US sanction forces China’s AI firm SenseTime to delay IPO

Chinese artificial intelligence start-up SenseTime Group has postponed its $767m Hong Kong initial public offering (IPO) after being placed on a US investment blacklist.

SenseTime said it remained committed to completing the offering and would publish a supplemental prospectus and an updated listing timetable.

Reuters first reported earlier on Monday the company’s plan to withdraw the offering and update its prospectus to include the potential impact of the US investment ban, with the aim of relaunching the IPO process.

SenseTime had planned to sell 1.5 billion shares in a price range of HK$3.85 ($0.49) to HK$3.99 ($0.51), according to its regulatory filings. That would raise up to $767m, a figure that had already been trimmed earlier this year from a $2bn target. The shares were expected to start trading on December 17.

However, instead of setting its listing price on Friday, as scheduled, it found itself in urgent talks with the Hong Kong Stock Exchange and its lawyers over the future of the deal amid reports about the looming blacklist.

The delay comes after a move by the US Treasury Department on Friday sanctioning the company for its alleged role in creating facial-recognition software used in the oppression of Uyghur Muslims in the Xinjiang autonomous region of Western China.

Bankers had been gauging investor interest in the IPO when news broke about the plan to add the firm to the Treasury Department’s list of so-called Chinese military-industrial complex companies, timed to fall on Human Rights Day as well as SenseTime’s expected pricing.

SenseTime did not provide details on the timetable for a revised IPO in its filing to the Hong Kong Stock Exchange on Monday.

“The company remains committed to completing the global offering and the listing soon,” it said in the filing.

China’s camps

One source said the company was trying to move quickly to avoid the regulatory requirement to completely refile the IPO after January 9 when its financial numbers in the current prospectus would need to be updated. The company had retained around $450m from cornerstone investors and could expect most of them to stay in the deal, the source added.

The company said it would refund all application monies in full, without interest, to all applicants who subscribed its shares in the offering process.

UN experts and rights groups estimate 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.

Some foreign lawmakers and parliaments, as well as the US Secretaries of State in both the Biden and Trump administrations, have labelled the treatment of Uyghurs as genocide, citing evidence of forced sterilisations and deaths inside the camps. China denies these claims and says Uyghur population growth rates are above the national average.

SenseTime said in a statement on Saturday it “strongly opposed the designation and accusations that have been made in connection with it,” calling the accusations “unfounded”.

Weak markets

SenseTime was due to be one of the biggest deals in the third quarter in Hong Kong and its postponement adds to the ongoing weakness in the city’s IPO market.

China Tourism Group shelved a plan to raise about $5bn in its secondary listing earlier in December, citing uncertain financial market conditions.

SenseTime’s IPO was the most high profile listing for HSBC this year, which was a joint sponsor with China International Capital Corporation (CICC) and Haitong International.