Megvii Files For Hong Kong IPO to Drive R&D in AI Technology

FILE PHOTO: The logo of Face++ facial recognition software is seen at the Security China 2018 exhibition on public safety and security in Beijing, China, October 24, 2018. REUTERS/Thomas Peter/File Photo

Chinese artificial intelligence (AI) firm Megvii, the firm behind well-known computer vision tech company Face++, has filed for a public listing in Hong Kong on Aug. 26 with Goldman Sachs, J.P. Morgan and Citibank serving as the underwriters.

The listing will allow Megvii to secure more funds to undergo more rigorous and expansive research and development in the fields of AI and facial recognition, a key part of China’s drive to become a world leader in AI technology by 2030. Both Megvii and Alibaba, its primary investor, will benefit from advancements in the sector as the technology is widely deployed in cities across China.

Backed by e-commerce giant Alibaba and state-owned enterprises such as Bank of China Group Investment, Megvii sells AI products ranging from facial recognition technology to algorithms designed for traffic management to clients including government agencies and private contractors.

According to the prospectus, the company posted a 1.429 billion yuan ($200 million) revenue in 2018, a massive 358.8% compound growth compared to its 2016 revenue, a meager 67 million yuan ($9.4 million). Revenue numbers dipped a little during the first half of 2019 to 949 million yuan ($132.8 million).

Megvii has not released the pricing of its shares or the timeline of its initial public offering (IPO). But the firm has signaled confidence in the Hong Kong market despite the ongoing protests and recent reports of Alibaba’s deferred listing.

Earlier this year, Megvii completed a $750 million funding round, reportedly putting its valuation north of $4 billion. Its closest rival, Sensetime, has a valuation at over $4.5 billion. This cash injection has helped spur Megvii’s recent revenue growth.

The Chinese company has also incurred widening losses of 3.35 billion yuan ($470 million) in 2018, compared to 758.8 million($106.2 million) in 2017. In the first six months of this year alone, the company lost 5.2 billion yuan ($730 million) — more than the amount it lost throughout 2018. Megvii attributed this to continued investment in its R&D department.