Chinese AI unicorn 4Paradigm makes third IPO attempt in Hong Kong, but cites chip supply risks amid US sanctions

After two previous applications to list in Hong Kong lapsed for unknown reasons, the developer of specialised AI software hopes the third time’s the charm
4Paradigm faces risks of tightened semiconductor shipments and tense US-China relations that already frustrated IPOs from AI giants SenseTime and Megvii

Artificial intelligence

Coco Fengin Beijing

Published: 5:16pm, 6 Sep, 2022

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Chinese artificial intelligence (AI) firm Beijing Fourth Paradigm Technology Co, or 4Paradigm, has filed for a Hong Kong initial public offering for a third time after two failed attempts to land a listing.

The company is the latest Chinese AI company to pursue a public listing in the city amid growing tensions between Beijing and Washington, which has targeted firms developing the cutting-edge technology and limited access to advanced semiconductors, a critical component for powering AI computing.

As a result, 4Paradigm warned that “export controls and economic or trade restrictions” may impact its business, according to its latest prospectus filed with the Hong Kong stock exchange on Monday.

Previous applications to go public in August 2021 and last February lapsed for unknown reasons.

Beijing forges ahead with all-in chip effort, brushing aside setbacks

Founded in 2014, 4Paradigm provides AI software that allows enterprises to develop their own decision-making AI applications in a range of industries such as banking, insurance, retail and agriculture. The start-up has raised more than US$1 billion from Goldman Sachs, Sequoia China, and Citic Private Equity, among others. It was valued at about US$3 billion last year.

Like many of its AI peers, 4Paradigm remains in the red. Its net loss in the first half of the year totalled nearly 204 million yuan (US$29.4 million), 19 per cent less than what it lost in the same period last year. Revenue grew 34 per cent to nearly 1.1 billion yuan in the same period, according to its prospectus.

US export controls have hit multiple companies in China’s emerging AI industry in recent years. Since 2019, unicorns such as SenseTime, Megvii and CloudWalk – which specialise in facial recognition technology – have been added to Washington’s entity list for alleged involvement in human rights violations against Muslim minorities in China’s western Xinjiang region.

4Paradigm has so far been left unscathed.

People walk beneath a welcome message for Chinese AI giant SenseTime after its listing in Hong Kong on December 30, 2021. Photo: AFP

Other IPOs have been affected by the sanctions. Megvii was added to the entity list two months after its August 2019 application for an IPO in Hong Kong. It eventually nixed those listing plans and turned to the Shanghai Stock Exchange’s Star Market two years later. The listing process has still not been completed, as Megvii has been required to add additional financial information.

SenseTime delayed its Hong Kong listing last year by 13 days after the US Treasury Department put the company on a blacklist barring American citizens and entities from investing in the company. When it listed two weeks later, SenseTime excluded US persons from participating in its HK$6.64 billion (US$846 million) stock offering.

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