China's SenseTime postpones $767 mln Hong Kong IPO after U.S. ban (updated)

Haitong International Securities

13/12/2021 02:38

(Adds analyst comment in paragraphs 9 and 16, and year-to-date
Hong Kong fundraising data in paragraph 18)
    By Kane Wu and Scott Murdoch
    Dec 13 (Reuters) - Chinese artificial intelligence start-up
SenseTime Group postponed its $767 million Hong Kong initial
public offering (IPO) on Monday after being placed on a U.S.
investment blacklist.
    SenseTime said it remained committed to completing the
offering and would publish a supplemental prospectus and an
updated listing timetable.
    Reuters first reported earlier on Monday the company's plan
to withdraw the offering and update its prospectus to include
the potential impact of the U.S. investment ban, with the aim of
relaunching the IPO process.
    SenseTime had planned to sell 1.5 billion shares in a price
range of HK$3.85 to HK$3.99, according to its regulatory
filings. That would raise up to $767 million, a figure that had
already been trimmed earlier this year from a $2 billion target.
    However, instead of setting its listing price on Friday, as
scheduled, it found itself in urgent talks with the Hong Kong
Stock Exchange and its lawyers over the future of the deal amid
reports about the looming blacklist.
    SenseTime did not provide details on the timetable for a
revised IPO in its filing to the Hong Kong Stock Exchange on
Monday. 
    "The company remains committed to completing the global
offering and the listing soon," it said in the filing.
    One source said the company was trying to move quickly to
avoid the regulatory requirement to completely refile the IPO
after Jan. 9 when its financial numbers in the current
prospectus would need to be updated. The company had retained
around $450 million from cornerstone investors and could expect
most of them to stay in the deal, the source added. 
    "Even if the company offers an updated prospectus with more
risk factors and goes ahead with a public listing, we expect the
investor sentiment to be low which will likely impact future
pricing of its shares and their performance post-IPO," said
Shifara Samsudeen, a LightStream Research analyst who publishes
on Smartkarma, told Reuters.
    
    FULL REFUND
    The company said it would refund all application monies in
full, without interest, to all applicants who subscribed its
shares in the offering process. 
    The U.S. Treasury added SenseTime to a list of "Chinese
military-industrial complex companies," accusing the company of
having developed facial recognition programmes that can
determine a target's ethnicity, with a particular focus on
identifying ethnic Uyghurs.  urn:newsml:reuters.com:*:nL1N2SV17I
    U.N. experts and rights groups estimate more than a million
people, mainly Uyghurs and members of other Muslim minorities,
have been detained in recent years in a vast system of camps in
China's far-west region of Xinjiang.
    Some foreign lawmakers and parliaments, as well as the U.S.
Secretaries of State in both the Biden and Trump
administrations, have labelled the treatment of Uyghurs as
genocide, citing evidence of forced sterilisations and deaths
inside the camps. China denies these claims and says Uyghur
population growth rates are above the national average.
    SenseTime said in a statement on Saturday it "strongly
opposed the designation and accusations that have been made in
connection with it," calling the accusations "unfounded".
    "There remains a large number of questions that need to be
answered, such as the impact of blacklisting and disruptions to
the operations, as well as the impact on SenseTime's plans of
pursuing global expansion," said LightStream's Samsudeen. 
    SenseTime was due to be one of the biggest deals in the
third quarter in Hong Kong and its postponement adds to the
ongoing weakness in the city's IPO market.
    There has been $41.1 billion raised in IPOs and secondary
listings so far in 2021, compared with $50.26 billion over the
same period last year, according to Refinitiv figures.
    China Tourism Group  601888.SS  shelved a plan to raise
about $5 billion in its secondary listing earlier in December,
citing uncertain financial market conditions.
    SenseTime's IPO was the most high profile listing for HSBC
this year, which was a joint sponsor with China International
Capital Corporation (CICC) and Haitong International.
    

 (Reporting by Kane Wu and Scott Murdoch; Editing by Jane
Wardell and Kenneth Maxwell)
 ((donny.kwok@thomsonreuters.com; +852 2843 6470;))