Goldman evaluating role in China's Megvii IPO after US blacklist

October 09, 2019 15:46
China's Megvii, known for its facial recognition platform Face++, has strongly objected to a US move to include the company on a human rights-related trade blacklist. Photo: Bloomberg

Goldman Sachs is reviewing its involvement in Megvii Technology's planned initial public offering after the US government placed the Chinese artificial intelligence firm on a human rights blacklist, Reuters reports.

The US investment bank, in an emailed statement in response to a request for comment on the Megvii IPO, was quoted as saying on Tuesday that it is “evaluating in light of the recent developments”.

Sources had previously told Reuters the listing was scheduled for Hong Kong in the fourth quarter and might raise as much as US$1 billion.

The Trump administration said on Monday that Megvii and seven other Chinese companies have been put on a blacklist due to the firms' perceived cooperation in Beijing’s repression of Muslim minority populations in the Xinjiang Uighur Autonomous Region.

Goldman is a joint sponsor of the Megvii IPO, alongside Citigroup and JPMorgan Chase.

Known for its facial recognition platform Face++, Megvii will become the first Chinese AI firm to go public if the deal goes ahead.

The company provides facial recognition and other AI technology to governments and companies including Alibaba, Ant Financial, Lenovo Group and Huawei.

Other US companies involved with the blacklisted Chinese firms, whether as investors or as underwriters, are also likely to re-evaluate their relationships, the report said.

The US Commerce Department announced this week that it has barred eight firms, as well as 20 Chinese government entities, from buying American technology without US government approval.

It said the entities were “implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups”.

Megvii said it “strongly objects” to being added to the blacklist and that there were “no grounds” for the designation.

In a statement, it said the company derived only around 1 percent of its revenues from Xinjiang in 2018 and none in the six months ended June this year.

It added that a May 2019 report from Human Rights Watch (HRW) on a surveillance app in Xinjiang had implicated Megvii’s Face++, but in a corrected and reissued report, HRW did not highlight Megvii’s name.

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