Shares of US-listed Chinese video streaming site iQIYI (Nasdaq: IQ) opened up more than 3 percent after the company said an internal investigation found no evidence to support allegations of short-selling agencies.
In an update on its internal review today, iQIYI said the review within the agreed scope has been substantially completed and did not uncover any evidence that would substantiate the allegations.
The company will continue to cooperate with the SEC in connection with the ongoing SEC investigation, including providing certain documents and records related to the Internal Review and other related information, subject to compliance with applicable law, it said.
The company is unable to predict the duration, outcome or impact of the SEC investigation, it added.
iQIYI was accused of fraud and inflating its financial numbers by Wolfpack Research in April just days after coffee chain Luckin Coffee found a senior executive fabricated 2019 sales.
Wolfpack Research, which describes itself as an “activist research and due-diligence firm”, released a report alleging that iQIYI “was committing fraud well before its IPO (initial public offering) in 2018 and has continued to do so ever since.”
The company pushed back against the report at that time and said it believes it contains “numerous errors, unsubstantiated statements and misleading conclusions and interpretations.”
In today's update, iQIYI said shortly after the publication of the report issued by Wolfpack Research in April 2020, it commenced an internal review into certain allegations raised in the short seller.
The Internal Review is overseen by the company's independent audit committee, which has been assisted in its efforts by professional advisors, including a Big 4 accounting firm that is not the Company's auditor, it said.
The Internal Review within the agreed scope has been substantially completed and did not uncover any evidence that would substantiate the allegations.
In 2018, iQIYI was spun off from Chinese search giant Baidu in a US IPO that raised over $2.2 billion. Baidu holds a more than 56% stake in iQiyi. Often dubbed the “Netflix of China”, iQIYI has become one of the major content streaming platforms in the country.
