Even though the stock market has cooled this summer, Chinese artificial intelligence company Megvii is close to its debut on the Hong Kong Stock Exchange.
“Megvii’s IPO is still going ahead as planned,” one banker close to the deal told FinanceAsia. The company has already started to write its IPO prospectus.
There were earlier reports that it had planned to delay its IPO plans on concerns about the US-China trade war and the bad performance of recent IPOs. The company completed an eye-catching $750 million fundraising in May this year.
The eight-year-old company is one of the few in China to have commercialised its AI-enabled solutions. It already provides the facial recognition technology to commercial banks such as Industrial and Commercial Bank of China (ICBC). Ant Financial, which invested in Megvii's $46 million Series C round, is using Megvii’s proprietary Face++ technology to develop a facial recognition-based digital payment feature.
International investors have favoured AI startups more than Chinese investors, which is a good reason for Megvii to go public in Hong Kong. Total global funding for AI startups in Q2 reached a record $7.4 billion, and there are more active investors in the AI sector than others, according to a report on CB Insights.
China, however, has seen a drop in AI investments. Total Q2 funding for AI startups plunged almost 40% quarter-on-quarter, and the number of companies to receive funding has also fallen 45% - a record low for the past five quarters, according to research firm ITJuzi.
Even though there may be some investment caution due to the sub-par performance of Xiaomi and Meituan that listed in Hong Kong last year, Megvii’s $750 million Series D funding shows clearly that investors remain interested in disruptive technologies.
But broader nervousness in the capital markets has been felt by AI companies. “International trade tension has caused uncertainty on the stock market, and it has also affected our investor’s confidence,” said a manager at SenseTime, another Chinese unicorn focused on facial recognition technology.
As its chief executive Charles Li has emphasised on multiple occasions, the Hong Kong Stock Exchange expects more Chinese tech companies to emerge. “People are waiting for big IPOs such as Alibaba or Megvii to lift up the stock market in Hong Kong,” one Hong Kong investor commented.
