Didi Global’s decision to delist from the US market heightened market decoupling risks, prompting Chinese regulators to issue a statement in an attempt to calm the markets. Reports suggesting US-listed Chinese firms were being pushed to cancel their listings were a “complete misreading and misinterpretation” of their regulations, they said.

“We see now is the right time to list our business in Hong Kong,” co-founder and chief executive officer Xu Li said during an online briefing on Monday. “Commercialisation [of our solutions] has been viable, so we see a clear path to profitability.”

The unprofitable AI company did not comment on its smaller-than-expected IPO size or its expected break-even target.

SenseTime’s offering represents about 4.51 per cent of its enlarged share capital. There is an overallotment option to sell an additional 150 million shares if there is strong demand. The offering will close on Friday, according to its timetable, and the stock could start trading on December 17 under the code “0020”.

The IPO values the AI company at as much as HK$133 billion, based on the upper end of its IPO price range. The firm’s biggest shareholders include SoftBank Group and Alibaba Group Holding, the owner of this newspaper.

CICC, Haitong International and HSBC are the joint sponsors of the offering. Eight cornerstone investors have committed to buy up to US$450 million worth of the stock, or almost 59 per cent of the deal, according to the term sheet. These include Mixed Ownership Reform Fund, Guosheng Overseas Hong Kong and Shanghai, and SAIC Hong Kong.

SenseTime’s listing comes amid Beijing’s intensified scrutiny of technology companies and their data security practices, in particular the transfer of data outside mainland China, which the government deems a matter of national security.

The offering by SenseTime and that of NetEase’s music streaming unit Cloud Village last week, are being viewed as test cases for new Chinese regulations requiring certain IPO applicants to pass a cybersecurity review before selling shares to global investors in Hong Kong.

The consultation will end on December 13. Some bankers have expressed concerns that such requirements could be applied retrospectively. SenseTime highlighted that “risk factor” in its draft prospectus.

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Tightened regulations among key trends shaping China’s internet in 2021

Tightened regulations among key trends shaping China’s internet in 2021

“Failure to comply with the cybersecurity and data privacy requirements in a timely manner, or at all, may subject us to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant operations, and revoking relevant business permits or business licenses,” it said.

The regulatory clampdown in the tech sector has hurt IPOs in Hong Kong, where 83 companies have raised US$38.8 billion this year through November, or only 40 per cent of the proceeds generated from IPOs on Nasdaq, according to Refinitiv data. Companies raised 6.3 per cent more from 126 IPOs in Hong Kong in the same period last year.

SenseTime plans to use the bulk of the net proceeds to improve its research and development over the next two years. It also aims to boost the use and adoption of its service offerings both domestically and internationally.

Founded by a group of professors at the Chinese University of Hong Kong in 2014, its AI technology is used in a variety of areas including autonomous driving, augmented reality, facial recognition and medical imaging. It is also being used in smart-city and smart-auto initiatives in mainland China.

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