China AI Tech Giant Megvii Technology Files For Hong Kong IPO

Megvii Technology
A map of China is seen through a magnifying glass on a computer screen showing binary digits (Photo: Reuters / Edgar Su)

Megvii Technology, one of China's largest artificial intelligence firms, has officially filed for an initial public offering (IPO) in Hong Kong. The IPO comes at a time of massive uncertainty in Hong Kong fueled mainly by China's ongoing trade dispute with the United States.

If Megvii does push through with its IPO, it will become the first Chinese artificial intelligence firm to be listed on the Hong Kong Stock Exchange. Based on its last funding round in May, Megvii has a public valuation of around $4 billion.

The move to file for an IPO came as a surprise for most given the slew of companies that have decided to postpone their public debuts amid the uncertain geopolitical climate. Chinese tech giant Alibaba recently announced that it would be postponing its mega IPO in Hong Kong. Anheuser-Busch InBev also announced in July that it was canceling the planned listing of its Asia Pacific unit, Budweiser Brewing Company APAC Ltd, citing that it was not able to get its desired pricing.

Megvii is heavily backed by Alibaba through its various subsidiaries. According to a draft prospectus, which was published on Sunday, Alibaba's affiliate Ant Financial currently holds a 15 percent stake in the company. Alibaba Group's subsidiary Taobao China also owns another 14 percent of the Chinese AI company.

The rest of the company is largely owned by its three founders, who hold a combined 16 percent in the company. The founders still retain control of voting power through an implemented dual-class share structure.

Megvii was originally established in 2011, offering various AI-related services and products to Chinese companies. The company's biggest customers include Alibaba, Lenovo, and Huawei. Megvii also supplies services to various government bodies, including the country's Ministry of Public Security.

Among its more popular products is its Face++ facial recognition software. The product is mainly used for online identity authentication and identification. Back in May, the company was caught in the middle of a controversy after a human rights group allegedly linked its software to a mass surveillance system sued by Chinese police in the western region of Xinjiang.

The human rights group later retracted its allegations and Megvii has denied any involvement. The group called the Human Rights Watch explained that the Megvii code that was found in the surveillance system called the Integrated Joint Operations Platform was basically inactive.  

According to Megvii's CEO Yin Qi, the company is apparently quite serious about the responsible use of AI technologies. The executive mentioned in a statement that Megvii appreciated the corrections made by the human rights group, but the damage to its reputation has. According to its draft prospectus, the allegation has been seen as a potential risk factor that will be difficult to mitigate. 

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