China's AI Startup SenseTime Shares Soar 23% In Hong Kong IPO Jet Encila

12/31

SenseTime Group Inc. surged on its first day of Hong Kong trading following a bumpy initial public offering postponed by concerns about new U.S. sanctions.

The Chinese artificial intelligence start-up secured $740 million in its first public offering and priced its shares at HK$3.85 ($0.4937) apiece, near the bottom of the range flagged, giving the company a $16.4 billion market value.

SenseTime has sold $1.5 billion in its second effort to go public in Hong Kong in as many weeks.

It came just a few weeks after the United States Treasury Department accused the firm of human rights abuses in Xinjiang, which the firm has strongly denied.

The curbs are in response to the Commerce Department's blacklisting during the Trump administration.

Chinese state-owned entities are among the SenseTime IPO's top cornerstone investors. Bocom International had also purchased shares in the company. SenseTime stated that the profits would be used to build its AI operations.

It canceled its initial attempt on December 13 after being placed on an investment blacklist just as the institutional book build for the offer was wrapping up.

Because of the dynamic and shifting nature of the applicable U.S. legislation, the company disclosed earlier this month in a revised filing to the city's stock exchange that it was compelled to exclude U.S. investors from the worldwide offering.



"We believe that the absence of U.S. investors from the IPO contributed to the low foreign subscription," Shifara Samsudeen, an analyst with LightStream Research and a SmartKarma contributor, said.

The IPO's major backers, all Chinese institutions, purchased almost 67% of the stock on offer, up from the nearly 60% ownership identified in the company's previous attempt.

Based on regulatory filings with the Hong Kong Stock Exchange, institutional investors submitted orders for only 1.5 times the quantity of stock on sale in the international tranche.

According to market observers, it had one of the lowest take-up rates of any major Hong Kong sale this year.

SenseTime, a company founded by software developers in 2014, specializes in AI-powered program that analyzes faces and photos on a massive scale and collaborates with law enforcement agencies, businesses, and health-care experts all around the world.

Statistics collated by Bloomberg show Chinese companies that launched in Hong Kong since July, when Beijing tightened its grip on many companies, had their shares jump an average of 1% on the first day of trade.

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