Baidu shares closed down almost 8 percent Monday after Chinese news outlet Sina reported the company's CEO, Robin Li, would be summoned by Chinese authorities over the death of a student.
China's Internet regulator said on Monday it would send an investigation team to Chinese search leader Baidu over the death of a university student, who had used the search engine to look for treatment for his cancer.
Wei Zexi, 21, died last month of a rare form of cancer.
He had turned to Baidu to look online for the best place for treatment, finding a department under the Second Hospital of Beijing Armed Police Corps that offered an experimental form of treatment that ultimately failed, according to state media.
Before dying, Wei had posted criticism online accusing Baidu of promoting false medical information, as well as the hospital for misleading advertising in claiming a high success rate for the experimental treatment, state radio said.
"Wei's family says they trusted the treatment because it was promoted by one of the military hospitals which are considered credible, and the attending doctor had appeared on many mainstream media platforms," state radio said.
The regulator said in a short statement Wei's case had attracted widespread attention on the internet.
It, along with the health ministry and State Administration for Industry and Commerce, would investigate Baidu over the case and "handle it in accordance with the law" and publicize its findings.
Shares in Baidu dropped 7.9 percent on the Nasdaq composite to $178.91 each after the reports surfaced, while the volume of options contracts traded was two-and-a-half times larger than usual, with sentiment heavily skewed toward bearish bets, Reuters reported, citing Trade Alert data.
Baidu said in a statement it deeply regretted Wei's death and sent its condolences to his family.
"Baidu strives to provide a safe and trustworthy search experience for our users, and have launched an immediate investigation of the matter," it said.
The company added it welcomed the investigation and would fully cooperate.
Internet portal Sina cited unidentified Baidu sources as saying the regulator had also asked to speak to the CEO, Li, but that the subject of the discussion wasn't clear.
Reuters was not able to reach the hospital for comment.
Baidu has been in trouble before for medical related issues.
This year, it was criticized for selling management rights for an online forum related to haemophilia to an unlicensed private hospital, which then used the platform for self-promotion and deleted comments that challenged its credentials, the official Xinhua news agency said.
In 2010, China's state-run television accused Baidu of promoting counterfeit drugs through its search engine.
— CNBC contributed to this report.