(Reuters) — Chinese AI firm Megvii Technology, backed by Alibaba, has filed in Hong Kong to conduct an IPO targeting proceeds of at least $500 million, two people said, just as the city faces political unrest and its first recession in a decade.

Beijing-based Megvii, widely known for facial recognition platform Face++, may raise as much as $1 billion in the initial public offering, said one of the people, who expect the share sale in the fourth quarter of the year.

The filing comes as companies postpone or slow down listing plans in a recession-bound city blighted with nearly three months of anti-government protests, and where the benchmark Hang Seng share price index fell to seven-month lows this month.

Reuters reported last week that China’s biggest ecommerce firm, Alibaba Group, had delayed its up to $15 billion Hong Kong listing.

Megvii has decided to press ahead with its IPO plans because it has little business in Hong Kong and expects the unrest to ease later this year, said a third person.

Megvii declined to comment. The people who had direct knowledge of the matter declined to be identified as the information was not public yet.

AI leader

Megvii, founded in 2011 by CEO Yin Qi and two friends from Tsinghua University, would become the first Chinese artificial intelligence firm to go public in Hong Kong.

Its filing comes amid government plans for China to become an international leader in AI, a technology that is becoming increasingly central in various sectors.

Once the preserve of researchers, AI has grabbed the attention of businesses as varied as healthcare and financial services looking to use algorithms to comb through troves of data to recognize patterns and solve problems.

In May, Megvii raised $750 million from investors including Bank of China Group Investment and Australia’s Macquarie Group at a valuation of slightly over $4 billion.

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

It booked a loss of 3.35 billion yuan ($472 million) on revenue of 1.43 billion yuan last year, widening the loss from 759 million yuan a year earlier. Its adjusted operating profit, which excludes one-off items such as share-based compensation payments, reached 75.7 million yuan last year, showed its draft prospectus.

It will use IPO proceeds primarily for research and development, marketing and sales plus global expansion and strategic investments opportunities, the prospectus showed.

Citigroup, Goldman Sachs and JPMorgan are joint sponsors of the IPO.
