08.17.20 - Investors have signaled an extreme cautiousness towards iQiyi, the online streaming provider often referred to as the "Netflix of China," as the SEC investigates allegations of inflated earnings.
The Nasdaq-listed company dropped almost 12% in pre-market trading Friday after the company announced an investigation had been opened into its practices. The investigation is following the release of a report alleging massive amounts of fraud within the company. The report, released in April by Wolfpack Research, accused the streaming service of "committing fraud well before its IPO in 2018," and states that they have been continuing to do so since there IPO.
iQiyi has denied the allegation put forward stating, "the report contains numerous errors, unsubstantiated statements and misleading conclusions and interpretations."
Chinese companies trading on US stock exchanges have been under intense scrutiny as of late due to scandals such as Luckin Coffee, another Chinese company that admitted to inflating its sales numbers. The company was subsequently delisted from Nasdaq, and its chairman and CEO were both fired.
Source: Wall Street Journal