Megvii Technology Ltd plans to seek approval for a Hong Kong IPO of at least $500 million on Thursday, said people with knowledge of the matter, despite being blacklisted by the US government.
Nonetheless - the Chinese artificial intelligence startup sponsored by e-commerce behemoth Alibaba Group, and widely known for its Face++ facial recognition system - has yet to determine whether to execute a roadshow once permission has been given, one of the people added.
Earlier, sources have told Reuters that in the fourth quarter the company's initial public offer bid was expected for Hong Kong and could collect as much as $1 billion.
The latest move came weeks after the US government put Megvii and seven other Chinese companies on a trade blacklist over their alleged involvement in human rights violations.
Goldman Sachs, joint sponsor of the Megvii IPO alongside Citigroup and JPMorgan, said it was "evaluating in light of recent events" about its participation last month.
In mid-October, Megvii acknowledged it was added to the blacklist and "strongly objects" as there was "no reason" for them to be included in the prohibition list. The company said in a report that in 2018 about one percent of sales are generated from Xinjiang and none in the six months ended June 30.
Megvii declined to comment with the three lenders. Yet people with knowledge of the transaction said the company's acceptance of the listing would give it some space to ponder its next move.
According to sources, acknowledging the approval would give the company the "flexibility to launch the deal" whenever it sees an opportunity. But the agreement itself could be a tough sell as a large numer of American investors would probably snub it, as long as the company remains on the blacklist.
Hong Kong, which in 2018 was on the top of the global charts for funds raised through IPOs, was rooted in nearly six months of political crisis. But the city's IPO volume has picked up since September, highlighted by Budweiser Brewing Company APAC Ltd, which has earned over $5 billion so far this year in the region's largest public listing.
Alibaba, on the other hand, has introduced its Hong Kong initial public bid sale last week and earned around $13.5 billion.
Chief Executive Yin Qi and two friends from Tsinghua University formed Megvii in 2011. It would then become the first Chinese Artificial Intelligence firm to become public-traded if the deal pushes forth.
The company provides AI services, like Alibaba, Ant Financial, Lenovo Group Ltd and Huawei, to governments and businesses around the globe.
In May, a $750 million fundraising valued the company at slightly over $4 billion and attracted investors including Macquarie Group and the Abu Dhabi Investment Authority.
