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A showcase of artificial technology designed for blind people at SenseTime’s showroom at the Hong Kong Science Park in the New Territories. Photo: Xiaomei Chen
BusinessBanking & Finance

SenseTime, artificial intelligence platform founded by CUHK professors, files to raise at least US$2 billion in Hong Kong IPO

  • Founded in 2014, Hong Kong start-up has quickly become China’s biggest artificial intelligence company
  • SenseTime warned it is subject to ‘complex and evolving’ rules on privacy and data protection
Banking & finance
Chad Bray
Chad Bray
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SenseTime Group, China’s largest artificial intelligence (AI) company, filed to go public in Hong Kong on Friday in one of the biggest technology offerings since Beijing cracked down on the country’s tech sector last month, a move that has unnerved investors from Hong Kong to New York.
The Hong Kong-based start-up, known for its facial-recognition software, is looking to raise at least US$2 billion in its initial public offering (IPO), according to a person familiar with the matter.
SenseTime warned on Friday that it is subject to “complex and evolving” laws and regulations regarding privacy and data protection, including new draft rules for cybersecurity reviews in China.
“We cannot predict the impact of the draft measures, if any, at this stage, and we will closely monitor and assess any development in the rule-making process,” SenseTime said in a stock exchange filing on Friday. “If the enacted version of the draft measures mandate clearance of cybersecurity review and other specific actions to be completed by companies like us, we may face uncertainties as to whether such clearance can be timely obtained, or at all.”

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The planned offering comes nearly two years after SenseTime’s Beijing subsidiary was blacklisted alongside a group of Chinese technology champions by the Trump administration in 2019 and added to the so-called Entity List, which prevents it from buying from American suppliers.
The US accused SenseTime and 27 other companies and government security bureaus of aiding alleged human rights abused against Uygur Muslims in China’s Xinjiang Uygur autonomous region, including mass surveillance. SenseTime has said it abides by all relevant laws and regulations where it operations and is developing an AI code of ethics to ensure its technology is used responsibly.

“If our subsidiary remains on the Entity List on a prolonged basis, we may not be able to compete effectively in certain business lines, and our business, results of operations and financial condition could be materially and adversely affected,” SenseTime said in its filing.

The Hong Kong IPO also follows China implementing sweeping changes to add additional oversight on companies who hold the data of 1 million or more Chinese persons and want to pursue listings in foreign capital markets.
The move has caused a number of technology firms to delay or scrap planned US listings this year and some companies to pause Hong Kong listings. Cloud Village, the music-streaming subsidiary of NetEase, put its Hong Kong IPO on hold because of unfavourable market conditions earlier this month.
US Securities and Exchange Commission chairman Gary Gensler also asked the regulator’s staff to “take a pause for now” in giving approval to listings by Chinese companies who use shell companies to go public on American bourses, a common practice for Chinese firms to list their shares outside the mainland.

On Friday, The Wall Street Journal, citing sources, reported that Beijing was considering new rules to ban companies with access to large amounts of consumer data from listing in the US.

Against this backdrop, technology stocks, particularly those tied to China, have been routed in recent weeks.

Wang Xiaogang, assistant professor at the Faculty of Engineering at Chinese University of Hong Kong (CUHK) and co-founder of SenseTime. Photo: Handout

The moves by Beijing and Washington DC could fuel more listings by Chinese technology firms closer to home, including in Hong Kong, according to analysts.

Founded by a group of professors at the Chinese University of Hong Kong (CUHK) in 2014, SenseTime develops AI technology used in a variety of areas, including autonomous driving, augmented reality, facial recognition and medical imaging. Its technology is being used in smart city and smart auto initiatives in China.

Wang Xiaogang, the company’s co-founder and managing director of its research laboratory, said Hong Kong remains an important place for him and the company.

“SenseTime is an unicorn that grew in Hong Kong. Hong Kong (government) gave us a lot of support and we have got a lot of support from the Chinese University of Hong Kong,” Wang said in a recent interview with South China Morning Post. “I came to Hong Kong in 2010. Now my family is also here in Hong Kong.”
A showcase of artificial intelligence technology called SenseMARS at SenseTime’s showroom at Science Park in the New Territories. Photo: Xiaomei Chen
SenseTime’s investors include SoftBank Group Corp, Temasek Holdings and Alibaba Group Holding, the owner of the Post.

SenseTime was valued at more than US$8 billion after completing its most recent round of fundraising in December. It has raised US$2.6 billion in nine rounds of fundraising since its inception, according to Crunchbase.

As of June 30, the company’s software platforms were used by more than 2,400 customers, including more than 250 Fortune 500 and other publicly listed companies, according to the filing. The company also has more than 8,000 AI patents and patent applications.

SenseTime’s algorithms are widely used in China’s public security and surveillance applications, contributing about 30 per cent of its revenue, according to local media reports. Wang, the co-founder, has said surveillance is not a business focus for the company.

The company remains unprofitable, reporting a net loss of 12.2 billion yuan (US$1.9 billion) in 2020, following two years of losses in 2018 and in 2019. Revenue rose 13.9 per cent to 3.45 billion yuan last year.

China International Capital Corporation (CICC), Haitong and HSBC are serving as underwriters on the offering.

Additional reporting by Masha Borak, Ren Wei and Peggy Sito

This article appeared in the South China Morning Post print edition as: SenseTime files to raise US$2b in share sale
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