Media today quoted multiple people familiar with the matter as saying that Chinese industrial intelligence start-up, MEGVII , did not pass the HONG Kong Stock Exchange’s listing hearing. MEGVII filed an IPO (initial public offering) prospectus on the Hong Kong Stock Exchange in August. In October, The Technology was added to the Commerce Department’s “entity list”, but that did not change its listing target. On Wednesday, it was reported that The Company was expected to raise between $500million and $1 billion through a hong Kong Stock Exchange listing on Thursday.
But at Thursday’s listing hearing, MEGVII did not get permission to list on the Hong Kong Stock Exchange, three people familiar with the matter said today. As it is on the “entity list” by the U.S. Department of Commerce, HKEx has asked Formore technologies to provide more information.
After lengthy discussions on the listing application, the HKEx’s listing committee decided that MEGVII must answer additional questions, according to people familiar with the matter. The HKEx Listing Committee, which consists of 27 independent members, including bankers, lawyers, accountants and investors, is crucial to obtaining approval from companies applying for listing.
Today’s meeting is a regular hearing of the HKEx, during which IPO applications from several other companies are discussed and approved.
The listing committee’s concerns include whether it is appropriate to seek an IPO at this time, as it is listed on the Commerce Department’s “entity list,” the sources said.
As for being included in the “entity list”, The U.S. Department of Commerce issued a notice last month that it had placed MEGVII on the list of entities without any factual basis, and MEGVII expressed strong protest against the decision. In an internal letter, yinqi, co-founder and CEO of MEGVII , also said the company would “fight” against the Commerce Department’s decision.
Some analysts say MEGVII is in urgent need of cash raising. In 2017, MEGVII lost 759 million yuan, and in 2018 it lost another 3.4 billion yuan. At the end of June, MEGVII had Rmb1.4bn in cash, cash equivalents and bank balances.
In the first six months of this year, MEGVII Used Rmb674m in net cash. At the end of June, its term deposits, which are short-term bank deposits for three to 12 months, were Rmb3.3bn. In the first half of this year, technology revenue was Rmb949m, up 210.3 per cent year-on-year, with an adjusted net profit of Rmb32.7m.
Goldman Sachs, JPMorgan Chase and Citigroup are underwriters of the IPO.