SenseTime Makes Debut on HKEX with World's Largest AI IPO, Valuation Exceeds HK$140 Billion

Today, December 30, Sensetime has finally been listed on the Hong Kong stock market.

It is reported that Sensetime has set the final issue price at HK$3.85 per share. Based on this calculation, the estimated net proceeds from the global offering are approximately HK$5.552 billion, with the stock code being 0020.

According to FUTU data, affected by the overall trend of Hong Kong stocks, the price of Sensetime-W fell in the dark market and broke below the issue price at the close of the dark market. Its latest market value is 126.806 billion Hong Kong dollars, approximately 16.269 billion US dollars.

But once the market opened, the opening price rose to HK$3.91 per share, an increase of approximately 1.56% compared to the issue price of HK$3.85. Based on this calculation, Sensetime's current market value is HK$147.1 billion. Compared to the last round of financing, the market value has increased by one-third.

Previously, China Venture reported that {The World's Largest AI Unicorn IPO is Here, Used in 450 Million Phones, with SoftBank, Alibaba, and Primavera as Core Shareholders》also mentioned that if Sensetime's IPO goes smoothly this time, it may create the largest IPO in the global artificial intelligence field, and also serve as the best footnote for the 216.9 billion yuan financing in China's artificial intelligence sector over the past decade.

Changes in cornerstone investors, all Chinese

Originally, SenseTime was scheduled to go public on December 17. However, when the company was proceeding with its IPO plan as usual, the situation changed dramatically as the U.S. Treasury suddenly placed SenseTime on the "Non-SDN Chinese Military-Industrial Complex Companies List."

In response, Sensetime promptly provided a clear response, "We believe that this decision and the related allegations are completely unfounded, reflecting a fundamental misunderstanding of our company. Technological development should not be influenced by geopolitics."

At the same time, Sensetime also announced on December 13 on the Stock Exchange that, in order to protect the rights and interests of investors, it would adjust the global offering and listing arrangements, and refund all application funds in full to all applicants.

However, SenseTime quickly restarted its IPO process. On December 20, SenseTime announced on the Hong Kong Stock Exchange that it officially restarted its public offering. According to the prospectus, there were no changes in the fundraising amount, issuance size, or price range for the new offering. This issuance is expected to include 1.5 billion shares, with an offer price between HK$3.85 and HK$3.99 per share, raising approximately HK$6 billion. Each lot consists of 1,000 shares.

However, compared with the previous round, the cornerstone investors in this Sensetime's restarted IPO have changed significantly. American investors have been excluded from subscribing to the global offering shares (including those offered in the Hong Kong public offering), and all the cornerstone investors are now Chinese institutions. Fortunately, the updated lineup of cornerstone investors is even stronger, with the scale of cornerstone investment further increased to $510 million.

Specifically, at the change level, previously, the Mixed-Ownership Reform Fund, Guosheng Overseas Hong Kong, Shanghai Artificial Intelligence Industry Equity Investment Fund, SAIC Hong Kong, GF Fund, Pleiad Fund, WT, Focustar Capital, Focustar Fund, and Hel Ved, among 9 cornerstone investors, collectively subscribed to Sensetime for $450 million. Among them, the last four are foreign capital.

In this resumed offering, the new group of nine cornerstone investors includes the Mixed-Ownership Reform Fund initiated by China Chengtong Group Co., Ltd., Guosheng Overseas Holdings (Hong Kong) Limited, Sensetime, and HKSTP Ventures, with four of them still on the list. Newly introduced investors are Shanghai Xuhui Capital, J & A INVESTMENT HONG KONG GROUP LIMITED, C-MER Medical, and Taizhou Cultural Tourism Development Group Co., Ltd.

Among these, the newly added Xuhui Capital, fully funded by the State-owned Assets Supervision and Administration Commission (SASAC) of Xuhui District in Shanghai, has become the second-largest cornerstone investor with a subscription amount of US$150 million, accounting for 20% of the offering shares. Behind Guosheng Overseas Hong Kong is Shanghai Guosheng (Group) Co., Ltd., wholly owned by the Shanghai SASAC. Its subscription amount and shares have also increased by 363%.

Currently, the public offering of Sensetime in Hong Kong has also been oversubscribed. On December 23, after the subscription ended, media reports indicated that the financing amount from 14 major brokers was only HK$1.337 billion, equivalent to 2.23 times the public offering amount. During the initial public offering, the total financing amount from 17 brokers was HK$3.08 billion, with an oversubscription multiple of 4.1.

