Chinese facial recognition company Megvii might decide to postpone its initial public offering (IPO), due to tensions and the trade war between the U.S. and China.
Last month, Megvii announced that it had raised $750 million in funding, giving it a value of $4 billion. The round was led by Bank of China Group Investment (BOCGI), the state bank’s private equity unit, with participation from Macquarie Group, ICBC Asset Management and a wholly owned unit of Abu Dhabi Investment Authority. Alibaba, an existing investor in Megvii, also participated.
The company was planning to launch an IPO in Hong Kong later this year, reportedly tapping Citigroup, Goldman Sachs and JPMorgan to handle it. Earlier in the year, reports pegged the IPO at $1 billion.
However, the trade war between the U.S. and China — along with concerns over Beijing’s use of surveillance of its citizens, and rumors that the company might be added to the Trump administration’s blacklist — is set to put those plans on hold.
While Megvii claimed it is not aware of being on any U.S. government list, one tech sector banker said, “Around Megvii in particular, there’s concern about who they are selling to, [and the] end use of the [products]. Megvii’s critical vertical is surveillance and security, and they earn more revenues from that compared with [rival] SenseTime,” according to the Financial Times.
He added that underwriters continued to “work fiercely” on the IPO, but, “at the very least, they will have to go through the grinder with the Hong Kong Stock Exchange … because how can you be [suitable] for listing if you are put on the entity list?”
One investor added that, “Megvii is still thinking about the potential [to IPO] this year, but timing also has to coincide with the right window.”
Its biggest rival, SenseTime, is reportedly holding off on going public until next year as well — or possibly 2021.
“SenseTime is in no hurry to IPO, and it’s quite profitable,” said one investor.