SenseTime’s IPO rescued by Chinese state-backed funds
Chinese artificial intelligence company SenseTime is relaunching its initial public offering in Hong Kong with the help of investment from state-backed entities after being blacklisted by the US.
In regulatory filings to the Hong Kong stock exchange on Monday, the AI company revealed Beijing’s crucial role in reviving the postponed $767m listing, with shares due to start trading on December 30.
State-backed entities dominate the list of cornerstone investors that are expected to buy about two-thirds of the offering. The listing was derailed by Washington when SenseTime was put on an investment blacklist this month.
Its largest cornerstone investor, the state backed Mixed-Ownership Reform Fund, recommitted $200m to buy shares, while a fund run by the local government in Shanghai, where SenseTime’s China headquarters are located, stepped in to purchase $150m of the new offering.
Another Shanghai government fund more than tripled its cash commitment to $73m and the city’s AI fund pledged an additional $1m.
State-owned Taizhou Culture & Tourism is putting forward $5m as a new cornerstone investor, along with a venture fund run by state-backed Hong Kong Science and Technology Parks Corporation.
The state-owned groups replaced cornerstone investors such as Focustar Capital and funds managed by Pleiad Investment Advisors.
Washington has accused the company, which specialises in facial recognition software, of enabling human rights abuses against Muslim Uyghurs in China’s western Xinjiang region. SenseTime has denied the charges.
Earlier this month, the US Treasury department added Hong Kong-based SenseTime Group Limited to its investment blacklist. The company is a subsidiary of the Cayman Islands-based SenseTime Group Inc, which is planning to sell the shares in Hong Kong.
SenseTime claimed in its filings to the Hong Kong stock exchange that Washington appeared to have targeted the wrong entity. The company and its lawyers said that the subsidiary blacklisted by the US had no plans to issue shares and that the designation did not apply to the parent company.
Therefore the sanction “does not restrict any United States person” from purchasing its shares in Hong Kong nor prevent “existing United States person shareholders from continuing to own [its shares]”, SenseTime said.
SenseTime’s existing shareholders include Silver Lake, a US private equity firm with a 3 per cent stake, as well as Fidelity International and chip company Qualcomm, which hold smaller stakes.
Still, SenseTime said it would exclude US investors from subscribing to its offering “due to the dynamic and evolving nature of the relevant US regulations” and noted the blacklisting might negatively impact its share price and liquidity.
An expert on US sanctions said the Treasury department “could easily update the list to include the name of an issuing entity”, adding that the department had in the past made administrative changes to correct information.
Additional reporting by Maiqi Ding in Beijing