Megvii IPO Is Poised to Bring AI to the Chinese Market

By

Mar. 16 2021, Published 2:18 p.m. ET

We're at the point in time where facial recognition isn't a fantasy anymore and AI (artificial intelligence) holds a legitimate stake. Now, the Beijing-based AI brand Megvii is going public on the Chinese market.

Article continues below advertisement

After filing for the initial offering on March 12, Megvii's financial prospectus shows strong losses—but a strong grasp of the Chinese market, too. 

Trump blacklisted Megvii in 2019

For a company of any size (including Megvii, which exceeded a $1 billion valuation by 2019), being blacklisted in America isn't a good thing. That's what happened to Megvii when the Trump administration blacklisted the company due to a human rights violation. Reportedly, Megvii used its facial recognition software to contribute to violence against Muslim people in China.

Article continues below advertisement

It's worth noting that Trump placed a ban on Muslim travel to America during his own administration, but that isn't comparable to a religious genocide like the one in Xinjiang.

This hurt Megvii's sales so badly that the company put its planned Hong Kong IPO on pause. Now, Megvii seems to be coming back with gusto. 

Article continues below advertisement

Megvii doesn't have an IPO date yet.

The Chinese regulatory process is much different than the process in the U.S. Historically, there have been instances where the government halted an IPO before it had a chance to come to fruition (the Ant Group IPO is a recent example).

In all, the Megvii IPO date is still pending due diligence. 

Article continues below advertisement

The Megvii IPO listing location is leaning toward Shanghai.

The interesting thing about the Megvii IPO is that the company is offering stakeholders CDRs (Chinese depositary receipts). These are similar to ADRs (American depositary receipts) in that they allow domestic investors to hold shares overseas. This means that Megvii may or may not list in Mainland China.

However, the company is currently part of the STAR board (an offshoot of the Shanghai Stock Exchange STAR Market). The group works to keep tech companies with high growth potential and a lack of profitability within the Chinese market, instead of going overseas (particularly to the U.S.). This shows an allegiance to the exchange.

Article continues below advertisement

Megvii's Shanghai stock and U.S. investors

If Megvii lists on the Shanghai market, U.S. investors might be able to access the company's shares. The company is making it easier by using CDRs instead of traditional stocks. CDRs are basically representative of shares in a foreign company. Class A shares in China are also open to foreign investors, but those aren't in use in this scenario.

How to invest in the Megvii IPO

Investors can contact a brokerage that deals with Chinese securities in order to invest in the Megvii IPO. This brokerage might be a U.S. domestic company that deals with foreign exchanges, or it may be a Chinese brokerage that works with foreigners. Either way, you'll have to wait until more details about the debut date, listing exchange, share price, and ticker symbol come to the forefront in order to make your move.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.