Risk consultants sees U.S. investors quietly exiting from their partnership/commitments with the affected Chinese companies.
In a significant development, Goldman Sachs Group Inc has stated, it is in the process of reviewing its involvement in China’s Megvii Technology Ltd’s initial public offering (IPO) following the U.S. Commerce Department placing the artificial intelligence firm on an Entity List over Beijing’s repression of Muslim minorities and placing them in concentration camps.
Goldman has stated, it was “evaluating [its role in the Alibaba-backed Megvii IPO] in light of the recent developments”.
According to sources, Megvii IPO’s IPO was scheduled for listing in Hong Kong during the fourth quarter and the AI firm was hoping to raise as much as $1 billion from the listing.
According to Silicon Valley lawyers and risk consultants, U.S. companies involved with the blacklisted Chinese firms, whether as investors or as underwriters, are likely to revisit their relationships.
Incidentally, Goldman is a joint sponsor of the Megvii IPO, along with JPMorgan Chase & Co, and Citigroup Inc.
Both, JPMorgan Chase & Co, and Citigroup Inc declined comment.
As per a source familiar with the matter at hand, Goldman had thoroughly evaluated the Megvii deal before initially signing onto it using its usual due diligence process.
According to risk consultants, investors and underwriters have jumped into the artificial intelligence sector without fully assessing the dangers both to their reputations and to the valuations of the companies concerned.
“There has been a dearth of adequate due diligence performed on these companies from both a national security and a human rights perspective,” said Roger Robinson, president and CEO of Washington DC-based risk consultancy RWR Advisory Group, and a former senior director of international economic affairs at the National Security Council.
He went on to add, investors and others involved with these Chinese companies “may well be putting themselves at risk.”
Silver Lake, Tiger Global and Qualcomm all declined to comment. Fidelity didn’t immediately return a call seeking a comment.
“There will be a judgment call as to whether any US investor would want to be associated with such businesses,” said Rocky Lee, managing partner of the Silicon Valley office of law firm King & Wood Mallesons. “I believe you will see some ‘quiet’ exiting by US funds and possibly LPs, at least those U.S. investors who feel strongly that owning companies engaging in these activities are either immoral or politically incorrect.”