Chinese face recognition firm Megvii denies report it is mulling delay of Hong Kong IPO after US blacklisting
- Megvii’s cloud-based identity authentication platform processed about 2.4 million daily face ID verification requests on average in first six months of this year
Chinese artificial intelligence start-up Megvii Technology dismissed a report that it is considering a delay in its Hong Kong initial public offering over US trade blacklist concerns.
The IPO, which could raise as much as US$1 billion, is expected to herald the debut of China’s AI start-ups on secondary markets at a time when the country’s AI ambitions are at the forefront of a trade war with the US.
The denial comes after Bloomberg reported on Tuesday that the Beijing-based company is discussing with advisers whether to proceed with the planned offering or hold off while it tries to get removed from Washington’s Entity List, which prevents it from buying key American technology.
The day after the ban was announced, Reuters reported that Goldman Sachs Group said it was reviewing its involvement in the Megvii IPO.
“The delaying IPO report is untrue,” a Megvii spokeswoman said on Wednesday when reached via text. The company declined to make any further comment on the listing.
First filed in August, the IPO application is still in process, with Megvii answering queries from the Hong Kong stock exchange and waiting for a listing hearing, according to a person familiar with the matter.
Megvii says US ban will hit its supply of servers and could disturb IPO
The company would “firmly carry on” with its IPO plans despite any disturbance, Megvii co-founder and chief executive Yin Qi said in an internal letter to staff last month, a copy of which was obtained by the South China Morning Post.
The letter came after the company was put on a US trade blacklist in early October, joining 28 Chinese public security bureaus and companies including peers SenseTime and Yitu and video surveillance specialists Hikvision and Dahua, over what Washington said was Beijing’s alleged human rights violations of Uygur Muslims and other predominantly Muslim ethnic minorities.
Founded by three Tsinghua University graduates in 2011, Megvii developed the country’s largest cloud-based identity authentication platform Face++, which processed about 2.4 million daily face ID verification requests on average in the first six months of this year.
Backed by Post parent company Alibaba Group and its affiliate Ant Financial, Megvii provides computer vision technology to a range of corporate customers, including Xiaomi, Lenovo Group, Vivo and Taiwan’s Hon Hai Precision Industry, the electronics contract manufacturing giant also known as Foxconn.
Megvii’s technology is used to unlock smartphones, make mobile payments and verify identities at banks, train stations and airports.
The Chinese companies added to the Entity List all denounced the ban, which came five months after the country’s telecommunication and smartphone giant Huawei was put on the list.
In the internal letter, Yin did not rail against the US, which has become involved in an escalating tech war with Beijing. Instead, he said the industry had “enjoyed the innovative fruits yielded by the US for four decades and had never really had a sense of crisis [before now].”
Megvii and its lawyers are negotiating with the US Department of Commerce about alternatives to the Entity List ban, as the company claims the human rights allegations are “ungrounded” in its case, according to Yin.
Although there is a chance the ban could be lifted in the short term, Yin said that a long term tech war had started between the US and China and that meant reconstruction of the supply chain was “unavoidable”.
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