iQIYI prices $350 million convertible notes offering

BEIJING - iQIYI, Inc. (NASDAQ:IQ), a prominent online entertainment service provider in China with a market capitalization of $2.44 billion, has announced the pricing of a $350 million offering of 4.625% convertible senior notes due in 2030. According to InvestingPro analysis, the company is currently undervalued based on its Fair Value assessment, with the stock showing strong momentum, up 20.4% year-to-date. The notes will pay interest quarterly, starting June 15, 2025, and will mature on March 15, 2030, unless repurchased or converted earlier under specific conditions.

The notes are subordinate to secured debts to the extent of the value of the securing assets. Conversion of the notes is restricted until 40 days post-issuance and is subject to certain conditions thereafter. InvestingPro data reveals that iQIYI’s current ratio stands at 0.44, indicating potential liquidity challenges, while the company maintains a debt-to-equity ratio of 1.06. When convertible, holders can receive cash, American Depositary Shares (ADSs), or a mix, at iQIYI’s discretion. The initial conversion rate is set at 64,819 ADSs per $200,000 principal amount, a 27.5% premium over the February 19, 2025, closing price of iQIYI’s ADSs.

iQIYI expects the offering to close on February 24, 2025, subject to customary conditions. The notes are being offered offshore in compliance with Regulation S of the U.S. Securities Act. The proceeds, approximately $344.8 million net, are earmarked for debt repayment and general corporate purposes.

Concurrent with the notes pricing, iQIYI negotiated privately to repurchase about $300 million principal amount of existing notes. The repurchase transactions may influence the market price of the ADSs and the trading price of iQIYI’s debt securities. The company anticipates that certain activities by holders of the existing notes and investors employing convertible arbitrage strategies could impact the market price of the ADSs and the trading prices of the notes and existing debt securities.

iQIYI is known for its technological platform, leveraging AI and big data analytics, and offers a range of services including membership, advertising, content distribution, and online games. The company generates annual revenue of $4 billion and maintains a P/E ratio of 10.92. For deeper insights into iQIYI’s financial health and growth prospects, InvestingPro subscribers can access comprehensive research reports and additional ProTips that provide valuable context for investment decisions. This press release, based on a press release statement, does not constitute an offer to sell or a solicitation of an offer to purchase any securities. The completion of the notes offering and the existing notes repurchase is not guaranteed.

In other recent news, iQIYI reported its fourth-quarter 2024 earnings, revealing a decline in both earnings per share (EPS) and revenue compared to analyst expectations. The company posted an EPS of -0.06 USD, missing the forecasted -0.04 USD, and revenue was slightly below expectations at 6.61 billion USD. Revenue decreased by 14% year-over-year, with significant declines in membership and advertising revenues. Despite these setbacks, iQIYI continues to focus on expanding its mini-drama portfolio and international presence. Benchmark maintained a Hold rating on iQIYI stock, citing growth challenges, while CFRA raised the stock price target to $2.50, maintaining a Hold rating. Tiger Securities also held a Hold rating with a $2.50 target following the earnings report. Citi, however, increased the price target to $3.10 and reiterated a Buy rating, reflecting optimism about iQIYI’s strategic plans for 2025. These developments highlight the mixed analyst sentiment and the company’s ongoing efforts to navigate a challenging market environment.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.