Megvii files for an IPO in Shanghai. This may raise at minimum $922M. Megvii had filed for an IPO HK after it was blacklisted (Bloomberg).
Hong Kong (CNN Business). A large Chinese artificial intelligence company has filed for an Initial Public Offering in Hong Kong.
Megvii Technology was last valued at $4 billion in May’s last round of funding.
Its listing proposal comes at a time when the city’s market is facing an escalating US/China trade war as well as widespread protests in the town. Chinese tech company Alibaba recently decided to delay its mega IPO within the city, according to Reuters. The report cited two sources who have knowledge of the matter.
Megvii would be the first Chinese AI stock trader on the Hong Kong Stock Exchange if it were to be listed.
Ant Financial — the Alibaba affiliate that Jack Ma founded — holds around 15% of Megvii through a subsidiary according to a draft prospectus Megvii, published late on Sunday.
Alibaba Group holds 14% more of the Chinese AI startup via its subsidiary Taobao China.
Megvii’s co-founders have 16.8% each. However, they hold a majority of the voting powers through a dual-class share structure. This gives their shares more voting rights than ordinary shareholders.
Megvii, founded in 2011, caters to Chinese technology giants like Alibaba, Huawei, and Lenovo. It also provides services for key government bodies like the Ministry of Public Security.
Face++ is a facial recognition program used for online identity authentication. The software has caused controversy in the past.
Human Rights Watch published a report this May linking the company to a mass surveillance program used by Chinese police to monitor citizens living in the western region of Xinjiang. This system is also known as the Integrated Joint Operations Platform (or IJOP).
The report was later corrected by the rights group, which stated that the Face++ Code it found in the surveillance application’s log-in function wasn’t working. Megvii denied any relationship to the IJOP, HRW stated.
CNN Business asked Megvii to clarify the incident. He provided CNN Business with a statement from Yin Qi, co-founder, and CEO of the company. Megvii thanked him for the correction and said that he is serious about the responsible use of AI technologies.
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The company also mentioned the claims as a risk factor but did not name Human Rights Watch. Although the allegations were corrected and proved incorrect, the company claimed that they had still suffered significant reputational damage which is difficult to repair.
Megvii acknowledged in its IPO filing that the US-China trade war could cause further damage to their business.
Both countries have imposed new tariffs on one another in the past few days. It said that a further escalation could result in Megvii losing its supplies from the United States.
It said that Washington’s global protest against Huawei — which Megvii manages — could have an indirect impact on the company’s business.