Artificial intelligence Company SenseTime Group Inc. jumped on the first day of trading in Hong Kong after delays over fresh U.S. sanctions hit its IPO.
As per Bloomberg News, the stock gained about 23% early trading on its debut and was headed for the biggest ever gains on the first day of any IPO in Hong Kong since July.
SenseTime Group, backed by Softbank Corp, raised $741 million (HK$5.78 billion) by offering 1.5 billion shares at 3.85HK$ per share, which was at the lower end of the IPO price range.
The strong debut of SenseTime is considered an exception in this year’s new listing as Hong Kong was the worst performer in 2021. The performance comes as a defiance to the sanctions imposed by the U.S Treasury Department over the company’s involvement in alleged human rights in Xinjiang. It was also blacklisted by the Trumps Administration Commerce department, which the company denied the charges vehemently.
SenseTime went ahead with the listing and secured $512 million from investors, including the Mixed Ownership reform fund backed by the government and Shanghai Xuhui Capital investment Co.
SenseTime, in its revised filing with the Hong Kong stock exchange early this month, said that it was excluding U.S. investors from its global offering due to the evolving and dynamic nature of the U.S. regulations.
SenseTime was founded by computer scientists in 2014. It specializes in facial recognition software technology powered by artificial intelligence technology. This technology works with retailers, healthcare researchers, and policing authorities globally. The company competes with rivals Megvii Technology, backed by Alibaba group and seeking a slice of market share in Shanghai.
As per Bloomberg data, Chinese companies that debuted this year on the Hong Kong stock exchange since July saw only a 1% increase on the first day of trading. Nine companies listed before the SenseTime IPO saw an average decline of 2.8% in the stock value.
SenseTime plans to use 60% of its IPO proceeds in research and development as per a television interview by CEO Xu Li before the sanctions were announced.
The company has invested in a big way in supercomputers that can train AI-models-backed clients. This effort is set to pay off and narrow down the company’s losses. As of June 30, SenseTime revenue doubled to $259 million or 1.65 billion Yuan. In contrast, the net losses reduced to 3.7 billion Yuan from 5.3 billion Yuan in the first half of 2020.
According to Xu, the key to the commercialization of technology is cost and the company’s investments are towards achieving profitability. CEO Xu also acknowledged that the company’s overseas expansion was impacted due to sanctions by the U.S. Commerce Department.
