Artificial intelligence startup Megvii will continue to seek a Hong Kong listing despite being blacklisted by the US earlier this month and is aiming for an early November listing hearing, Bloomberg reported.
Why it matters: Megvii filed for a Hong Kong initial public offering (IPO) in August following reported delays due to ongoing US-China trade tensions.
- The filing came after months of political unrest in the city, with companies including e-commerce giant Alibaba opting to wait in order to gauge investor sentiment following city-wide protests.
- After Megvii’s blacklisting, Goldman Sacks, one of the IPO’s underwriters, said it was reevaluating its involvement in the company going public.
- Investors could be discouraged from buying stock in a company that has been banned from doing business with US firms.
- The government of Taiwan is opening an investigation of the firm, which was awarded in September a contract to install a security system for the Taichung Power Plant, after the blacklisting.
Details: Megvii is currently seeking a listing hearing in November, people familiar with the matter told Bloomberg.
- While being added to the US Entity List, which effectively banned Megvii from sourcing products and components from American companies, has cut off Megvii off from an essential supply of chips from Nvidia, the company has not given up on its listing goals, the people said.
- Megvii said previously that its inclusion on the blacklist came as a result of a “misunderstanding,” adding that the company complies with all laws in regions in which it operates.
- Megvii cited being put on a US trade blacklist as a possible risk in its IPO prospectus. The company said that, should it be prohibited from procuring “certain goods and technologies,” its “ability to develop and provide solutions might be impaired.”
Context: Alibaba-backed Megvii provides its facial recognition technology to companies including smartphone maker Xiaomi and payments firm Ant Financial. The AI firm also supplies solutions for public security bureaus around China.
- Megvii was one of eight Chinese AI firms blacklisted by the US for their alleged complicity in human rights violations in northwest China’s Xinjiang Uyghur Autonomous Region.
- Other companies recently included on the list include Sensetime, the world’s most valuable AI startup, speech recognition and national language processing firm iFlytek, as well as surveillance camera makers Hikvision and Dahua Technology.
- A company IPO typically takes place five to eight weeks after receiving approval from the listing committee during the hearing, according to guidelines from corporate law firm Mayer Brown. Xiaomi passed its listing hearing on June 7, 2018 and floated its shares on the Hong Kong stock exchange on July 8, 2018.