Benzinga | Aug 14, 2020 03:24AM EDT

'The Netflix Of China' iQiyi Tanks 12% On SEC Probe Revelation

iQiyi, Inc. (NASDAQ:IQ) shares dropped more than 12% in the after-hours session Thursday as the company revealed it's under investigation from the United States Securities and Exchange Commission.

What Happened: The Chinese video-streaming service akin to Netflix Inc (NASDAQ:NFLX) said the SEC is seeking financial and operating records dating from January 1, 2018, CNBC reported.

The video streamer said the federal agency has also asked for documents related to acquisitions and investments identified in a Wolfpack Research report dating back to April.

Why It Matters: Wolfpack claimed at the time that iQiyi had been fudging user numbers since its initial public offering in 2018. In 2019 alone, it inflated revenue by up to $1.8 billion, according to the Muddy Waters Research-backed research firm.

The report was released days after Luckin Coffee Inc (OTC:LKNCY), a China-based coffee chain, admitted its Chief Operating Officer inflated sales numbers in previous SEC filings.

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

The streaming platform's membership revenue grew 19% year-over-year in the latest quarter, while advertising revenue fell 28%.

Price Action: iQiyi shares fell 12.36% at $19 in the after-hours session Thursday, after the revelation. It had closed the regular session 2.4% lower at $21.68.