Chinese artificial intelligence firm Megvii, backed by Alibaba (BABA), recently filed for an IPO with the Hong Kong exchange. The filing comes in the middle of Hong Kong-China conflicts and the US-China trade war.
Why is Megvii so important?
The artificial intelligence firm is backed by Chinese e-commerce behemoth Alibaba as well as several state-owned enterprises like Bank of China Group Investment. Though it has several AI products like algorithms that can manage traffic, it is known mostly for its facial recognition technology.
The company has not revealed the initial price of its share, nor has it shared details about the IPO timeline. However, its move to list on the Hong Kong market shows the firm’s confidence. The ongoing protests in the city are sending shivers across the investment community, and even Alibaba found it better to postpone its listing until the unrest subsides.
Megvii has already completed a $570 million funding this year which values it at $4 billion. However, the company’s rival Sensetime has a $4.5 billion valuation. Facial recognition has become a point of content in the Hong Kong protests. Therefore, the company’s move to complete an IPO; there is a very bold move.
Why is China investing in facial recognition?
China aims to become the leader of AI technology in the world by 2030 because of which it is throwing its weight behind facial recognition. The authorities feel that facial recognition is the kye to AI success because of which they have already deployed this tech in several cities across the country. For Megvii, the Chinese government is a key customer too.
Given the authorities’ intensive focus on this tech, the company saw unprecedentedly fast revenue growth. It grew by 350% to 1.42 billion yuan ($199.7 million) in 2018. The company has earned 948.9 million yuan in the first half of 2019 alone. However, the losses have grown equally fast. In 2018, it lost 3.35 billion yuan while in 2017, it lost 758.8 million. In the first two quarters, it lost 5.2 billion yuan. The firm said that it is investing in research and development continues, which is responsible for the losses.
The company has also highlighted its extensive R&D costs as well as negative publicity as risk factors. Even Human Rights Watch wrongfully quoted Megvii for being involved in mass surveillance of Uighurs in China because of which the company received flak left, right and center.