US blacklists SenseTime in blow to its IPO plans
The US placed SenseTime on an investment blacklist on Friday, in a move that may have delayed the Chinese AI company’s plan to list its shares in Hong Kong.
The Treasury Department imposed investment restrictions on SenseTime, accusing it of enabling human rights abuses against Muslim Uyghurs in Xinjiang.
Washington’s action comes on the same day SenseTime was expected to price its shares in Hong Kong, ahead of its initial public offering, with the company seeking a valuation of up to $17bn. The pricing did not occur, however.
SenseTime declined to comment on whether it would delay its IPO if the US included it on the blacklist, as expected following a Financial Times report on Thursday.
Traders in Hong Kong on Friday said that, based on client feedback, they expected the IPO to be delayed if Washington restricted investments in the company. Trading was slated to begin on December 17.
One veteran trader in Hong Kong not involved directly in the deal told the FT that clients with orders for shares in SenseTime had warned they could pull out of the listing.
The initial public offering was expected to raise as much as $767m in the city’s largest new stock listing in months, providing a test for investor appetite for Chinese technology companies.
SenseTime had hoped to raise as much as $2bn earlier this year but had delayed its roadshow because of an intensifying crackdown on China’s tech sector by Beijing.
The downsized IPO has come under increased scrutiny following a Financial Times report that the US was planning to put the company on a blacklist the same day its shares were going to price.
“Clients said if it [the blacklisting] comes, they were out — they have to be,” the trader said. “It looks like unfortunately now that [plan] has pretty much caused the whole deal to be delayed yet again.”
He added that the blacklisting plans, which would forbid US investment in SenseTime, had “pretty much put the kibosh on most of the long-only community” investing in the IPO.
The head of another brokerage said that while his clients had not said they would pull out of the deal, expectations of a delay were widespread.
Washington has accused SenseTime of enabling human rights abuses against Muslim Uyghurs in the Chinese region of Xinjiang. The company has denied the allegations.
The Uyghur controversy had already been enough to turn US investment banks off the deal, with HSBC serving as the only western bookrunner for the Hong Kong listing. The bank turned down a request for comment.
The Treasury Department on Friday noted that the company’s technology was designed to identify Uyghurs and that when applying for patents, SenseTime had “highlighted its ability to identify Uyghurs wearing beards, sunglasses and masks.”
Investor concerns over a potential delay comes despite extensive support from cornerstone investors, who had pledged to buy $450m worth of shares, including a $200 investment from a fund led by China Chengtong Holdings Group, a state-run investor. That had left just $300m to cover by institutional and retail investors this week.
The decision to blacklist SenseTime has coincided with the final day of the Democracy Summit that President Joe Biden has convened with more than 100 countries.
Additional reporting by Ryan McMorrow in Beijing