【英文】爱奇艺做空报告（37页）

 IQ’s barter sublicensing revenues are so inflated that they wouldn’t come close to being  believable even if IQ bartered every single TV episode produced in China in each of the last  three years.  IQ’s reported barter sublicensing revenues imply it traded every single TV episode produced in  China in 2018 and 2019 for ~RMB 79,000 and ~RMB 64,000 each, respectively.13,14 A former  IQ employee who worked in content acquisition (hereinafter referred to as “the former”) told us  that non-exclusive licenses are typically worth RMB 1,000 to 5,000 per episode, or a maximum  of up to RMB 20,000 for an extremely popular show. To give IQ every benefit of the doubt, we used the maximum of RMB 20,000 per episode,  according to the former, as the average value of the episodes that IQ bartered. Even doing so, IQ would have needed to barter the licenses for ~3.9x and ~3.2x the total number of TV series  episodes produced by all Chinese production companies in order to legitimately reach its  reported barter revenues in 2018 and 2019, respectively. Barter sublicensing revenues are determined by IQ’s internal estimates of the value of the  content it traded. In other words, IQ’s management can effectively assign any value they want to  these transactions, providing management an easy opportunity to inflate its revenues which it  obviously takes advantage of. Large-scale non-monetary barter transactions are a serious red  flag. In September 2019, the SEC charged Comscore (NASDAQ: SCOR) and its CEO with  fraud involving non-monetary revenues from bartered exchanges of data, and at scale much  smaller than IQ’s.

 IQ’s reported deferred revenue is significantly overstated which further shows that it inflates its  revenue. Deferred revenue is a balance sheet account that is supposed to arise when a customer  has prepaid for a service delivered in the future. Because most of IQ’s customers prepay,  revenues are a function of deferred revenue.  We obtained Chinese credit reports for all of IQ’s VIEs and WFOEs since 2015. These are the  onshore operating entities listed below: • Beijing iQIYI Science & Technology Co., Ltd., (aka "Beijing iQIYI") • Shanghai iQIYI Culture Media Co., Ltd. (aka "Shanghai iQIYI") • Shanghai Zhong Yuan Network Co., Ltd. (aka "Shanghai Zhong Yuan") • iQIYI Pictures (Beijing) Co., Ltd. (aka "iQIYI Pictures") • Beijing iQIYI Cinema Management Co., Ltd. (aka "Beijing iQIYI Cinema") When aggregated and compared to IQ’s F-1 prospectus, we found that the deferred revenues  reported to the SEC were overstated by 261.7%, 165.5% and 86.2% in 2015, 2016 and 2017,  respectively.