SenseTime postpones Hong Kong IPO after more U.S. sanctions

SenseTime, the Hong Kong-headquartered artificial intelligence giant, has postponed a $767 million initial share sale on the Hong Kong Stock Exchange that had been expected for later this week, the Wall Street Journal reports.

• The company was blacklisted by the U.S. three days ago, barring Americans from investing in the company.
• This was the second round of U.S. sanctions against SenseTime: Back in 2019, the U.S. Commerce Department added several Chinese AI companies, including SenseTime, to its “entity list,” barring U.S. companies from supplying them.
• Earlier that year, SenseTime was accused of “automated racism” by making facial recognition software designed to detect Uyghurs, the highly repressed ethnic minority in China’s Xinjiang region, though the company quickly said that it had sold out of its Xinjiang security joint venture.
• The newest sanctions are vague about what SenseTime is accused of, with no specific allegation of continuing abuses against Uyghurs. The U.S. Treasury Department writes:

SenseTime owns or controls, directly or indirectly, a person who operates or has operated in the surveillance technology sector of the PRC’s economy. SenseTime…has developed facial recognition programs that can determine a target’s ethnicity, with a particular focus on identifying ethnic Uyghurs.

“The accusations are unfounded and reflect a fundamental misunderstanding of our company,” a SenseTime spokesperson said. “We regret to have been caught in the middle of geopolitical tension.”

• China’s Foreign Ministry added (in English, in Chinese) that the “sanctions by the U.S. fully expose its sinister intention of using Xinjiang to contain China.”

What’s next for SenseTime?

The company’s IPO had already been downgraded from $2 billion to $767 million, the WSJ noted, and “represented a fraction of the billions of dollars of private funding that the company received in the years since its inception.”

• The company is “planning to relaunch the deal as soon as this month,” per the WSJ.
• The apparent insistence on a Hong Kong listing contrasts with “Megvii Technology Ltd., a domestic rival of SenseTime’s, [which] scrapped its Hong Kong IPO plan after being added to the [U.S.] export blacklist and is applying for a listing on Shanghai Stock Exchange’s STAR Market.”

See also:

• Xinjiang: On technology and crimes against humanity / SupChina
• U.S. to bar investment in Chinese AI giant, considers banning key exports to top chip maker / WSJ (paywall)
  “Separately, officials are planning to discuss this month a Defense Department proposal to close regulatory loopholes that have allowed Semiconductor Manufacturing International Corp. to purchase critical U.S. technology…SMIC…has been able to continue buying U.S. tools to make chips despite its inclusion on the Commerce Department’s entity list.”
• U.S. bans investment in SenseTime facial recognition over Uyghur repression / Washington Post
• SenseTime postpones Hong Kong IPO, plans updated prospectus / Bloomberg (paywall)
• Joint statement on the export controls and human rights initiative / The White House