Megvii Technology backed by Alibaba Group Holding Ltd. is all set to become the first major Chinese artificial intelligence startup to file for an IPO. According to the startup’s prospectus, it plans to issue up to 253 million Class B shares for the Chinese Depository Receipt Offering as the underlying stock. The offering may raise at least $922 million (6 billion Yuan) after fees. According to the filing, the startup will use this to fund research and development in visual Internet of Things and robotics, as well as to replenish capital. CITIC Securities Co. Ltd. is the listing sponsor.
This move comes after more than a year when the startup known for Face++, its computer vision platform filed to go public in Hong Kong in 2019. Reuters reported at the time that the startup could raise between $500 million and $1 billion. However, Megvii’s application for a Hong Kong listing lapsed after it became one of the many companies that were blacklisted by the Trump Administration over alleged involvement in human rights violations against Muslim minorities in China.
Founded in 2011, Megvii Technology gained fame in part because of China’s fixation with security that led to a nationwide boom in video-surveillance. It is one of the world’s largest artificial intelligence startups specializing in facial recognition.
Megvii Technology provides enterprises and developers with intelligent solutions and data services. The startup leverages recognition, optimization, control, and other algorithms to connect objects, scenarios, and individuals, building a platform of IoT OS. The startup’s technology is based on its original deep learning system Brain++.
Megvii connects standardized hardware like robots, sensors, and personal devices with artificial intelligence and the Internet of Things, thereby commercializing 3 application-oriented IoT brains on a large scale, namely- supply chain brain, city brain, and personal life brain. The startup’s technology can be found powering smart city infrastructure across the country as well as many mobile apps and smartphones.
Since its inception, Alibaba, the Bank of China, and the Ant Group have pumped in about $1.4 billion into the startup. Megvii along with its rivals CloudWalk, SenseTime, and Yitu are together recognized as the ‘Four AI Dragons’ of the country for their market dominance and funding from top investors.
The company’s prospectus discloses that there is both rapid growth in revenue and widening losses. Megvii attributes the losses to changes in the fair value of its investment in research and development and preferred shares. In the first six months of 2019, the company made 948.9 million RMB. However, it registered a loss in the first nine months of the year 2020 of $160 million (1.03 billion Yuan), excluding one-time items. The company now joins the Lenovo Group Ltd. taking the benefit of the CDR Program started by Beijing three years ago to attract big names and promising startups to mainland stock markets.
In an emailed statement, the startup has said that the proceeds from the listing will be used to strengthen areas including production capacity and research.