Chinese AI Company Mobvoi, Despite Losses, Submits Second IPO Filing in Hong Kong

Chinese artificial intelligence (AI) company Mobvoi Inc. has submitted its application for an Initial Public Offering (IPO) on the Hong Kong Stock Exchange (HKEX) for the second time, just a day after its previous filing in May expired.

A scan of the IPO prospectus shows that Mobvoi’s losses have been expanding during the past half year. Its revenue has declined by more than 20% year-on-year in the first half of this year, and accumulated losses had reached 2.784 billion yuan as of June 30, 2023. The company’s cash and cash equivalents had fallen to less than 160 million yuan as of October 30, 2023, highlighting the reason why Mobvoi is so persistent in pursuing an IPO. The company’s last private funding round was in 2019.

Founded in 2012, Mobvoi was initially focused on natural language processing and provide commercial application of this technology in various industries. In 2013, for instance, it released a voice search service feature in WeChat.

During the past year, Mobvoi has launched generative AI products such as ‘Magic Sound Workshop’ and the overseas version ‘DupDub’ based on generative AI model ‘Sequence Monkey’, focusing on dubbing, writing, video, and other fields.

Mobvoi has previously received seven rounds of investment of roughly US$233 million since its establishment from well-known institutions such as Google, Sequoia Capital, ZhenFund, and SIG Asia. It also struck a high-profile partnership with Volkswagen, which invested over US$150 million in Mobvoi and the two firms set up a joint venture company for voice-enabled in-car services.

Like many AI startups, including OpenAI, Mobvoi is grappling with the challenge of achieving profitability. From 2020 to June 2023, Mobvoi’s profits were 56.146 million yuan, -276 million yuan, -670 million yuan, and -218 million yuan respectively.

The company previously demonstrated growth, recording revenues of 265 million yuan, 398 million yuan, and 500 million yuan in 2020, 2021, and 2022, respectively. However, in the first half of 2023, Mobvoi reported a revenue of 262 million yuan, marking a 23.7% decrease year-on-year, as it faces hurdles in expanding its new businesses.

Mobvoi’s overseas expansion is facing challenges as well. Mobvoi listed 8 countries or regions it has entered, and apart from Germany and Brazil that maintained growth, the other six countries or regions including Mainland China, the United States, the United Kingdom, Italy, Spain, and Japan all experienced declines in the first half of 2023. In fact, as early as 2022, revenues from the United States, the United Kingdom, Italy, Spain, and Germany had already shown a significant decline.

Mobvoi’s dependence on Mainland China has become increasingly apparent. From 2020 to June 2023, the revenue from Mainland China accounted for 30.8%, 24.4%, 58.2%, and 73.8% of its overall revenue, respectively.

The partnership with Volkswagen, one key contributor to Mobvoi’s revenues, has also ended. In 2021, Mobvoi entered into a share repurchase agreement with a subsidiary of Volkswagen to repurchase its Mobvoi shares for a consideration of US$17 million.

Concurrent with Volkswagen’s divestment, Mobvoi sold all 50% of its shares in the joint venture company Mobvoi JV to Volkswagen China for US$15 million. Volkswagen China previously invested over US$150 million in Mobvoi and the joint venture.

Mobvoi explained in its filing that this ‘breakup’ is an adjustment in the cooperative strategy between the two parties. For Mobvoi, the previous exclusive agreement with Volkswagen had, to some extent, limited potential cooperation and commercialization opportunities with other automakers.

However, Mobvoi has no other automotive companies as its top five customers of during the reporting period. The company’s performance was instead highly dependent on Volkswagen.

Volkswagen China was Mobvoi’s largest customer in 2022 and the first six months of 2023. The prospectus shows that from 2021 to June 2023, the revenue from Volkswagen China accounted for 0.8%, 42.6%, and 53.0% of the total revenue, respectively.

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