Following its placement on a U.S. investment blacklist, Chinese artificial intelligence start-up SenseTime Group postponed its $767 million Hong Kong initial public offering (IPO) on December 13. SenseTime remained committed to completing the offering and would publish a supplemental prospectus and an updated listing timetable, according to its official statement.
Intending to re-launch the lucrative IPO process, the firm has now planned to withdraw the offering and update its prospectus to consist of the possible effect of the United States ban, Reuters was the first to report earlier on Monday.
Based on its regulatory filings, SenseTime had planned to sell 1.5 billion shares in a price range of HK$3.85 to HK$3.99. That would raise up to $767 million, a figure that had already been trimmed earlier this year from a $2 billion target.
However, amid reports about the looming blacklist, it found itself in urgent talks with the Hong Kong Stock Exchange and its lawyers over the future of the deal, instead of setting its listing price on Friday, as scheduled.
SenseTime failed to provide details on the timetable for a revised IPO in its filing to the Hong Kong Stock Exchange on Monday. It wrote in the filing:
“The company remains committed to completing the global offering and the listing soon.”
The company was trying to proceed rapidly to avoid the regulatory requirement and stipulation to entirely refile the IPO after January 9 when all of its financial numbers in the current prospectus would need to be updated, one source said. From cornerstone investors, the company had retained around $450 million and could expect most of them to stay in the deal.
Shifara Samsudeen, a LightStream Research analyst, stated:
“Even if the company offers an updated prospectus with more risk factors and goes ahead with a public listing, we expect the investor sentiment to be low which will likely impact future pricing of its shares and their performance post-IPO.”
To all applicants who subscribed to its shares in the offering process, the company said it would refund all application monies in full, without interest.
SenseTime was added to a list of “Chinese military-industrial complex companies,” by the U.S. Treasury accusing the company of having developed facial recognition programs that can determine a target’s ethnicity, with a particular focus on identifying ethnic Uyghurs.
According to U.N. experts and rights groups, approximately more than a million people, mainly Uyghurs and members of other Muslim minorities, have been detained in recent years in a vast system of camps in China’s far-west region of Xinjiang.
The treatment of Uyghurs has been labeled as genocide, citing evidence of forced sterilizations and deaths inside the camps, by some foreign legislators and parliaments, as well as the United States Secretaries of State in both the Biden and Trump administrations. China negates these claims saying Uyghur population growth rates are above the national average.
In a statement on Saturday, SenseTime said it “strongly opposed the designation and accusations that have been made in connection with it,” calling the accusations “unfounded”.
LightStream’s Samsudeen stated:
“There remains a large number of questions that need to be answered, such as the impact of blacklisting and disruptions to the operations, as well as the impact on SenseTime’s plans of pursuing global expansion.”
During the third quarter, SenseTime was due to be one of the biggest deals in Hong Kong and its postponement adds to the ongoing weakness in the city’s IPO market.
So far in 2021, there has been approximately $41.1 billion raised in initial public offerings (IPOs) and secondary listings, compared with the $50.26 billion that was raised over the same period in 2020, as documented by Refinitiv.
Earlier in December, China Tourism Group (601888.SS) suspended a plan to raise nearly $5 billion in its secondary listing, citing uncertain financial market conditions.
This year, SenseTime’s initial public offering (IPO) was the most high-profile listing for HSBC. The investment bank was a joint sponsor with China International Capital Corporation (CICC) and Haitong International.