SenseTime Delays Hong Kong IPO, Instead Eyes Private Equity Market to Raise USD 1 billion
As the coronavirus outbreak hits the market, the Chinese artificial intelligence startup has joined many companies that have abandoned plans to sell shares.
Hong Kong-based artificial intelligence startup SenseTime has postponed its IPO of up to USD 750 million in Hong Kong this year and has moved towards the private equity market to raise as much as USD 1 billion.
The firm, which is backed by giants such as Alibaba, Qualcomm and Softbank Group, has raised a staggering amount of USD 2.6 billion to date. SenseTime started a joint IPO with China Investment Bank and China International Capital Corporation last year, but its IPO plan met hurdles due to it being one of the eight Chinese companies blacklisted by the US.
According to a Chinese media outlet, Techweb, people familiar with the matter, there were reports that the company's 2019 revenue would increase by 200%. Considering its investment plans, the company's cash flow remains negative. They predict that SenseTime may consider raising USD 500 million to USD 1 billion from existing and new investors.
SenseTime held several meetings with investors last year to explain the company's evolving new businesses, including facial recognition, robotic delivery, smart healthcare and education.
The firm has information that Beijing-based rival Megvii recently Megvii-back-on-track-for-500-million-IPO-Sources-N3jH7iaXZu/index.html" target="_blank">obtained an IPO approval from the Hong Kong Stock Exchange, but has decided not to list for the time being given the current challenges.
SenseTime has neither confirmed nor denied the fundraising plan. Instead, the company said in an emailed correspondence “At this stage we do not have any new financial plans or information to share.”
So far, the COVID-19 pandemic has infected nearly 200,000 people, causing nearly 8,000 deaths, and with borders closed, supply chains and labor severely disrupted, many businesses and economies have been marginalized. As the global economy is likely to decline, investors have opted for safe-haven investments. Global stock markets have lost nearly USD 20 trillion since their highs in mid-January.
Potential IPO applicants had to postpone plans as investor meetings were canceled. According to Dealogic's data, Hong Kong was the world's largest IPO market last year, and the size of new shares issued in February decreased by 93% from the same period last year to USD 49 million.
At the same time, only two companies were listed in Hong Kong in February, compared with 11 in the same month last year.
Market research firm CB Insights valued the company at USD 4.5 billion last year, but later that year in September, media quoted SenseTime co-founder and CEO Li Xu as saying that the company's valuation had exceeded USD 7.5 billion.
In a speech at MIT in 2018, Tang Xiaoou (汤晓鸥宣), co-founder of Shangtang Technology, announced that his company defeated Facebook and its facial recognition technology achieved a near 99% success rate, making it one of the most advanced artificial intelligence solution providers.