IQiyi’s stock falls on heavy volume following the revelation of SEC probe, weighs on Baidu shares

Shares of iQiyi Inc. IQ,
-11.16%
plunged 15% on heavy volume Friday, in the wake of the revelation by China-based streaming video service of an investigation by the Securities and Exchange Commission into certain acquisitions and investments. Trading volume was 38.5 million shares, enough to make the stock the 7th most active on major US exchanges, and more than 7 times the all-day average. The SEC investigation follows a report issued by short seller Wolfpack Research in April. Analyst Rob Sanderson at Loop Capital Markets said investors “should not be incrementally rattled by the announcement of the SEC investigation,” because the lack of content and heavy post-COVID-19 emissions were already known. The revelation of the survey was in the second-quarter profit report last Thursday, in which iQiyi reported a narrower-than-expected loss and revenue that exceeded forecasts, according to FactSet, while online advertising revenue and subscribers were missing, Loop’s Sanderson said. Apart from that, the sale of the stock helped the BIDU share of Baidu Inc.,
-6.28%
of 6.1%. In Baidu’s second quarter report, the China-based Internet search and marketing company said iQiyi’s revenue accounted for about 27% of total revenue. So far this year, iQiyi shares have fallen 12.4% and Baidu has lost 7.5%, while the iShares MSCI China ETF MCHI,
-0.05%
has increased by 12.6% and the S&P 500 SPX,
-0.01%
has received 4.5%.