SenseTime Group shares jumped as much as 23 per cent from their initial public offering (IPO) price as they debuted on the Hong Kong Stock Exchange on Thursday (Dec 30).
The Chinese artificial intelligence (AI) start-up raised US$740 million in its IPO and priced its shares at HKUS$3.85 (US$0.4937) each, at the bottom of the range flagged, valuing SenseTime at US$16.4 billion.
The stock reached a high of HKUS$4.74 in early trading, outstripping the Hang Seng Index that was up just 0.19 per cent.
The gains were in contrast to most analysts’ expectations that the shares would slip or trade flat due to the relative weak demand during the IPO process.
SenseTime sold 1.5 billion shares in what was its second attempt to list in Hong Kong in a matter of weeks.
It shelved its first attempt on Dec 13 after it was placed on an investment blacklist just as the institutional book build for the deal was being concluded.
The US Treasury added SenseTime to a list of “Chinese military-industrial complex companies” on Dec 10, accusing it of having developed a facial recognition programme to determine ethnicity, with a focus on identifying ethnic Uyghurs.
UN 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.
The blacklisting meant US investors could not participate in the IPO.
SenseTime relaunched the deal on Dec 20, but with a higher cornerstone investor stake.
Cornerstone shareholders, all Chinese institutions, bought about 67 per cent of the stock on offer in the IPO, up from the 58 per cent stake flagged in the company’s first attempt.
Institutional investors placed orders for just 1.5 times the amount of stock on sale in the international tranche, regulatory filings with the Hong Kong Stock Exchange show.
Analysts said it was one of the poorest take up rates for a major deal in Hong Kong this year.
The retail oversubscription rate was 5.12 times, which analysts said was also low for a Hong Kong IPO.
“We think the exclusion of US investors from the IPO led to poor international subscription,” said Shifara Samsudeen, LightStream Research analyst who publishes on SmartKarma. CNA