'Netflix Of China' iQiyi crashes 12 percent exposed on SEC Investigation

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 In the after-hour session on Thursday, iQiyi, Inc. ( NASDAQ: IQ) shares fell more than 12 per cent as the company announced it was under investigation by the United States Securities and Exchange Commission.

What Happened: The Chinese video streaming company similar to Netflix Inc (NASDAQ: NFLX) said the SEC was looking for financial and operational documents from 1 January 2018, CNBC reported.

The video streamer said that the federal agency has also demanded documentation related to acquisitions and investments listed in a study of Wolfpack Research dating from April.

How It Matters: At the time, Wolfpack reported that since its initial public offering in 2018, iQiyi had been fudging user numbers.

It inflated sales by up to $1.8 billion in 2019 alone, according to research firm Muddy Waters.

The report was published days after Luckin Coffee Inc (OTC: LKNCY), a China-based coffee chain, acknowledged an exaggeration of sales figures in previous SEC filings by its chief operating officer.

The search engine giant Baidu, Inc (NASDAQ: BIDU) spun off iQiyi in an IPO, raising $2.2 billion.

The subscription revenue of the streaming site rose 19% year-over-year in the last quarter, while advertisement revenue dropped 28%.

Price action: iQiyi stock dropped at $19 after the revelation Thursday at 12.36 per cent in the after-hour session. It had closed a 2.4 per cent lower daily session at $21.68.

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