Black Sesame leads surge in Hong Kong IPO filings
Black Sesame International Holding, a Chinese chipmaker specialising in autonomous driving applications, is among the highest-profile companies in the latest batch targeting IPOs on the Hong Kong Stock Exchange.
More than two dozen filings have been made in the past week, including eight by companies with significant private equity and venture capital backing. Others include J&T Global Express, Insilico Medicine, Unisound AI Technology, Baiwang, SATP Holding, RoboSense, Qiniu, and Lianlian DigiTech.
KPMG noted that Hong Kong recorded slight year-on-year increases in the number of IPOs and total funds raises in the first half of 2023 while global activity remained weak. It is predicting a “major rebound” in the second half of the year, highlighting the loosening of listing requirements to allow pre-profit technology companies to go public with market capitalisations as low as HKD 6bn (USD 764m).
"The new Chapter 18C is designed to help companies with specialist technology (such as artificial intelligence, robotics and automation, as well as semiconductors) gain access to Hong Kong's deep pool of capital, in order to develop and commercialise their technology to a widespread audience,” said Irene Chu, head of new economy and life sciences in Hong Kong at KPMG China.
“In the long term, we are hopeful for major growth in the IPO markets driven by new technologies."
Black Sesame has received USD 695.5m in funding across nine Series A, Series B and Series C tranches, according to a prospectus. The company’s post-money valuation doubled between the fourth and fifth Series B tranches, in August 2020 and April 2021, reaching USD 1.1bn. On initiating the Series C a few weeks later, it was worth USD 1.49bn, rising to USD 2.2bn by the Series C extension in late 2021.
Northern Light Venture Capital was the earliest investor – in 2016, the year Black Sesame was founded – and it remains the largest external shareholder with 10.52%, followed by SummitView Capital at 7.04%, Xiaomi at 3.71%, and Tencent Holdings at 3.55%. SummitView led the Series C extension of USD 218.2m; Xiaomi led the USD 235.8m Series C, its first investment in the automotive chip field.
Other investors include Oceanpine Capital, Legend Capital, Delta Capital, Fenghe Capital, Hina Group, FutureX Capital, Oriza Hua, Lenovo Capital & Incubator Group, Sunic Capital. In addition, the company is supported by investment vehicles linked to China Merchants Group, Bank of China, Industrial Bank, Geely Automobile Holdings, FAW Group, Wingtech Technology, and SDIC Investment Management.
Black Sesame claims to be a leading provider of semiconductor-on-chip (SoC) – an integrated circuit that includes key electronic components such as central processing units, memories, and interfaces – for intelligent vehicle solutions. It initially focused on autonomous driving and then expanded into areas such as smart cockpits, advanced imaging, and interconnection.
The company was the third-largest provider of automotive-grade high-computing power SoCs globally based on shipments in 2022, according to Frost & Sullivan. Shipments of the flagship A1000 Series exceeded 25,000 units as of December 2022. Mass production of the Huashan A1000 began last year, while the cross-domain Wudang Series was announced in April.
Black Sesame had 89 customers as of December 2022, including more than 30 original equipment manufacturers and tier-one parts suppliers. It counts FAW Group, Dongfeng Auto, JAC, Hycan, Ecarx, Baidu, Bosch, ZF Group, and Marelli as customers.
At present, there is an emphasis on L2 autonomy (also known as advanced driver-assistance systems, or ADAS, where cars can change lanes, overtake, and park automatically) and L3 autonomy (conditional autonomy, where vehicles can make limited informed decisions, such as accelerating past a slow-moving vehicle). The company said this was because it recognises “that product-market fit is crucial for commercial success.”
Frost & Sullivan expects sales of autonomous vehicles globally to rise from 41.6m units in 2022 to 71.6m units in 2028, with the penetration rate increasing from 60.6% to 94.4%. This will, in turn, drive demand for computing SoCs. The global automotive-grade SoC market is projected to grow from CNY 42.8bn (USD 5.9bn) in 2022 to CNY 179.2bn in 2028.
Over this period, China is expected to account for one-third of global autonomous driving vehicle sales and 40% of the automotive-grade SoC market. The country’s shipments of high-computing power automotive-grade SoCs will rise from 350,000 units in 2022 to 1.05m units in 2023, which equates to a 90% global share.
Black Sesame’s revenue came to CNY 165.4m in 2022, up from CNY 60.5m in 2021. Its largest customer was responsible for 43.5% of revenue in 2022 and the top five accounted for 75.4%. Over the same period, the company’s net loss widened from CNY 2.36bn to CNY 2.75bn. On an operating basis – which excludes changes in the fair value of shares issued – the loss went from CNY 722.7m to CNY 1.05bn.
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