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AI startup Megvii files Hong Kong IPO amid political uncertainties

China-based facial recognition startup Megvii Technology Ltd. filed for a public listing in Hong Kong Aug. 25, amid ongoing protests in the city and escalating trade tensions between the U.S. and China.

The Chinese company will use the IPO proceeds on human resources, research and development for its deep learning platform Brain++ and infrastructure build-up for data centers. It will also use the funds on marketing efforts domestically and globally as well as merger and acquisition projects, according to Megvii's filings to the stock exchange.

The startup posted a total revenue of 948.99 million yuan at the end of June, compared to 305.80 million yuan in the same period of 2018, according to the prospectus. Megvii reported a loss of 5.20 billion yuan attributable to owners of the company in the first six months of 2019, compared to a loss of 726.19 million yuan attributable to owners of the company in the same period in 2018.

The company is still waiting for the Hong Kong exchange's approval for proceeding with the IPO application, a spokesperson for the company told S&P Global Market Intelligence. Megvii aims to raise at least US$500 million in the IPO, according to a Reuters report Aug. 25. The prospectus did not state the pricing of Megvii's shares or the timeline of its listing.

Megvii had reportedly reconsidered its July IPO plan due to concerns related to the U.S.-China tensions. However, the spokesperson for Megvii said its operations "will not be affected much by the trade tensions, or the ongoing protests in Hong Kong," adding that most of Megvii's clients are in China.

As of Aug. 23, US$1 was equivalent to 7.09 Chinese yuan.