SenseTime says the US has ‘a fundamental misperception’ of the company as sanctions cloud IPO
- The White House has placed the company on an investment blacklist over alleged human rights abuses in Xinjiang
- Earlier this week, the AI company cut its IPO size by more than half amid a sell-off in technology stocks triggered by regulatory and privacy concerns
In response to the latest sanctions, SenseTime said in a statement on Saturday, “We strongly oppose the designation and accusations that have been made in connection with it. The accusations are unfounded and reflect a fundamental misperception of our company. We regret to have been caught in the middle of geopolitical tension.”
US sanctions China’s SenseTime, Xinjiang officials over ‘human rights abuses’
SenseTime did not price its stock offering, which was poised to raise HK$5.99 billion (US$768.3 million), on Friday as expected as investors anticipated the sanctions. The company provided no details as to whether the scheduled listing date next Friday will be kept.
“Treasury is using its tools to expose and hold accountable perpetrators of serious human rights abuse,” said Deputy Secretary of the Treasury Wally Adeyemo on Friday, identifying SenseTime as being responsible for “human rights abuse enabled by the malign use of technology”.
According to an executive order signed by then-US President Donald Trump last year, American companies are barred from investing in businesses on the blacklist. As such, some experts said that a delay seems hard to avoid.
“US Treasury’s decision yesterday [ …] will prohibit the purchase or sale by any US person of any publicly traded securities or derivatives of such securities that trade on a securities exchange in any jurisdiction (including Hong Kong),” said Chen Weiheng, partner and head of China practice at US law firm Wilson Sonsini.
That prohibition will take effect 60 days from December 10, 2021. US persons, however, will have one year until December 9, 2022 to divest any securities of SenseTime, Chen said.
“This sanction will impose a significant challenge for the ongoing IPO by SenseTime as no new US investors will participate in the offering and existing US investors will need to sell within a year,” Chen said. “SenseTime will need to update its prospectus to reflect this latest development so at least a delay would be expected.”
“It also creates a tricky situation for the Hong Kong stock exchange as to whether it would like to set a precedent to host a listing by a company on the [blacklist],” Chen added.
01:46
AI instructors teach student drivers in Shanghai how to get behind the wheel
In its statement on Saturday, SenseTime said that it is a software company committed to promoting the sustainable, responsible and ethical use of AI. “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.
It also stressed that its AI Ethics Council comprises both internal and external experts, who guide the company to strictly adhere to “recognised ethical principles and standards”. SenseTime said that the company collaborates closely with third-party institutions and international organisations to ensure the responsible and sustainable development of AI technology.
“We are an entrepreneurial company founded by AI scientists and practitioners with an aim to use technology to improve people’s lives,” the firm said. “We remain committed to accomplishing our mission to create a better AI-empowered future through innovation, and will take appropriate actions to protect the interests of our company and our stakeholders.”
SenseTime, established in 2014 by Massachusetts Institute of Technology alumnus Tang Xiao’ou and his team, bills itself as a technology platform that serves many industries from education to health care, instead of focusing on a single vertical that may quickly saturate.
Earlier this week, the company cut its IPO size by more than half amid a sell-off in technology stocks triggered by regulatory and privacy concerns.
It originally aimed to net about US$2 billion, or about HK$16 billion, in proceeds.
AI giant SenseTime trims US$2 billion Hong Kong IPO amid market turmoil
In an online briefing on Monday, Xu Li, co-founder and chief executive of SenseTime, said that it was “the right time to get listed” in Hong Kong.
The sanctions by the Biden administration come after the Trump administration placed SenseTime on an entity list on national security grounds two years ago.
In October 2019, the US accused SenseTime and 27 other companies and government security bureaus of aiding alleged human rights abuses against Uygurs in China’s Xinjiang autonomous region, including mass surveillance.
Prior US sanctions had already cast a dark cloud over SenseTime’s future. In its filing to the Hong Kong stock exchange, SenseTime said, “If our subsidiary remains on the entity list on a prolonged basis, we may not be able to compete effectively in certain business lines, and our business, results of operations and financial condition could be materially and adversely affected.”
The decision to blacklist SenseTime also coincides with the last day of the Democracy Summit hosted by the US in which more than 100 countries took part.
The sanctions on SenseTime could deal a blow to its US shareholders including Silver Lake, a private equity firm that has a 3 per cent stake in the AI company, and Fidelity, which owns a smaller stake.
