Facial recognition developer Megvii Technology had no choice but to turn to a listing at home after Washington’s hostility pressured investors to reconsider their Chinese tech portfolios.
As reported by the South China Morning Post, Megvii has launched its initial public offering process, which usually takes months, as it has yet to get government approval, on Shanghai’s high-tech STAR Market. Underwriting its IPO is CITIC Securities.
The company has been pursuing an IPO for over a year. In February 2020, it let its application expire on the Stock Exchange of Hong Kong amid increased investor uncertainty caused by the rising Covid-19 outbreak and Megvii’s inclusion on U.S. President Donald Trump’s blacklist. The U.S. Entity List placed Megvii next to its rivals SenseTime and Yitu for their alleged roles in aiding Beijing in the mass surveillance of Muslim minorities in western China.
In Hong Kong, Megvii sought to raise between $500 and $1 billion. The size of its domestic listing has yet to be determined. In May 2019, it was valued at over $4 billion.
The STAR Market, China’s first Nasdaq-like exchange, which allowed unprofitable startups to go public, was opened in 2019 to lure its tech titans back home, and it has been successful at that. In July 2020, it witnessed the $6.6 billion debut of China’s largest chip foundry, Semiconductor Manufacturing International Corp. (HKEX: 00981; OTC: SMICY), after the company chose to delist from the New York Stock Exchange amid Trump’s tech war on China. Ant Group, Alibaba’s financial titan and operator of Alipay, was also scheduled to go public on STAR simultaneously with its Hong Kong offering before it got suspended.
Founded in 2011, Megvii is a world leader in facial recognition technology, known for its Face++ system. The company has been backed by Alibaba Group (NYSE: BABA; HKEX: 9988), Lenovo Group (OTC: LNVGY), and Foxconn. In August 2019, after finding itself on Trump’s trade blacklist, it announced the establishment of a committee for privacy protection and guarding against the weaponization of AI in mass surveillance.
At the time, Megvii’s co-founder and chief executive, Yin Qi, said, as cited by Biometric Update, “Given the uncertainties in our industry, we strive to build rather than disrupt industries, to change how people work for the better, and to find solutions that respect people’s dignity and privacy.”
Qi also said, “These are real policies, not mere words. Still, we acknowledge that challenges remain and these are early days.”