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US blacklists 28 Chinese entities over Xinjiang
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https://scmp.com/business/companies/article/3161461/sensetime-set-underwhelming-hong-kong-debut-us851-million-ipo Companies
SenseTime rises 7 per cent in Hong Kong debut after surprise surge as traders defied US sanctions
- The US$851 million global offering was delayed by the US decision to sanction the AI group for alleged human rights abuses
- Stock surged to as high as HK$4.74, versus the indicative price range of HK$3.83 to HK$3.90 in grey-market trading
People walk beneath a message welcoming Chinese artificial intelligence group SenseTime to the Hong Kong stock exchange on December 30. Photo: AFP
SenseTime Group, China’s artificial intelligence champion, jumped more than expected on its trading debut, paying off for investors who shrugged off concerns about US sanctions in the run-up to its US$851 million stock offering.
The stock jumped as much as 23 per cent to HK$4.74 in Hong Kong from its initial public offering (IPO) price of HK$3.85. That compared with a range of HK$3.83 to HK$3.90 indicated in pre-trading action late Wednesday. It closed at HK$4.13, a 7.3 per cent premium, valuing the group at HK$138 billion (US$17 billion).
Controversy has dogged the group’s listing plan for more than a year amid heightened geopolitical risks, prompting it to downsize the IPO from as big as US$2 billion, according to reports. The US blacklisted SenseTime in early December for alleged human rights abuses in the far-west Xinjiang region, forcing a relaunch with an amended prospectus and the exclusion of US investors.
The company has rejected those allegations as unfounded, describing the US move as a fundamental misperception.
The US Commerce Department had placed SenseTime on its Entity List in 2019 alongside more than 20 other Chinese firms because of its alleged role in Xinjiang. Companies on the blacklist are prohibited from doing business with American companies without a licence.
SenseTime raised HK$6.64 billion (US$851 million) by selling 1.725 billion shares, including an overallotment option, in its delayed IPO. Investors submitted bids for 5.2 times the 150 million shares in the retail portion. The allocation for global investors was upsized by 225 million to 1.575 billion shares.
The IPO proceeds are about one-seventh of those collected in the Kuaishou Technology IPO in February, the biggest IPO in the city this year. Hong Kong slipped to fourth in the global IPO league table in 2021 as a crackdown on the Chinese technology sector hurt sentiment and wiped out billions of market value, according to KPMG.
SenseTime has an 11 per cent share in the computer vision software market in China, making it the largest player in the industry, according to its IPO prospectus. The market size is expected to reach 101.7 billion yuan (US$16 billion) in 2025 from 16.7 billion yuan, or about 44 per cent annually, it said.
As an industry leader, “it is easier for SenseTime to win recognition from customers and achieve higher-than-average revenue growth,” said Jiao Juan, an analyst at Essence Securities. The brokerage expects the group to remain unprofitable until 2023.
Despite the expected poor debut, the listing will put a market value to the shares held by its co-founder Tang Xiao’ou. The 53-year old university professor holds a 20.8 per cent stake worth HK$28.5 billion. Tang is credited with US$3.4 billion in net worth before the listing, according to Bloomberg data.
Elsewhere another two companies also started trading in the city. Chervon Holdings jumped 28 per cent above its IPO price to HK$56, while Sirnaomics surged 18 per cent to HK$77.90.