Chinese artificial intelligence start-up SenseTime heads for IPO. Despite the withdrawal of its stock market listing plans by its mainland peers, it is listing in Hong Kong. This was done in response to growing crackdowns on Beijing’s tech sector.
More details on SenseTime heading for IPO
Investors like Softbank, Alibaba, Tiger Global, and Silver Lake are backing the company. It submitted an initial public offering document to the Hong Kong Stock Exchange late Friday. SenseTime hasn’t shown yet how much it plans to raise but it is one of the most valuable AI startups in the world.
The Donald Trump administration blacklisted the company in 2019. Despite that, its business has grown significantly over the past few years. SenseTime is China’s fastest-growing company in the AI industry.
Reason behind the IPO in Hong Kong
According to the company, sales in 2020 were up by 14%, i.e. RMB 3,4 billion (approx.. $525M). While in the first half of 2021, they were up 92% i.e. RMB 1.6 billion year-on-year. And the operating loss in 2020 increased by 13% to RMB 1.8 billion. Thus, bringing the total loss in the first half of 2021 to RMB 2.1 billion.
The move to head for an IPO in Hong Kong is due to Chinese regulators cracking down on the technology sector this year. This seemed to be targeting consumer technologies such as e-commerce, food delivery, lending, and gaming companies.
Cloud Village is China’s leading music streaming service. It was the first one to shelve its plan of $1 billion IPO in Hong Kong due to increased regulatory crackdowns. However, industries like AI, semiconductors, and biotechnology are receiving a lot of support from Beijing. The companies in these areas are considered by China to be essential to reduce their reliance on US technology. Furthermore, these are essential to consolidate the nation’s reputation as a technology hub in its own right.
SenseTime is known for computer vision technology that allows machines to analyze visual data. Its facial recognition software is used in millions of smartphones around the world. Furthermore, the pandemic is driving the demand for products such as temperature sensors and the ability to identify people wearing masks.
Its main product is SenseCore. It’s a platform that helps businesses create low-cost AI models and algorithms to meet their needs, such as autonomous driving.
Risks related to the growth of the company
As SenseTime heads for IPO, the regulatory risk regarding the submission cannot be ruled out. SenseTime is subject to the complex and evolving laws on data protection. This includes a new draft regulation on cybersecurity reviews in China.
The growth SenseTime has shown in its seven years of working has made the U.S. Department of Commerce notice it. It has added SenseTime and other major Chinese AI champions such as Megvii, iFlytek, and Yitu to the Entity List.
Companies on the list cannot purchase products from US companies.
“There is no guarantee that we will maintain access to all the items our business needs,” SenseTime said.