SenseTime postpones US$768 million IPO in Hong Kong after US blacklists AI firm on human rights grounds
- China’s largest AI firm said it would postpone its Hong Kong IPO after the US barred American investors from owning shares in the firm
- Washington blacklisted SenseTime over alleged human rights abuses in Xinjiang, which the AI firm called ‘unfounded,’ based on a fundamental misperception of the company
The company will publish a supplemental prospectus with amendments and an updated schedule, and refund all the IPO applications made by investors without the associated interest, SenseTime said.
SenseTime “remains committed to completing the global offering and listing soon,” the company said, without elaborating. Spokespeople at SenseTime declined to comment. Joint sponsors of the deal including CICC, Haitong International and HSBC were not immediately available for comment.
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Two days after the law passed, the US Treasury Department put SenseTime on its sanctions list, which would bar American investors from holding stocks in the company.
The sanctions list, announced on the day when SenseTime was supposed to price its Hong Kong IPO, made it impossible for the company to press ahead with its fundraising, which had already been slashed by almost two thirds to HK$5.99 billion (US$768 million).
The company was selling 1.5 billion shares at between HK$3.85 and HK$3.99 each according to its prospectus.
SenseTime can revive the IPO quickly within the six-month window of its current listing approval, provided it comes clean to investors on the impact of the US sanction, according to two regulatory sources. They pointed out that as the listing approval remains valid, the company does not have to apply again.
Several major brokers in Hong Kong, including Bright Smart Securities, Futu Securities and Interactive Brokers, said they would waive their fees and interest payments for clients who subscribed to the SenseTime IPO using margin loans.
“The delay to one IPO will not have a market-wide impact, but it will obviously hurt brokers’ businesses due to losses from interest and commission income,” said Robert Lee, chairman of the Hong Kong Securities Association, the local guild for the city’s stockbrokers.
These pre-IPO investors hold redemption rights which they can exercise if a listing does not happen by a certain predetermined date, according to the prospectus. American companies are barred from investing in businesses on US blacklists, according to an executive order signed by then-US President Donald Trump last year.
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“Treasury is using its tools to expose and hold accountable perpetrators of serious human rights abuse,” Wally Adeyemo, deputy secretary of the Treasury, said on Friday, identifying SenseTime as being responsible for “human rights abuse enabled by the malign use of technology”.