China's SenseTime plans pared back Hong Kong IPO

The company, which has raised more than $5.2 billion in private funding over the past seven years, will sell 1.5 billion shares at HK$3.99 apiece, according to a filing. When the company posted its initial documentation with the exchange in August, it was said to be targeting around $2 billion.

The revision in expectations coincides with weaker investor sentiment. Listed Chinese technology companies have taken repeated hits in recent months with the rollout of new regulations.

At the same time, although Hong Kong is expected to benefit from fewer Chinese IPOs in the US, technology sector activity has been muted in the second half of the year. Cloud Village, the last private equity-backed pre-profit start-up of size to test the market, is trading below its IPO price.

SenseTime itself has also courted controversy. An earlier plan to list in New York was abandoned when the company was one of eight Chinese AI start-ups blacklisted in 2019 by the US government over allegations that their technology contributed to human rights violations.

SenseTime, Megvii Technology, and Yitu Technology were all implicated, which meant they couldn’t buy components from US companies without government approval. Megvii’s Hong Kong IPO attempt came to nothing, and the company filed to list on Shanghai’s Star Market in March.

SoftBank Vision Fund 1 is SenseTime’s largest external investor with 14.88%, followed by Primavera Capital Group and Silver Lake with 3.05% apiece. IDG Capital, China Structural Reform Fund, Shanghai International Group, Sailing Capital, and CDH Investments each own between 1% and 2%.

SenseTime was formed in 2014 by Xiao’ou Tang, a professor at the Chinese University of Hong Kong, alongside two PhD students – Li Xu and Bing Xu – and Fan Yang, formerly a software development engineer at Microsoft. It now claims to be Asia’s largest AI company by revenue, supporting over 450 mobile phones and 200 apps. There are more than 2,400 customers in total.

The company has built a universal AI infrastructure that serves as the backbone for software platforms that feature in commercial space management, residential property management, urban management, manufacturing, infrastructure, transportation, healthcare, and automobiles. The core offering is SenseCore, which combines supercomputers, data processing, and developer tools.

SenseTime also provides standardized software platforms – each one featuring thousands of AI models – that can be embedded into this infrastructure. There are four broad categories or use cases: enterprise management, real-time coordination of public utilities, connecting consumer-oriented internet-of-things (IoT) devices, and advanced driver assistance and AI-as-a-service for cars.

Revenue reached RMB3.45 billion in 2020, up from RMB3 billion the previous year. Gross profit margins grew from 56.8% to 70.6% over the same period, but net losses widened from RMB4.97 billion to RMB12.2 billion. These losses are largely attributable to fair value losses on SenseTime’s preferred shares, according to the prospectus.

Of the company’s total private funding, $2.9 billion has been raised since the start of 2019. IDG and StarVC were among the earliest investors. Other backers include CICC Capital, 5Y Capital, Fidelity, Mirae Asset, Tiger Global Management, Hopu Investment, Qualcomm Ventures, Alibaba Group, Temasek Holdings, Dalian Wanda Group, Advantech Capital, and China Renaissance.

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• Topics
• Greater China
• Technology
• IPO
• China
• artificial intelligence
• deep-tech
• Softbank
• CDH Investments Management
• Primavera
• Silver Lake
• IDG capital
• sailing capital
• Tiger Global Management