Alibaba-Backed Startup Tests Investors’ Appetite for AI Security in Hong Kong

Julia Cristina Silvi Fioretti

26 Aug 2019, 02:19 PM IST

(Bloomberg) -- Megvii Technology Ltd., backed by Alibaba Group Holding Ltd., is testing investors’ appetite for security powered by artificial intelligence just as concerns about facial recognition surface in the protests rocking Hong Kong.

The seven-year-old startup filed for a Hong Kong initial public offering on Sunday and is said to be targeting as much as $1 billion. The filing shed light on its stunning growth driven primarily by products that help government agencies and other clients improve public safety and optimize traffic management, which it labeled “city IoT solutions”. That business accounted for 73% of its revenues in the first half of the year, the draft prospectus showed.

Meanwhile, protesters in Hong Kong toppled so-called smart lampposts with notes declaring “no totalitarian surveillance” left on them over the 12th weekend of unrest gripping the financial hub. The government has said that the lampposts only collect “city data, including traffic, meteorological and air quality data” and do not carry any facial recognition functions. A company called Ticktack Technology Limited supplied the devices, the government said.

While Megvii only generated 4.9% of its revenues in the first half of 2019 from outside mainland China, it will still be relying on retail investors in Hong Kong to fill part of its order book, making both the timing and sales pitch of the IPO delicate. China’s voracious demand for security equipment such as surveillance cameras, voice-recognition technology and big-data analytics has spawned some of the world’s fastest growing startups, including Megvii and fellow AI rival SenseTime, while fueling concerns about the erosion of civil liberties.

In its filing, Megvii acknowledged the potential for concern around the misuse of AI technology for mass surveillance “that could affect user perception, public opinions and their adoption.” The company said it has set up an “AI Ethics Committee” and aims to “find solutions that respect people’s dignity and privacy.”

UPCOMING LISTINGS:

Shanghai Henlius Biotech
- Hong Kong exchange
- Got listing approval Aug. 22
- Size at least $600m
- Started gauging investor demand Aug. 26
Telefast Indonesia (provider of enterprise software solutions)
- Kresna Sekuritas and Trimegah Sekuritas
- Expected offering period Sept. 9-11
- Expected listing Sept. 16
AllHome (home-furnishing retailer)
- Size about $230m
- Approved by Philippines exchange Aug. 19
- Owned by billionaire Manuel Villar
Beijing ABT Networks (maker of security products)
- Shanghai Star market
- Expected to take orders Aug. 28; listing date TBA
- Tianfeng Securities
Ruida Futures (Chinese brokerage)
- Shenzhen exchange
- Expected to take orders Aug. 27; listing date TBA
- Citic Sec., Essence Sec.

More ECM situations we are following:

Shanghai Henlius Biotech Inc. starts gauging investor demand Monday for its proposed Hong Kong initial public offering, according to terms for the deal obtained by Bloomberg
Some of China’s biggest state-owned banks have been invited to pitch for the Saudi Aramco initial public offering, people with knowledge of the matter said, signaling the oil giant’s potential desire to attract Asian investors to the $100 billion listing
Hong Kong IPO drought comes to end as Henlius meets investors
Optima Prima Metal Sinergi seeks to offer maximum of 400 million shares at price range between 125 rupiah and 135 rupiah each
Burger King’s China franchisee is weighing a Hong Kong initial public offering after earlier scrapping plans for a U.S. share sale, people with knowledge of the matter said
Asset World Corp. will start gauging foreign investor demand for what could be one of Thailand’s biggest initial public offerings this year after the nation’s securities regulator approved the sale, according to people familiar with the matter