Going Public Brings New Challenges

According to Frost & Sullivan data, by 2025, the global AI industry scale will reach 121.8 billion US dollars, with a compound annual growth rate of 31.9% from 2020 to 2025. Of this, the computer vision market size accounts for 60.9% of the entire AI industry. By then, the domestic computer vision market size alone will reach 101.7 billion yuan.

The prospectus shows that Sensetime is an artificial intelligence software company focusing on computer vision and deep learning technology. Its main businesses include four major sectors: smart business, smart city, smart life, and intelligent vehicles, with a focus on artificial intelligence application areas such as facial recognition, medical image recognition, video analysis, unmanned driving, and remote sensing.

Among these, the smart city business contributed 40% of Sensetime's sales last year. Since 2008, at least 500 cities in China have adopted smart city technologies, collaborating with companies such as Sensetime, Alibaba, Hikvision, and Huawei to find digital solutions to urban problems.

However, specifically at the revenue level, Sensetime's revenues for 2018-2020 and the first half of this year were RMB 1.85 billion, RMB 3.03 billion, RMB 3.45 billion, and RMB 1.65 billion, respectively. During the same periods, losses amounted to RMB 3.43 billion, RMB 4.97 billion, RMB 12.16 billion, and RMB 3.71 billion, with cumulative losses over three and a half years reaching RMB 24.27 billion, equivalent to an average daily loss of RMB 19 million.

Behind this is Sensetime's super financing capability. Before its IPO, Sensetime has completed 12 rounds of financing since its establishment, with a total financing amount reaching 5.2 billion US dollars. The last round of financing before the IPO was completed in June 2021, with a post-financing valuation reaching 12 billion US dollars.

At the shareholder level, the prospectus also shows that the largest shareholder of Sensetime is founder Tang Xiaohan, with a stake of 21.73%; major investors include: SoftBank (14.88%), Taobao China (7.59%), Primavera Capital (3.08%), and Silver Lake Capital (3.05%), among others.

At the current market value of approximately $16 billion, these early investors have still reaped substantial returns. According to the Bloomberg Billionaires Index, founder Tang Xiao’ou holds 21% of Sensetime's shares, raising his net worth to $3.4 billion.

In 2018, Xu Li, CEO of Sensetime, said: "Sensetime is a global leading artificial intelligence platform company, and in the future, it will focus on technology to empower more industries."

Nowadays, the development of Sensetime also benefits from the company's "SenseCore AI Mega Device". This general-purpose AI infrastructure enables the company to achieve automated, large-scale, and intensive mass production of AI models, addressing various computational power and long-tail demands encountered in current AI development, and driving the scale effect of artificial intelligence.

Yang Fan, Co-founder and Vice President of Sensetime, also mentioned in his latest sharing with 36kr that the demands industries are placing on artificial intelligence have become increasingly deep and refined. For instance, detecting defects in parts on high-speed trains to improve efficiency—this is an extremely fine-grained demand that we wouldn’t have dared to imagine 3 to 5 years ago.

As a result, the amount of data accumulated and precipitated in the entire society is maintaining a very rapid upward momentum. How to face this new means of production, and how to define its ownership and usage rights, are common questions that the industry needs to answer.

Of course, as the business continues to move forward and technological innovation is still underway, the continuous transformation between technological imagination and practical applications still has the opportunity to further expand the imaginative space of the track.

The listing of Sensetime also implies the arrival of another layer of new challenges: after completing the IPO, can companies represented by Sensetime demonstrate tangible growth that matches their high R&D investment and continuous losses?

Dr. Xu Li, Co-founder, Chairman, and CEO of Sensetime, also stated in his speech at the listing ceremony: "Enterprises in every era carry different hopes and responsibilities, and our mission is to shift from survival and catch-up to development and innovation. When we see significant technological breakthroughs, Sensetime aims to promote the implementation of these technologies, using breakthroughs to redefine scenarios and models, and reshape public perceptions of artificial intelligence. Sensetime firmly believes that the transformative power of AI technology brings incremental value, which will undoubtedly usher in an era of inclusive and equitable intelligence. Together with our investors and partners, we will advance the construction of AI infrastructure, empower various industries, and benefit the masses. With our hundred points of passion, we will shine a thousand beams of light." (By Zhang Lijuan, Source/China Venture)