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U.S.-listed shares of Baidu ( BIDU ) fell for the second day amid a Chinese government probe of China’s Internet search leader after the death of a university student. The Cyberspace Administration of China (CAC) has reportedly set up a task force to investigate Baidu amid mounting criticism over its prominent placement of sponsored health care services providers in its search results. “We think this incident will have some negative impact on Baidu’s share price and its search business. In view of the public outrage triggered by this incident, the task force could convict Baidu of wrongdoing at the end of its investigation and could suggest certain punishments to appease the public,” Jialong Shi, an analyst at Nomura Securities, said in a research report. “A minimal punishment would be a cash fine for violation of certain regulations or misconduct as an ad publisher,” the Nomura analyst said. “A more material impact would be a complete/partial ban on health care advertising on the Internet, including search engines. Based on our industry sources, Baidu derives 20% to 30% of its search revenue from the health care category.” Baidu stock was down more than 2% in late-afternoon trading in the stock market today , at a nearly two-month low near 175, after falling 7.9% Monday. Baidu has an IBD Composite Rating of 76 out of a possible 99. It is now in sell territory, down nearly 8% after a breaking out from a cup-with-handle base at 189.90 on March 29. The 21-year-old university student, Wei Zexi, died last month of a rare form of cancer. He had used the Chinese search engine to look for treatment for his cancer and later died after receiving care at a hospital he had found on Baidu search results. “A more profound negative impact would question Baidu’s brand as a trustworthy and reliable search engine,” said the Nomura analyst. “The overwhelming negative press coverage over this incident could once again shake Internet users’ trust in Baidu’s search results.” In 2010, China’s state-run television accused Baidu of promoting counterfeit drugs through its search engine. Scalper1 News
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