Baidu shareholder challenges iQiyi sale

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New York hedge fund Acacia Partners, which is a major shareholder in Chinese tech giant Baidu, has asked the company’s chairman Robin Li to withdraw his bid to take streaming site iQiyi private, claiming that the sale price is far too low.

“We strongly believe the purchase by you of iQiyi is against the best long-term interest of Baidu and its shareholders,” said Acacia in an open letter to Li.

“We worry that embracing what is an inherent conflict of interest will lead to damage to the reputations of both you and Baidu…It is better for Baidu to be regarded as a key institution, not the extension of the pocketbook of one man.”

Acacia argued that the short-term improvement to Baidu’s earnings resulting from the sale of iQiyi would be trivial compared to the potential long-term value created for Baidu shareholders by owning iQiyi.

Baidu announced in February that it was selling an 80% stake in the online video site to Li and iQiyi founder Gong Yu in a deal that valued the platform at $2.8bn. In comparison, rival streamer Youku Tudou was sold to Alibaba for $4.3bn in October 2015.

Acacia suggested Baidu could spin off iQiyi through an IPO or maintain partial ownership. The hedge fund also proposed a rights issue that would enable all Baidu shareholders a chance to benefit from ownership in iQiyi on equal terms.

Baidu responded that the company “upholds the highest standards of corporate governance” and has established a special committee of independent directors to evaluate the proposed sale.

One of China’s leading streaming platforms, iQiyi has been ramping up on content acquisition and original content over the past year, with Baidu mostly footing the bill, another sticking point for Baidu shareholders.