Chinese AI startup Megvii Technology Ltd has filed for an initial public offering in Hong Kong, targeting at least $500 million valuations for the debut. Its public debut comes even if its largest backer, Alibaba Group Holding Ltd, had postponed its supposed $15-billion Hong Kong IPO.
The startup had reportedly pushed forward for its IPO despite market instability in Hong Kong because it is optimistic that the unrest will be settled before the year ends. This was according to two people familiar with Megvii's IPO move who spoke with Reuters exclusively. Megvii declined to comment.
Meanwhile, Bloomberg reported that Megvii has indeed filed for an IPO on Aug 25 and is eyeing a valuation as much as $1 billion. Bloomberg said its optimism to debut in Hong Kong proved that its products have strong market demands.
The startup is known for its AI products, called IoT solutions, used by government agencies to improve public safety and manage traffic. These products accounted for as much as 73 percent of the startup's revenue.
If the situation goes in favor of Megvii, the startup will be the first Chinese artificial intelligence firm to go public in Hong Kong. Further, it will widen its reach in a market estimated to be worth billions in the coming years.
The worldwide market for artificial intelligence was worth $16.06 billion in 2017. A recent estimate said the market could grow to $190 billion by 2025.
Aside from Alibaba, Megvii is also backed by Bank of China Group Investment Ltd, Australia's Macquarie Group Ltd., Ant Financial, Lenovo Group Ltd, and Huawei Technologies.
As for its reported Hong Kong IPO, Megvii will use the funds it will raise for research and development of new products, global expansion, and strategic investments.
While Megvii is optimistic about its intended public debut, Alibaba decided to delay its Hong Kong listing which was supposed to lift its valuation to $15 billion. China's largest e-commerce company and strong competition of Amazon had pushed back due to market instability in Hong Kong amid the ongoing geopolitical tensions. The postponed IPO was supposed to happen by the end of August.
Despite, Alibaba's hesitance on the Hong Kong market, a report from Deloitte China released early this year offered a positive IPO outlook for the combined markets of the Chinese Mainland and Hong Kong. The report said there could be around 200 IPOs happening in the said markets, raising proceeds of approximately HK$180-230 billion for 2019.