“The blacklisting does not prevent companies from purchasing Megvii’s products and services, but it does prevent companies from selling to Megvii, which means that Megvii has been unable to buy things like Nvidia processors used in its business.”
China-based facial recognition specialist Megvii is preparing to push ahead with a planned IPO on the Hong Kong stock exchange despite having been blacklisted by the US government, according to a new report.
Citing anonymous sources who are “familiar with the matter”, South China Morning Post says that the company’s leadership is aiming to go public in early November. The company’s co-founder and CEO, Yin Qi, has issued an internal letter asserting that the company will seek to “fight” the Trump administration’s blacklisting, which has accused several tech companies of being complicit in human rights violations stemming from the Chinese government’s oppression of Uighur Muslims in the province of Xinjiang. In response, Megvii has asserted that it complies with all of the laws in place in the regions in which it operates.
The blacklisting does not prevent companies from purchasing Megvii’s products and services, but it does prevent companies from selling to Megvii, which means that Megvii has been unable to buy things like Nvidia processors used in its business.
Megvii’s leadership were already aware of the dangers of a blacklist when they detailed their investment risks in an IPO filing earlier this year, noting that potential trade restrictions could negatively impact the business and were beyond the company’s control. The filings also noted the “significant damages” done to Megvii’s reputation by a Human Rights Watch report implicating the company in the Uighur abuses, even though a subsequent report cleared Megvii of wrongdoing.
This all may make the timing of an imminent IPO risky, as would the cash flow issues detailed in Megvii’s filings, in which the company reported a loss of 5.2 billion RMB, or roughly $730 million USD, in the first six months of this year. Nevertheless, a Reuters report from earlier this year cited anonymous sources in suggesting that Megvii’s leadership believed they could raise as much as $1 billion with an IPO, which could then be used to stoke further R&D into the company’s AI-driven biometric technology, as well as an overall expansion effort.
Source: South China Morning Post
October 16, 2019 – by Alex Perala