China AI Unicorn Megvii Tech Goes Ahead With IPO plan
The Beijing-based AI company Megvii is going ahead with an IPO plan on the Hong Kong Stock Exchange, despite having been blacklisted by the US administration.
Rumors about Megvii (旷视科技) being set to be listed in Hong Kong have been widespread since the second quarter of 2019, with the company engaged in an attempt to raise more than USD 1 billion. This raised many questions among investors about the credibility of the company since it had been blacklisted by the US. However, Megvii is still actively trying to achieve its goal to go public this month.
The tech firm is one of eight Chinese tech companies included in the Commerce department’s ‘Entity List.’ Among them was one of the world’s most valuable AI startups, SenseTime Group (商汤科技). The firms were targeted over alleged connections to human rights abuses.
Halfway through 2019 Megvii had accumulated around CNY 5 billion in losses. However, despite such huge setbacks, the flourishing market of artificial intelligence backed by the Chinese government’s plan to lead the country to become one of the top leaders in the AI industry has given Megvii investors an optimistic view about the future development of the AI market.
In order to become the market leader in the AI industry, the Chinese government has plans to invest more than USD 15 billion in the industry by the end of 2020 and USD 140 billion by 2030. More than 10 provinces have been localized with the AI development plan, and Beijing has become the center of China’s AI industry.
So far, Megvii has raised more than USD 1.4 billion in funding, accounting for seven rounds in total, raising the company value to around USD 4 billion. The latest funding round was raised on May 8, 2019, from a Series D funding round worth USD 750 million led by Bank of China Group Investment (中银集团).
The question has been raised regarding how the market will perform after the company goes public, and it has become the main issue of contention among investors. Low demand for company stakes is expected to inch the market, which will affect a possible decrease in share price after IPO.
An exclusive interview with Li Haoran, manager of Megvii's cloud services, led by EqualOcean analyst, Sylvia Liang, revealed some interesting facts about the company and how it works. Below is an extract from that interview.
Q: You mentioned your financial client and we learned that MEGVII has more exposure in the financial industry relative to other players. Besides identification varication, what are the other applications that MEGVII provides to its financial clients?
A: Our financial services clients are in banking, insurance, micro-financing, and P2P lending. Our thinking was that since our company specializes in computer vision, how can we use it to help financial institutions in more situations? In speaking with client companies, we found that some of them were hoping to include computer vision in their risk management arms. Right now, we are communicating with multiple clients to explore such applications.
If you want to know more about the interview, please read here
Since its foundation in 2011, Megvii has expanded its market globally and enhanced its confidence in the global market. The company has operations in Japan, Thailand, the Middle East, and Southeast Asia.
In the event the company enters the Hong Kong Stock Exchange, it’s possible it will have a successful entrance, since the company is backed by big investors like Alibaba Group (BABA: NYSE), Foxconn Technology Group (2324: TPE) and recently Bank of China Group Investment, which means confidence in the market.
After all, it’s hard to preview the post-IPO market performance based on the limited information provided by the market. One can only sit down and wait for the opportune moment to take the final decision: is it worth buying?