SenseTime sources legal opinion suggesting limits to US sanctions ahead of planned IPO
American sanctions against SenseTime for supplying its biometric technology in support of rights abuses in Xinjiang only apply to one of its business units, the company is claiming in the runup to its planned initial public offering.
The company has been preparing for a potential $2 billion IPO on the Hong Kong Stock Exchange, and says that only one of its business units is actually covered by the U.S. sanctions that appear to have complicated its IPO prospects, Bloomberg reports. That opinion was provided by Hughes Hubbard & Reed LLP, but according to Bloomberg interprets the Entity Listing in a more restrictive way than usual.
A 2020 revision of the Entity Listing added an additional, longer name for SenseTime, in a move Bloomberg sees as possibly including more of the company’s business units.
SenseTime’s revenues rose by 14 percent to 3.45 billion yuan (US$533 million) in 2020, and its operating loss grew to 1.81 billion yuan ($280 million). Of the company’s 2020 revenue, nearly 353 million yuan ($54.5 million) came from Chinese government grants.
Stanford Center for International Security and Cooperation Postdoctoral Fellow Jeffrey Ding told the Financial Times that while Western investors may want SenseTime to swear off biometric ethnicity detection, doing so could cost the company domestic contracts.
Documents filed by the company indicate its revenues from smart city projects, which often include facial recognition, grew significantly from the first half of 2020 to the first half of 2021, making up nearly half of its 1.65 billion yuan ($255 million) earned in 1H 2021. SenseTime’s five largest customers make up almost a third of its sales, according to the report.
SenseTime smart city technologies have been deployed in 119 cities, mostly in China. The company’s face biometrics are also supplied to the enterprise market, as well as ‘smart life’ and ‘smart auto’ business lines.
Yitu, another of China’s biometric unicorns, was reported in August to be considering Hong Kong as the venue for its proposed IPO. At the time, Bloomberg described Chinese AI firms as “cash starved.”