Megvii considers to postpone IPO as US $4 billion valuation may not be guaranteed

On November 5, Beijing time, people familiar with the situation said that due to the uncertainty behind the company’s current US $4 billion valuation being included in the “entity list” by the United States, Megvii technology, an AI start-up company, is considering whether to postpone its initial public offering (IPO). People familiar with the matter said that at the time of trying to get out of the US “entity list”, Megvii technology is discussing with its consultants whether to continue to promote the listing plan in Hong Kong this month or to postpone the IPO.

40亿美元估值恐不保 旷视科技考虑推迟IPO

Because investors are hesitant to buy shares of Megvii technology,  Megvii technology may not even get a valuation of $3.5 billion. The “entity list” will make it difficult for Megvii to acquire key US technologies.

Megvii technology and its biggest rival, Shangtang technology, are the fastest-growing technology start-ups in China, but their future is in danger after they are listed in the “entity list” by the United States. Both companies are trying to get off the list and think they have done nothing wrong. Megvii technology obtained the investment of Alibaba group and Innovation workshop, and obtained the valuation of about 4 billion US dollars in the last round of financing.

People familiar with the matter said the company has yet to make a final decision and plans to hold a listing hearing in Hong Kong this month. Megvii’s consultation with the consultant is still at an early stage, and discussions on valuation may change. Megvii technology representatives have yet to comment.

Megvii technology filed an IPO in August and may need cash. Megvii technology lost 3.4 billion yuan (about 480 million US dollars) in 2018, partly because of the change in the value of preferred shares. As of the end of June this year, the total amount of cash, cash equivalents and bank deposits held by Megvii technology was 1.4 billion yuan. In the first six months of this year, Megvii technology used nearly half of its cash reserves for operation. As of June, the fixed-term deposit of Megvii technology was 3.3 billion yuan.

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