AI firm Megvii to seek approval for $500 million Hong Kong IPO

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Artificial intelligence (AI) firm Megvii plans to seek approval for its Hong Kong listing on Thursday, aiming to raise at least $500 million, Reuters reported citing people familiar with the matter.

Why it matters: In October, the US government added Megvii to the so-called “Entity List” for alleged complicity in Beijing’s human rights abuses in China. The move effectively blocks the company from sourcing American-made components for its products.

  • Megvii has denied the allegation and said its inclusion on the list comes as a result of a “misunderstanding.”
  • The company’s initial public offering (IPO) has been delayed as a result of the US-China trade war and blacklisting.

Details: Megvii was previously seeking a fourth-quarter listing of up to $1 billion, according to Reuters.

  • The company has yet to decide whether to carry out a roadshow once the application is approved, the people said.
  • Goldman Sachs said after Megvii’s blacklisting that it was re-evaluating its involvement in the IPO given “recent developments.”
  • The company filed for a Hong Kong IPO in August but gave no indication of how much it was seeking to raise.

Context: Megvii is one of a handful of startups that is spearheading China’s AI boom, including Sensetime, Yitu, and Cloudwalk, though none have yet gone public.

  • These companies have benefited from broad government goals to build China into an AI front-runner by 2030.
  • The company earns nearly three quarters of its sales from AI services for government agencies and the healthcare industry, among others.
  • In May, Megvii raised $750 million in a round led by Bank of China’s equity arm, valuing the company at more than $4 billion.

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