China’s Megvii kick-starts IPO on Shanghai’s Star Market after Trump added facial recognition giant to entity list
- The Beijing-based owner of Face++ software has kick-started an initial public offering on the Nasdaq-like exchange in Shanghai
- Megvii let its US$500 million Hong Kong IPO application lapse in February last year after finding itself on a Washington trade blacklist
China’s Megvii Technology, one of the foremost developers of facial-recognition technology, is looking to favourable policies and more receptive investors at home to help bankroll its expansion in artificial intelligence.
China is nurturing local hi-tech companies to fulfil its ambitions of becoming the global leader in fields such as artificial intelligence by 2030 and trying to offset any damage to promising start-ups from the US-China trade war.
The Star Market, established under the orders of Chinese President Xi Jinping, also represents a bold move by Shanghai to lure tech companies away from other financial hubs such as Hong Kong and New York.
An IPO would give Megvii’s shareholders, including Alibaba Group Holding – the owner of the Post – a chance to exit or partially sell their shares. Other shareholders of Megvii include Alibaba’s affiliate Ant Group, the personal computer maker Lenovo, Foxconn, the world’s largest contract electronics manufacturer, and the Abu Dhabi Investment Authority (Adia).
Megvii objected to its inclusion on the list and said it had generated only around 1 per cent of its revenue from projects in Xinjiang in 2018 and no revenue from the area in the six months ended June 30.
Megvii was keen to list in Hong Kong, not only to raise capital but also to diversify its shareholder base and boost its brand outside its home market. The Beijing-headquartered firm started expanding across the rest of Asia and the Middle East in 2018.
Megvii posted operating losses of just over 115 million yuan (US$16.2 million) in the first six months of 2019, according to its Hong Kong IPO filing documents.
Megvii’s peers include SenseTime and Hikvision in China, as well as Cognex in the US and Japan’s Keyence.
Founded in 2011, Megvii set up an AI ethics committee last year to guard against the weaponisation of its tech.
The company was last valued at more than US$4 billion after raising US$750 million in May 2019.
Additional reporting by Enoch Yiu