SenseTime

SenseTime develops technology that uses artificial intelligence (AI) to quickly identify and analyze personality hallmarks using cameras (see Facial recognition technology (FRT)). It was used during limited testing by the Chinese authorities to track and detain suspects at airports and festival venues.

The number of clients SenseTime includes about 40 local governments of China (data for 2017)

History

2021

Exit to the exchange

On December 29, 2021, the largest Chinese company engaged in the development of artificial intelligence technologies, SenseTime Group, announced that it raised more than $700 million as a result of its initial public offering (IPO) on the Hong Kong Stock Exchange. Earlier, the company postponed its IPO amid blacklisting by the United States due to a potential human rights violation.

IPO SenseTime was the first major foreign IPO of a Chinese unicorn technology firm since the Didi Global taxi service held a placement on the New York Stock Exchange in July 2021.

The largest Chinese AI company entered the exchange and earned $700 million

SenseTime held an IPO at the lower end of the price range and sold 1.5 billion of its shares at HK $3.85 ($0.49). The market value of the company is estimated at more than $16 billion. The company said that as a result of the placement, it raised 5.55 billion Hong Kong dollars ($767 million). SenseTime reported that most of the funding received would be for AI research and development and for the construction of data centres.

The IPO was supposed to take place in early December 2021, but the company was forced to postpone it after the US government added SenseTime to the investment blacklist, banning US investors from owning its shares, arguing that the company's facial recognition technology was used to oppress predominantly Muslim ethnic minorities in the Chinese region of Xinjiang. Lawyers SenseTime said that the sanctions apply only to a certain subsidiary, but in any case excluded American investors. Support from cornerstone investors, including the state, helped mitigate the lack of capital from the United States.

SenseTime resumed the IPO process a few days after being blacklisted in the United States, with a group of major investors increasing their investments from $450 million to $512 million. Initially, SenseTime planned to raise up to $2 billion through listing, however, the exclusion of American investors, combined with poorer market sentiment, forced the company not to fulfill its ambitions.^[1]

Imposition of sanctions by the United States

In early December 2021 USA , the most expensive was added - ChineseAIstartup SenseTime blacklisted on December 10, 2021. Actions against a company that, in its opinion, Washington allows human rights violations against Uighur Muslims in Xinjiang will be part of a package of sanctions against a number of countries in honor of human rights day.

The US Treasury included SenseTime in a special list of companies in the military-industrial complex of China. In June 2021, President Joe Biden signed a decree prohibiting Americans from investing in companies from this list, following the policy of the Donald Trump administration to eliminate threats to the country's national security.

The United States imposed sanctions against the most expensive AI startup in China SenseTime

The decision to blacklist SenseTime will coincide with the last day of the Democracy Summit, which Biden convened with the participation of more than 100 countries. In November 2021, the US president held a virtual meeting with Xi Jinping, his Chinese counterpart, during which they discussed ways to prevent tensions between the countries from escalating into conflict. However, Biden emphasized that he would not stop criticizing China for human rights violations.

Blacklisting may be a problem for American shareholders. SenseTime Silver Lake, an American private investment company that owns a 3% stake in the company, agreed to block part of the shares for six months after the IPO. Fidelity and Qualcomm own smaller shares. HSBC is the only Western investment bank involved in the IPO, according to U.S. bank executives. Other banks avoided listing after SenseTime was blacklisted by the US Department of Commerce in 2019.

Chinese state investors are prominent in the SenseTime IPO, which is expected to become the largest listing in Hong Kong from September 2021. SenseTime depends on China for a large part of its business, namely: sales of face recognition systems, predictive policing, artificial intelligence (AI) tools for cities. All products accounted for 40% of the company's total sales in 2020. The importance of state sales for the future of the company has increased, as Chinese technology groups have begun to develop their own internal AI systems.^[2]

2019: Blacklisting in the United States

In October 2019, the US Department of Commerce blacklisted 28 Chinese companies, including Dahua Technology, Hikvision Digital Technology, Megvii Technology and SenseTime. More details here.

2018: Attracting $1.2 billion of investments; company valuation - $4.5 billion

At the end of May 2018, SenseTime raised $620 million in investments in addition to the similar amount that the company received six months earlier.

Thus, over six months, more than $1.2 billion was invested in the SenseTime, and the company's value exceeded $4.5 billion (over the year, the estimate tripled), which is the highest among startups specializing in artificial intelligence technologies. Moreover, the Chinese developer achieved such a result in just three years from its inception.

The most expensive AI company in the world attracted $1.2 billion in investments

Investors who participated in the financing round at the end of May 2018 included Fidelity International   and Silver Lake Partners. In addition, Tiger Capital,  Qualcomm Ventures and Hopu Capital invested.

The SenseTime intends to spend the funds raised on the development of research and development centers, as well as on the search for talented specialists.

According to Bloomberg, investors are providing billions of dollars to Chinese AI startups, hoping to "catch the wave" related to the support of the government of such companies and the country's plans to become a world leader in artificial intelligence by 2030. However, some investors warn that the sector may experience a decline by the end of 2018 if startups cannot provide revenue growth.

As for SenseTime, its business is showing a rapid recovery. In the period from 2015 to 2017, the company increased revenues by 400% annually due to the fact that its technologies are used in various industries. The SenseTime says that by 2018, contract revenue jumped by an average of 10 times compared to the previous figures.

A key focus for SenseTime is an internal talent development program that aims to reduce the company's reliance on AI developers attracted from outside, as this segment of the labor market is^[3]

2017: Development of unmanned vehicles

In December 2017, it became known that Honda and SenseTime entered into an agreement for a period of 5 years. By 2020, companies plan to introduce a jointly created self-driving machine. Its alleged characteristics are not reported. More details here.