiny.
When accusing iQiyi of exaggerating the number of users, the report cited the back-end data of third-party data company QuestMobile and advertising agencies, trying to use third-party data to prove that the DAU data released by iQiyi was exaggerated.
In practice, it is very common for third-party data and official data to have discrepancies. For example, the data basis of QuestMobile’s statistics is based on the data obtained by accessing the SDKs of various apps, which is inevitably different from the actual data. On the other hand, the third-party data and official data are also different due to different statistical calibers. For example, in addition to the data of the website and App, whether to calculate the traffic of other channels such as WeChat applets.
In terms of income, Wolfpack accuses iQiyi of increasing the revenue in 2019 by 8 billion to 13 billion yuan through accounting operations, mainly based on the sample survey of the proportion of iQiyi members and according to the former membersThe estimated purchase price of the episode revealed by the interview. Compared with the data of short agencies going to Ruixing stores to shoot videos and count people, Wolfpack’s persuasion on iQiyi’s financial fraud charges is much weaker.
Gongyu, CEO of iQiyi, also denied fraud in his personal circle of friends, saying that he is honest and does things honestly.
Why is iQiyi?
Although Wolfpack ’s allegations of iQIYI ’s revenue and user fraud are relatively weak, iQIYI does face operational difficulties.
The financial report shows that iQiyi ’s total revenue for fiscal year 2019 was RMB 29 billion, an increase of 16% year-on-year, but its net loss was RMB 10.3 billion (approximately US $ 1.5 billion), which was an increase year-on-year. The loss was RMB 9.1 billion.
Since its establishment in 2010, iQiyi has continued to lose money, and the loss has shown an upward trend. Although iQiyi has successively tried to buy popular movies and TV shows, exclusive rights to variety shows, self-made content and other ways to reduce losses, and has been firmly ranked the first camp of video sites, it has never achieved profitability.
In 2015, iQiyi launched its self-made drama “Tomb Raider Notes”, and was the first in the industry to launch a member pay-to-watch full-collection model, placing the hope of profit on member pay. This model has been widely accepted by users, but iQiyi still has many challenges to achieve profitability.
Iqiyi ’s fourth quarter 2019 financial report shows that its membership service revenue was RMB 3.9 billion, an increase of 21% year-on-year. Online advertising service revenue was RMB 1.9 billion, down 15% year-on-year.
Iqiyi ’s membership service revenue has exceeded advertising revenue as the main source of revenue, but advertising revenue cannot continue the trend of rapid growth a few years ago.
On the one hand, due to the macroeconomic situation, the growth of the advertising industry has slowed down, and the rapid rise of short videos such as Douyin and Kuaishou has diverted iQiyi users and advertisers; on the other hand, iQiyi After the rapid growth of membership, the membership-free advertising model has also caused some advertisers to question the effectiveness of advertising: do users who have the ability to pay to buy membership-free advertising, and the rest of the users who are still watching advertisements greatly discount the value of the advertiser?
The changes in the market ’s competitive environment and increasing losses have made iQiyi more questionable than ever.
The Ruixing incident may trigger a crisis of confidence in the Chinese stock market
After being accused of falsification of financial data and business data by the muddy waters, Ruixing exposed itself to a financial fraud of 2.2 billion yuan, which triggered a crisis of confidence in the market and affected more Chinese stocks.
On April 2, affected by the Ruixing incident, the stock price of hundreds of Chinese stocks fell. As a result, iQiyi faced a business dilemma was short-sought.
In addition to iQiyi, online education companies are short with anyone. Grizzly, the short-seller, accused the financial data from whom it was unbelievableLetter, the main reason is fraud. The agency accused its financial fraud from aspects such as who the profit margin was exaggerated, used unconsolidated related parties to manipulate financial data, and accused it of falsely reporting the number of students through third-party traffic analysis.
With whom to learn CEO Chen Xiangdong responded in the circle of friends today, “I am very stunned, we will understand more that trust between people is very fragile, let alone between people in different countries. Trusted. “
The confidence crisis caused by financial fraud may affect more companies preparing to go public. Luo Wei, an associate professor in the accounting department of Guanghua School of Management at Peking University, pointed out that this kind of financial fraud has been in existence for nearly 20 years since Chinese concept stocks were listed in the United States. Among them, the situation in 2011 and 2012 was very serious, resulting in the absence of Chinese companies listing in the United States in the following year, which is equivalent to the entire capital market losing confidence in Chinese companies.
Luo Wei said that the Ruixing incident has once again given a lesson to Chinese companies. If you are pregnant with ghosts and go to falsify, you will be punished by the market. American investors are not fools, and 80% are institutional investors, they will evaluate and judge. “