SenseTime’s IPO to test market demand for high-growth, high-loss shares in Hong Kong

Here in the United States, we’re counting down to the Nubank and HashiCorp IPOs that should touch down in mere days. But those are not the only technology offerings to keep eyes on at the moment. SenseTime, a Chinese AI company, is also listing this week, providing a new window into the value of the country’s upstart tech companies under a changed regulatory regime.

As Didi looks to delist from U.S. markets amid hubbub that Alibaba could do the same, it’s not a surprise that SenseTime will list in Hong Kong and not the Nasdaq or NYSE.

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Despite listing close to home, however, SenseTime is not having the best time possible in its public-market debut. The company’s IPO, according to the South China Morning Post, “plans to raise as much as HK$5.99 billion (US$768 million) by selling 1.5 billion shares at HK$3.85 to HK$3.99 each.” Raising three-quarters of a billion dollars is nothing to sneeze at, but at the same time is a far cry from the $2 billion that SenseTime wanted to raise.

The company’s offering is expected to begin tomorrow, so expect to hear more about its listing over the coming day.

SenseTime could command a valuation of as much as $17 billion in its IPO, depending on its final price. Is that figure strong? And what can we learn from comparing the company’s miniaturized IPO to its operating results? Let’s dive into the numbers and see what we can find out.

Fast, expensive growth

SenseTime builds AI products. Or as it puts it in its IPO prospectus, it has “built a first-of-its-kind universal AI infrastructure to achieve mass production of a diverse and growing portfolio of AI models with rich functionality and superior accuracy.” Normally we wouldn’t quote something as self-serving as that particular riff, but the breadth implied by the comment was noteworthy.

Why? Because it undergirds SenseTime’s claims that it has “leading market positions” in AI areas as far afield as “smart” cities, manufacturing, apps and healthcare. The company, then, has a very wide market lens for its software products.

The company’s business model isn’t hard to parse. SenseTime notes that it “primarily” generates revenues from selling software licenses, along with “AI software-embedded hardware and related services.” The company’s model includes the “license of software installed on customers’ devices or on-premise at customers’ servers,” along with hardware-software combinations including physical products made by SenseTime and other companies. SenseTime also provides an “AI-as-a-service offering to customers for customized model production.”