Alibaba-Backed Chinese AI Firm Megvii Files For Hong Kong IPO

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Megvii files an IPO in Shanghai. It may raise at most $922M. Megvii’s HK IPO Application was rejected by Trump (Bloomberg).

Hong Kong (CNN Business). One of China’s most important artificial intelligence companies has applied for an initial public offering in Hong Kong.

Megvii Technology was valued at $4 billion during its most recent funding round in May.

The proposed listing is being made as the city’s financial markets face an increasing US-China tariff and protests in the area. According to Reuters, two sources familiar with the matter were cited in a report. Chinese tech company Alibaba has recently delayed its mega IPO in Hong Kong.

Megvii, if it is listed, would be the first Chinese AI stock trading platform on the Hong Kong stock market.

Alibaba is rumored to delay its second listing in Hong Kong.

Ant Financial, the Alibaba affiliate owned by Jack Ma, the billionaire founder of the company, owns approximately 15% of Megvii through its subsidiary, according to a draft prospectus Megvii that was published late Sunday.

Through its subsidiary Taobao China, Alibaba Group also owns 14% of the Chinese startup AI.

Megvii’s three founders own 16.8% of the company. They still control the majority of the voting rights through a dual-class structure that gives them more voting rights than ordinary shareholders.

Megvii was established in 2011 and caters to Chinese technology companies like Alibaba, Huawei, and Lenovo. It also provides services to government agencies like the Ministry of Public Security.

Face++, an online facial recognition software that allows for identity authentication, is the most well-known product of the company. However, the software has been controversial in the past.

Human Rights Watch published a report in May linking the company with a mass surveillance system used by the Chinese police to monitor residents of Xinjiang’s western region. This system is called the Integrated Joint Operations Platform or IJOP.

Later, the rights group corrected its report and stated that the Face++ code it discovered in the surveillance app’s login function was “inoperable.” Megvii stated that it was not associated with the IJOP. HRW confirmed this.

CNN Business was asked by Megvii about the incident and Megvii gave CNN Business a statement that CEO Yin Qi had released in June. Megvii said that he appreciated the correction and is serious about responsible AI technology use.

Although the company mentioned the allegations in its prospectus draft, it didn’t mention Human Rights Watch. The company stated that although the allegations were “proven wrong” and were rectified, it still felt the report had caused “significant damages to our reputation that are difficult to fully mitigate.”

Trump’s rough weekend included ups and downs during the China trade war

Megvii admitted that the US-China Trade War could further hurt its business, in its IPO filing.

In the last few days, both countries have declared new tariffs against each other. It stated that further escalation could impact Megvii’s supply from the United States.

The company could be affected by Washington’s global attack on Huawei, which is Megvii’s client, but the direct effect will be minimal, it stated.

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