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Startups

SoftBank-backed startup preps $500m IPO to make Pepper smarter

Robotics company touts cloud-based brain that expands memory space

CloudMinds uses its system to power smart robots including the android Pepper, which it sources from major shareholder SoftBank.   © Getty Images

NEW YORK -- CloudMinds, a Beijing-based robotics startup backed by SoftBank Group's Vision Fund, has filed for a $500 million listing on the New York Stock Exchange.

CloudMinds touts itself as the first in the world to commercialize a cloud-based robotics system. It operates an end-to-end architecture consisting of a "cloud brain," a "nerve system" and controllers, used on smart robots including Cloud Pepper, which the startup sources from SoftBank Robotics and customizes with its own technology. 

SoftBank Vision Fund, known for pumping money into late-stage startups worldwide, is a seed investor in CloudMinds and holds a 34.6% share of the company, according to the prospectus filed with the U.S. Securities and Exchange Commission last week. Three SoftBank executives sit on the startup's board. 

Chairman and CEO William Xiao-Qing Wang, who co-founded CloudMinds in 2015, was president of China Mobile's research and development division as well as chief technology officer of Nasdaq-listed UTStarcom, after a four-year stint at Bell Laboratories.

CloudMinds says a cloud-based system results in smarter and more versatile robots, whereas traditional robots are limited by their local storage space and are generally unable to handle a large amount of data and computation, acquire new skills or upgrade.

The startup expects its cloud robots to be deployed in warehouses, hotels, hospitals, shops and homes. SoftBank Robotics' own android Pepper has been adopted by thousands of businesses in Japan. Last year, SoftBank inked a deal with Chinese electronics giant Haier, which now uses the Japanese technology company's android in its smart stores and as part of its smart home solutions.

But analysts have expressed doubts that the startup can withstand market scrutiny of its financials. In 2018, CloudMinds recorded a $157 million net loss on $121 million in revenue. Though revenue soared 500% last year, it declined sharply in the first three months of 2019 to just $12 million -- down from $33 million in the year-ago period. The net loss also more than doubled year-on-year to nearly $60 million in the first quarter.

Yet a CloudMinds listing may be able to ride a continued bull run in the U.S. equity market, which saw the S&P 500 surge past 3,000 points in recent days on the Federal Reserve's hints of an interest rate cut and renewed optimism for a trade deal between Beijing and Washington.

Drew Bernstein, co-managing partner at Marcum Bernstein & Pinchuk, said "the fact that players like SenseTime and Megvii have postponed their IPOs for now may have created a window for this cloud-based AI robot player."

Bookrunners for CloudMinds' listing are Citigroup, JPMorgan Chase and UBS.

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