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424B4
IQIYI, INC. filed this Form 424B4 on 03/29/2018
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DILUTION

If you invest in our ADSs, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and our net tangible book value per ADS after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

Our net tangible book value as of December 31, 2017 was US$703.7 million, or US$2.05 per ordinary share and US$14.35 per ADS. Net tangible book value represents the amount of our total consolidated tangible assets, less the amount of our total liabilities. Dilution is determined by subtracting net tangible book value per ordinary share, after giving effect to the additional proceeds we will receive from this offering, from the initial public offering price of US$2.57 per ordinary share, which is set forth on the cover page of this prospectus adjusted to reflect the ADS-to-ordinary share ratio, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Because the ordinary shares have the same dividend and other rights, except for voting and conversion rights, the dilution is presented based on all ordinary shares.

Without taking into account any other changes in net tangible book value after December 31, 2017, other than to give effect to (i) the automatic conversion of all our outstanding preferred shares into 3,728,823,500 ordinary shares; (ii) the re-designation of ordinary shares held by holders other than Baidu or its affiliates into 1,231,841,032 Class A ordinary shares; (iii) the re-designation of ordinary shares held by Baidu or its affiliates into 2,839,530,705 Class B ordinary shares, in each case immediately prior to the completion of this offering, and (iv) our issuance and sale of 125,000,000 ADSs, representing 875,000,000 Class A ordinary shares, offered in this offering at the initial public offering price of US$18.00 per ADS, after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2017 would have been US$2,886.2 million, or US$0.58 per ordinary share and US$4.06 per ADS. This represents an immediate increase in net tangible book value of US$0.41 per ordinary share and US$2.87 per ADS to the existing shareholders and an immediate dilution in net tangible book value of US$1.99 per ordinary share and US$13.94 per ADS to investors purchasing ADSs in this offering. The following table illustrates such dilution:

 

     Per Ordinary Share      Per ADS  

Initial public offering price

   US$ 2.57      US$ 18.00  

Net tangible book value as of December 31, 2017

   US$ 2.05      US$ 14.35  

Pro forma net tangible book value after giving effect to the conversion of our preferred shares

   US$ 0.17      US$ 1.19  

Pro forma as adjusted net tangible book value after giving effect to the conversion of our preferred shares and this offering

   US$ 0.58      US$ 4.06  

Amount of dilution in net tangible book value to new investors in this offering

   US$ 1.99      US$ 13.94  

 

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