Not smarting from US sanctions, SenseTime says its IPO is on again

Not smarting from US sanctions, SenseTime says its IPO is on again

Face biometrics giant SenseTime is again pushing forward with a planned IPO.

Expected to raise as much as $2 billion on the Hong Kong stock exchange, the announcement is almost more noteworthy for the stuttering IPO plans of SenseTime and other so-called AI dragons of China.

The facial recognition dragons are SenseTime, Megvii and CloudWalk. They often are described as unicorns, although each enjoys some degree of backing from the Chinese government.

SenseTime, which develops deep learning and computer vision algorithms, began talking publicly about an initial offering on the Hong Kong stock exchange in 2017. Executives were vague about the timing but said it could occur as early as 2018.

Their first go-around, in 2020, was postponed. The previous fall, the United States had put SenseTime (and seven other Chinese companies, including Megvii and Yitu) on its foreign trade Entity List, designed to make it more difficult for companies to sell their products. CloudWalk was added in May 2020.

SenseTime and Megvii won spots on the list for their alleged participation in the ongoing imprisonment of one of China’s ethnic and political minorities, the Uyghurs. The companies have loudly pleaded innocence.

Being on the list, according to the leaders of those companies, has turned out not to be as commercially damaging as they and Washington thought, which explains SenseTime’s new market move.

Some governments and non-U.S. businesses wanting to identify and track people have ignored the list.

Around the globe, no one has invested as much in the relevant technologies and deployed it at the scale that China has.

In many circles, Chinese facial recognition products are perceived as the ones to buy, and buyers are spending freely. That no doubt disappoints Washington, but in SenseTime’s case, it makes for an optimal time for an IPO.

Other IPO campaigns among the dragons have had similar headaches.

In 2019, Megvii considered listing on the New York Stock Exchange, but that idea was paused. Executives applied for an IPO in Hong Kong (dual listings are not uncommon), but in the same year, the IPO was delayed.

Hong Kong regulators wanted more information about reports that Megvii, which developed the AI platform Face++, was involved in systematic repression of Uyghurs.

It was not until March 2021 that new IPO plans were announced. A $950 million offering was approved on Shanghai’s stock market.

Yitu filed an IPO application with Shanghai regulators in September 2020, but this March, it suspended that application for three months without explanation. The problem could be related to political problems that its parent Alibaba is having with Beijing.

So far, among the dragons, only CloudWalk has enjoyed a coherent path to an IPO — so far.

In December 2020, it announced a $573 million IPO in Shanghai.

Seven months previous, CloudWalk announced a $253.6 million round of financing. Investors in the placement included investment firm China Internet Investment Fund, which is owned by the Chinese government.

Also investing were Shanghai state-government entities including the Enterprise Reform and Development Equity Investment Fund, Guangzhou Nansha Financial Holding and Yangtze River Delta Industrial Innovation Fund.

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