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Chinese AI Company SenseTime Relaunches US$767M Hong Kong IPO; Excludes US Investors

SenseTime Group Ltd., a Chinese artificial intelligence (A.I.) startup firm, recently relaunched its Hong Kong initial public offering (IPO) after postponing it on 12 December 2021.

Credit: SenseTime

According to people with direct knowledge of the matter, the company relaunched the deal to raise the same amount as its initial Hong Kong IPO when the amended risk disclosures from the Hong Kong Exchange (HKEX) were being approved.

The people were not identified due to the information not being public.

SenseTime was forced to put its IPO on hold after the U.S. Department of the Treasury imposed investment restrictions due to its supposed connection to human rights abuse. According to the U.S. Department of the Treasury, the company is allegedly involved with the People's Republic of China's (PRC) surveillance technology, focusing on identifying ethnic Uyghurs. Under this reasoning, the U.S. Treasury classified SenseTime as a Non-SDN Chinese Military-Industrial Complex Company (NS CMIC) under Executive Order 13959.

China has around 200 million cameras deployed around the country. Hundreds, if not thousands of them, are equipped with facial recognition technology that can detect a person's ethnicity, criminal record and even know if you're wearing a mask. / Credit: Getty Images

"SenseTime 100 per cent owns Shenzhen SenseTime Technology Co. Ltd., which has developed facial recognition programs that can determine a target's ethnicity, with a particular focus on identifying ethnic Uyghurs," the U.S. Treasury said in a released statement. "When applying for patent applications, Shenzhen SenseTime Technology Co. Ltd. has highlighted its ability to identify Uyghurs wearing beards, sunglasses and masks."

The accusations thrown were in relation to the maltreatment of Uyghurs and members of other Muslim minorities in detention camps in China's region of Xinjiang. According to the Council on Foreign Relations, more than a million people have been detained in Xinjiang's detention camps since 2017 for reeducation.

The company strongly opposed the U.S. Treasury's designation and accusations, calling them "unfounded and reflect a fundamental misperception" of the company.

"As a software company committed to promoting sustainable, responsible and ethical use of A.I., we have complied with the applicable laws and regulations in relation to our business in all material respects in the jurisdictions where we conduct business," the company said in a statement. "Our A.I. Ethics Council, comprising both internal and external experts, ensures that our business strictly adheres to recognised ethical principles and standards."

A picture of the Hong Kong Stock Exchange building. / Credit: Visual China Group

Despite the restriction, the company retained its target of selling 1.5 billion shares for between HK$3.85 and HK3.99 each, with the final price to be set on 23 December 2021. However, the company will have to rely on cornerstone investors to buy around 67 per cent of shares instead of the previously expected 58 per cent of shares.

Aside from SenseTime, the U.S. Treasury gave investment restrictions to eight more Chinese companies because they allegedly were a part of the Chinese Military-Industrial Complex (CMIC). These companies are Cloudwalk Technology Co., Ltd., Dawning Information Industry Co., Ltd., Leon Technology Company Limited, Megvii Technology Limited, Netposa Technologies Limited, SZ DJI Technology Co., Ltd., Xiamen Meiya Pico Information Co., Ltd., and Yitu Limited.

The U.S. Treasury believes that the previously mentioned companies are a part of the CMIC for the same reason as SenseTime was: their alleged involvement or support of the biometric surveillance and tracking of ethnic and religious minorities in China, particularly the Uyghurs in the region of Xinjiang.

A picture of DiDi's headquarters in Beijing. / Credit: DiDi

SenseTime isn't also the only Chinese company moving to the HKEX. DiDi, the operator of China's primary app for ride-hailing, had itself delisted from the New York Stock Exchange (NYSE) due to government probing and regulation at home. According to a Bloomberg report, the Chinese government asked DiDi to delist from the NYSE after failing to address regulators' concerns about the leakage of sensitive data.

However, unlike SenseTime, Americans are still permitted to invest in DiDi with a catch: American shareholders have to convert their American Depositary shares into freely tradable ones in the HKEX. This is so that American shareholders will not be forced to sell shares to switch to the HKEX.


Written by John Paul Joaquin

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