Corporate investors SoftBank, Qualcomm, Alibaba, Suning and Dalian Wanda scored exits today as China-based computer vision technology provider SenseTime floated in Hong Kong in a HK$6.64bn ($851m) initial public offering.
The company sold 1.5 billion shares priced at the foot of the HK$3.85 to HK$3.99 range it set for the offering earlier this month and an extra 225 million through an over-allotment option. They closed at HK$4.13 ($0.53) on their first day of trading on the Hong Kong Stock Exchange.
Founded in 2014, SenseTime produces artificial intelligence-equipped chips, sensors and software for use in image, facial and vehicle recognition, and its technology stems from Chinese University of Hong Kong’s Media Lab. It generated approximately $520m in revenue in 2020.
SenseTime had initially planned to price its shares on December 10, but the IPO was delayed after the US government added the company to a blacklist due to its technology being used to aid human rights abuses directed towards China’s minority Uyghur population.
However, cornerstone investors stepped in to help salvage the offering, expanding their allocation from about $450m to $511m.
China’s Mixed-Ownership Reform Fund bought $200m of shares and carmaker SAIC and Hong Kong Science and Technology Parks’ HKSTP Venture Fund acquired $30m and $5m respectively.
The majority of the IPO proceeds will be allocated to research and development, with additional capital earmarked for funding emerging business opportunities and strategic investments.
Although the final takings for the offering represent a sharp decline from the reported $2bn SenseTime had been seeking, the share price values it at roughly $17bn, up from $12bn when it last secured equity funding, from undisclosed investors in January this year.
SenseTime had raised a total of over $2.6bn as of a $1bn investment by internet and telecommunications group SoftBank in 2018.
In a wider sense, the fact the offering went ahead can be seen as somewhat of a balm for the Chinese markets, which have seen share prices fall in recent months amid a stream of government regulations targeting the country’s tech companies.
The latest move came yesterday when China’s National Development and Reform Commission and Ministry of Commerce published a guide to the country’s variable interest entity (VIE) laws, which allow domestic businesses to form foreign entities to avoid rules barring foreign investment.
The rules include a list of sensitive industries where companies must receive an official waiver in order to float outside China, and the government’s concerns about data security means they will likely impact the country’s digital-focused companies significantly.
Foreign investors will be barred from owning more than 10% of a China-based company looking to go public, while total foreign ownership will be capped at 30%.
The most significant impact of the regulations could be felt by one of SenseTime’s investors, Japan-headquartered SoftBank, which holds substantial stakes in highly valued private companies such as online education provider Zuoyebang and TikTok owner ByteDance.
China International Capital Corporation, Haitong and HSBC were joint sponsors for the SenseTime offering, and served as joint global coordinators, bookrunners and lead managers alongside CMB International, DBS Bank and China Merchants Securities.
