Chinese holographic AR firm WiMi IPOs, sees real profit in virtual future

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By:
Elliot Wilson
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The coronavirus lockdown turned WiMi’s IPO roadshow into an all-digital affair – although that may have done the augmented reality firm a favour; the Beijing-based AR specialist is now eyeing expansion into southeast Asia.

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Think of WiMi Hologram Cloud’s initial public offering as a sign of our unusual and rapidly changing times. When the Beijing-based holographic augmented reality (AR) specialist went public on the Nasdaq on April 1, raising $26 million, it caught the eye for a number of novel reasons.

For one thing, it marked the first US IPO since the World Health Organization declared Covid-19 to be a global pandemic on March 11. Coronavirus is ebbing in some countries and yet to peak in others but is certain to tip the world into outright recession this year.

For another, it turned out to be something of a damp squib for the founders of a company whose early investors include UOB Venture Management, an arm of Singapore’s United Overseas Bank. 

In New York, investors priced the sale of 4.8 million American depositary shares at the very bottom of the $5.50 to $7.50 range, valuing the firm at $325 million. Over the following two weeks, that valuation slipped further: at close of trading on April 15 the shares were trading at $5.22.

But that wasn’t the main bone of contention. With much of the world including the US on lockdown, WiMi’s roadshow was an all-digital affair – no chasing the sun in business class.

“It was totally different to how I thought it would be,” says Michael He, a co-founder of the firm and its head of technology. “I wanted a typical roadshow – you know, Hong Kong to Singapore to New York. Then Boston, San Francisco. But it was just us sitting around a desk using Zoom or teleconferencing.”

He laughs as he talks, but the frustration is palpable. Sometimes investors could see the firm’s patented enhanced video software. When a call was audio-only, that wasn’t possible. 

“It was pretty hard to do,” he admits.

Worse, due to coronavirus, he and his colleagues didn’t even get to ring the opening bell to celebrate the listing. 

“They’d closed the whole thing,” he says. “Perhaps we can go there in the summertime to do it. I don’t feel happy about this personally. You don’t get many chances to go to the Nasdaq and ring the bell.”

Huge trend

But WiMi’s co-founder isn’t too downhearted. He knows the firm’s products are tailor-made for an event like this, when most people, especially in the West, are unable to move far beyond their own doorstep.

More than 80% of its revenues come from advertising. It uses holographic AR to digitally implant, say, the image of an energy drink into the video of a celebrity on TikTok, the video-based social networking platform owned by Chinese firm ByteDance.

“This is a huge trend in China,” he says. “Or we can embed a sports car into a video of a mountain road, which is easier than someone having to film it all themselves. It’s a win-win for everyone.”

He says the TikTok demonstration played particularly well on the virtual roadshow. “Investors asked us how Covid-19 was impacting us. We presented a short movie showing how people are sitting at home, bored, watching videos six hours a day – so why not [get firms to] expand their advertising budget a little.”

The idea of millions of people glued to TikTok mini-videos rather than using the time to learn to knit or speak Portuguese sounds a bit grim. But advanced holographic technology is inevitable and, in many cases, highly welcome.

According to WiMi’s IPO prospectus, the company has 180 registered patents, with 59 more pending in China. Some of them are frivolous but fun, such as the rentable hardware that enables a mall owner to lure shoppers with a dancing Santa Claus or a bar owner to entice punters with a life-like crooning Taylor Swift. 

“It looks real,” He promises – although the photo he sends of a blurry Santa in front of a large fir tree suggests otherwise.

Workplace applications

But there are many other far more serious uses, from educational to medical. He points to the example of a teacher showing a class how to perform a science experiment using 3D glasses and a surgeon using them to learn a new procedure.

It also has applications for the white-collar workplace. 

“No more Zoom meetings,” he promises. “Two or three years from now, using this kind of technology, using glasses and the right software, I will literally be in your room with you having a meeting. The software already exists and, as bandwidth speed catches up, that is our future.”

He hopes the firm and the industry will continue to grow. Statista projects the global AR industry to be worth $198 billion by 2025, against $5.9 billion in 2018. 

Business consultancy Frost & Sullivan tips China’s AR market alone to be worth Rmb143.9 billion ($20.3 billion) by the middle of the decade.

WiMi wants to use its listing as a prelude to wider growth. The firm is headquartered in Beijing with offices in the southern Chinese technology hub, Shenzhen. It posted unaudited profit of $15 million in 2019 on revenues of $45 million, says its co-founder.

The next step, he says, is to “expand globally, which is one of the reasons for doing this IPO. Southeast Asia, a region with a similar culture to China and with countries with big populations, is key. After that, we will look to expand into the US and western Europe, but for now we are taking it step by step.”