One of China’s largest artificial intelligence companies has filed for an initial public offering in Hong Kong.
Megvii Technology was most recently valued at approximately $4 billion in its last funding round in May.
Its proposed listing comes as the city’s financial market faces an escalating US-China trade war and mass protests in the city. Chinese tech company Alibaba (BABA) recently decided to postpone its mega IPO in the city, according to a report by Reuters that cited two sources with knowledge of the matter.
If listed, Megvii would become the first Chinese AI stock trading on the Hong Kong stock exchange.
Ant Financial — the Alibaba affiliate controlled by the company’s billionaire founder Jack Ma — owns around 15% of Megvii through a subsidiary, according to a draft prospectus Megvii published late on Sunday.
Alibaba Group owns another 14% of the Chinese AI startup through its subsidiary, Taobao China.
The three co-founders of Megvii own a combined 16.8% stake in the company. But they control a majority of the voting power through a dual-class share structure, which gives their shares greater voting rights than ordinary shareholders.
Established in 2011, Megvii caters to Chinese technology giants including Alibaba, Huawei and Lenovo. It also supplies services to key government bodies, like the Ministry of Public Security.
The company is best known as the developer of Face++, a facial recognition software used in online identity authentication. But the software has landed it in controversy in the past.
In May this year, Human Rights Watch published a report linking the company to a mass surveillance system the Chinese police used to monitor citizens in the western region of Xinjiang. The system is known as the Integrated Joint Operations Platform, or IJOP.
But later the rights group corrected the report and said the Face++ code it found in the surveillance app’s log-in function was “inoperable.” Megvii said it had no relationship with the IJOP, HRW said.
When asked about that incident, Megvii provided CNN Business with a statement released by company co-founder and CEO Yin Qi in June. He said at the time that Megvii appreciated the correction and is “serious about the responsible use of AI technologies.”
The company also mentioned the allegations as a risk factor in its draft prospectus, though it did not refer to Human Rights Watch by name. Although the allegations “were proven to be wrong” and were corrected, the company wrote that the report “had still caused significant damages to our reputation which are difficult to completely mitigate.”
The US-China trade war could hurt Megvii’s business further, the company admitted in its IPO filing.
Both countries have announced new tariffs on each other in the last few days, and a further escalation could affect Megvii’s supplies from the United States, it said.
Washington’s global campaign against Huawei — one of Megvii’s clients — could also affect the company’s business, though the direct impact will be limited, it said.