Nod for VIE-structured Chinese AI developer Megvii to list on Shanghai’s Star Market signals further approvals

Megvii Technology, an artificial intelligence company with a variable interest entity (VIE) structure, has been given the nod to list in Shanghai, indicating that Beijing is ramping up efforts to encourage home listings of overseas-domiciled Chinese companies.

The Shanghai Stock Exchange’s listing committee on Thursday approved the Cayman Islands-incorporated company known for its Face++ facial-recognition software to launch an initial public offering on the technology-heavy Star Market, according to a statement posted on the bourse’s website. The committee also asked Megvii to elaborate on its core technology and business outlook, given its diversified customer base and position as a non-major industry player.

The approval is a sign that the Chinese regulators could give the go ahead to more VIE-structured companies to list on domestic exchanges. US listings are becoming increasingly difficult for Chinese companies with the special structure, as the US Securities and Exchange Commission (SEC) is set to tighten approval norms after Beijing’s unexpected regulatory crackdown on industries from technology to private education hits American investors. Chinese regulators have also said that they will draft new rules on overseas flotations by domestic companies.