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SenseTime will not offer shares to U.S. investors The list of cornerstone investors has been greatly adjusted

21st Century Business Herald reporter Bai Yang reported from Beijing

On December 20, seven days after the suspension of the listing plan, SenseTime announced the restart of the global offering and is expected to be listed on the Hong Kong Stock Exchange on December 30.

Originally, SenseTime originally planned to be listed on December 17, but on December 13, SenseTime announced that its global offering and listing would be delayed. The trigger that made SenseTime's IPO plan press the pause button was that on December 10, the US Treasury Department included SenseTime in the list of "Chinese military enterprises".

The 21st Century Business Herald reporter noted that the issuance scale and price of SenseTime's IPO have not changed, but the supplementary prospectus disclosed by SenseTime on the Hong Kong Stock Exchange has made many amendments and supplements to the original prospectus.

Shares are not offered to U.S. investors

The Supplementary Prospectus mentions that on December 10, 2021, the U.S. Treasury Department designated SenseTime Group Limited as a "Non-SDN China Military Complex Enterprise List" ("NS-CMIC List") pursuant to Executive Order No. 13959, designating it as a Chinese Military Complex Enterprise ("CMIC").

The Executive Order prohibits U.S. persons as defined in the Executive Order from "buying or selling any publicly traded securities of any person classified as CMIC, or any publicly traded securities derived from such securities or intended to provide investment exposure to such securities," as effective as from the effective date of the designated CMIC, unless licensed or authorized by the relevant U.S. government authority.

Under the Executive Order, U.S. persons here include any U.S. citizen, lawful permanent resident, entity incorporated under the laws of the United States or any jurisdiction within the United States (including foreign affiliates), or any person in the United States.

Hughes Hubbard & Reed LLP ("HHR"), SenseTime's legal counsel in relation to U.S. export control laws and sanctions laws, held that designating SenseTime Holdings Limited as a CMIC restricts only U.S. persons from purchasing or selling the relevant securities of SenseTime Group Limited, and SenseTime, as a wholly-owned subsidiary of SenseTime, does not have any publicly traded securities outstanding and has no intention of issuing any publicly traded securities in the foreseeable future.

HHR also stated that cmic designation and related restrictions only apply to legal entities specifically designated on the NS-CMIC list, so as long as there are publicly traded securities of affiliates that are neither derivatives of such CMIC publicly traded securities nor are intended to provide investment exposure to such securities, U.S. persons will not be restricted from buying or selling publicly traded securities of any affiliate (including direct or indirect parent or affiliate) of a designated legal entity identified on the NS-CMIC list.

The implication is that SenseTime is to say that SenseTime Group Limited, which is included in the NS-CMIC list, is only a wholly-owned subsidiary of SenseTime, and the restrictions on the company will not affect SenseTime, including not restricting Americans from purchasing Class B shares in SenseTime's global offering, and existing U.S. shareholders can continue to hold shares in SenseTime.

However, SenseTime also stated that due to the changing and evolving nature of the relevant US regulations, it has required that US investors be excluded from subscribing for offer shares offered worldwide (including offer shares offered for sale in the Hong Kong public offering).

In the risk warning, SenseTime also pointed out that it cannot guarantee that other member companies of SenseTime (including the Company) will not be included in the NS-CMIC list and become CMIC in the future. In this case, especially after SenseTime is included in the list, SenseTime's ability to raise capital, especially from U.S. investors, may be restricted, and the liquidity of SenseTime's publicly traded securities may be adversely affected by the lack of participation of U.S. investors.

In addition, certain existing shareholders of SenseTime are or may be considered U.S. persons, and if they withdraw from their investments in SenseTime, the company's market capitalization may also be adversely affected.

The list of cornerstone investors has been greatly adjusted

In addition to disclosing information about U.S. regulations, the supplementary prospectus also involves a number of list adjustments. Such as cornerstone investor changes and underwriter changes.

SenseTime said it had entered into a number of new cornerstone investment agreements and a number of amendments to the original cornerstone investment agreement. Pursuant to the Agreement, Cornerstone Investors have agreed to subscribe for a total of approximately US$511 million (approximately HK$3.99 billion) of the relevant number of Offer Shares at the Offer Price, subject to certain conditions.

Previously, SenseTime disclosed the list of cornerstone investors for mixed ownership reform fund, Guosheng Overseas Hong Kong, Shanghai Artificial Intelligence Industry Equity Investment Fund, SAIC Hong Kong, GF Fund, Pleiad Fund, WT, Focustar and Hel Ved.

The latest list of cornerstone investors is mixed ownership reform fund, Xuhui Capital, Guosheng Group, Shanghai Artificial Intelligence Industry Investment Fund, SAIC Motor, Guotai Junan, Hong Kong Science and Technology Park, Xima Ophthalmology, Taizhou Cultural Tourism.

It can be seen that there have been major changes in the list of two cornerstone investors, among which the mixed ownership reform fund has always been the cornerstone investor with the largest subscription amount, with a subscription amount of 200 million US dollars.

It should be noted that the Mixed Ownership Reform Fund is a close contact of SenseTime's existing shareholder, Wing Lok Holdings Limited, and the only related party among all cornerstone investors.

With an issue price range of HK$3.85 to HK$3.99, the total number of Class B shares to be subscribed by Cornerstone Investors will be 1,014,848,000, representing approximately 67.66% of the Offering Shares, and approximately 3.05% of the total issued share capital of SenseTime immediately following the completion of the Global Offering (assuming the over-allotment shares are not exercised).

In addition to cornerstone investors, according to the Supplementary Prospectus, Guotai Junan Securities (Hong Kong) Limited and BOCOM International Securities Limited will no longer act as joint bookrunners, joint lead managers and underwriters.

According to the latest IPO plan, SenseTime will start a global offering on December 20, a pricing date on December 23, and trading on the Hong Kong Stock Exchange on December 30. So this time, can SenseTime go public smoothly?

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