Despite being included in the US' trade blacklist, Chinese artificial intelligence (AI) firm Megvii Technology is reportedly still going ahead with its previously planned IPO. According to sources familiar with the matter, the company is even targeting a listing hearing next month.
Being included in the US' trade blacklist is a big blow to the Chinese firm given that it will no longer be able to import vital components from its American suppliers.
The company does heavily depend on US components, such as chips from Nvidia Corp for its core business, but it is likely confident that it can find alternative suppliers.
In the meantime, Megvii has filed an appeal to the US Commerce Department to reverse its decision of prohibiting it and other Chinese firms from doing business with American companies.
The Trump administration included a total of 28 companies on the country's trade blacklist just this month, all of which were accused of being involved in alleged human rights violations in Xinjiang.
The blacklist has apparently not changed the company's goals of going public this year and it is still aiming to raise additional funds. Megvii had publicly mentioned that the US' actions against it were completely "unsubstantiated" and that the company had complied with all of the laws and regulations of every country it has operated in.
According to analysts, Megvii may be pushing ahead with its planned IPO for the simple reason of it just needing cash.
The company had lost quite a bit of its liquidity over the past years, including a $480 million loss last year. This was preceded by a $107 million loss in 2017. The losses were mainly due to significant shifts in the value of the company's preferred shares.
Moving ahead with its planned IPO is a risky move for Megvii as investors could shy away from the stock given its current standing with the Trump administration. Megvii's originally IPO filing coincidentally did include the possible imposition of trade restrictions by the US against it, which was part of a 40-page outlook on possible risk factors that could affect the company.
Some of the other risk factors that were mentioned included competitive threats and the possible issues with AI technologies. Megvii explained in its filing that being the target of an economic and trade restriction will not have any adverse impact on its business and operations, even if it is prolonged, given its various compliance programs and contingency plans.
While Megvii may be confident in its ability to weather the storm, some of its partners likely don't share its optimism. Last week, Goldman Sachs, one of the company's hired underwriters for its IPO, announced that it was reviewing its role given the recent turn of event.
