Author 丨Ma Yuanyuan
Editor 丨 Kang Xiao
Produced by 丨Shenwang Tencent News Xiaoman Studio
After being interrupted by U.S. sanctions to interrupted its first listing plan, SenseTime, the country's most valuable artificial intelligence company, was listed on the Hong Kong Stock Exchange on December 30. As of 9:50 a.m. on Dec. 30, SenseTime (0020. HK) shares rose more than 15 percent from their issue price, with a total market capitalization of HK$146.7 billion (about 120 billion yuan). SenseTime raised a net amount of HK$5,552 million in the listing.
The listing has brought considerable wealth effects to the core founding team. Based on the market value on the first day of listing, the founder Professor Tang Xiaoou is worth more than 26 billion yuan; co-founder Xu Li is worth more than 1 billion yuan, and Wang Xiaogang and Xu Bing are also worth more than 800 million yuan and 400 million yuan respectively.
SenseTime used the remote AR cloud gong to go public, and SenseTime CEO Xu Li said at the listing ceremony, "7 years ago, it was difficult to imagine a group of famous school graduates willing to join a company with uncertain prospects, low salaries, and even a name that was not well thought out. In the past seven years, SenseTime has grown into a leading technology company in Asia, refreshing the industry and the public's understanding of artificial intelligence. ”
He also said, "Technology is rapidly bridging the gap between virtual and real. SenseTime's technology is driving the transformation of the real world on the one hand, and the content of the digital world into the perception of reality on the other. The huge gift value brought by artificial intelligence will surely bring about the era of technological inclusion, and SenseTime will promote the construction of artificial intelligence infrastructure to empower hundreds of industries. ”
SenseTime, which has successfully gone public, still faces many challenges. One is the impact of external sanctions. The second is the commercialization problem that AI companies have always had. Ai technology research and development investment is large, difficult to land is already an open secret, the prospectus shows that SenseTime's R & D investment in the first half of this year accounted for 107.3% of revenue, and the adjusted net losses in the first half of 2018-2021 were 221 million yuan, 1.037 billion yuan, 878 million yuan and 726 million yuan, respectively.
"SenseTime is in an industry that needs long-term deep cultivation, and at this stage, it is like eight hundred strong men who stick to the Sihang warehouse." Xu Li once told Tencent News "Financial Appointment You".
Long-term capital investment is huge, and AI unicorn companies such as SenseTime urgently need to go to the capital market. Since the beginning of this year, the "FOUR LITTLE DRAGONS OF AI" have all gone all out to impact the listing, in July, the listing plan of Yitu Technology was stranded, and in September, Megvii Technology and Cloud were approved from the IPO of the Science and Technology Science and Technology Innovation Board. Even if there is a major external change that may have an impact on the stock price, SenseTime quickly re-offered its shares by replacing cornerstone investors and underwriters.
In its prospectus, SenseTime tells the story of a new metaverse beyond AI. According to the statistics of "Deep Net", SenseTime mentioned the metaverse 49 times in its latest prospectus, and defined itself as "one of the largest meta-universe empowerment platforms". Can the metaverse, which is still in the conceptual stage, become an important source of revenue for SenseTime in the future?
Overseas investors exit, institutional investors take over
SenseTime originally planned to announce the final offer price, placement results and other information on December 16, and officially listed on the Hong Kong stock market on December 17.
Due to U.S. sanctions, SenseTime urgently suspended the listing process on December 13 and resumed its public offering on December 20, a week later. The size of the offering and pricing range are consistent with the previous ones: a total of 1.5 billion shares were issued, of which 90% were international placement shares and the remaining 10% were Hong Kong public offering shares; the offering price ranged from HK$3.85 to HK$3.99 per share, and the plan was to raise about HK$6 billion.
There are two main differences between the second offering and the previous one: First, the exit of overseas cornerstone investors. SenseTime has targeted 9 cornerstone investors, including China Chengtong's Mixed Ownership Reform Fund, Xuhui Capital, Guosheng Group, Shanghai Artificial Intelligence Industry Investment Fund, SAIC, Guotai Junan, Hong Kong Science and Technology Park, Sima Ophthalmology, Taizhou Cultural Tourism, and overseas cornerstone investors such as Pleiad Fund, WT, Focustar and Hell Ved, which were previously planned to subscribe, have withdrawn.
Second, there has been a change in the underwriter. SenseTime said in the announcement that under the amendment agreement to the Hong Kong Underwriting Agreement, Guotai Junan Securities (Hong Kong) Limited and BOCOM International Securities Limited no longer act as joint bookrunners, joint lead managers and underwriters.
The impact of sanctions on fundraising is mainly reflected in the level of individual investors. SenseTime shares closed for subscription at 12:00 noon on December 23, and according to data released by all 14 brokers, the funds of individual investors who subscribed to SenseTime were HK$1.337 billion, and the previous subscription fund interrupted on December 10 was HK$3.08 billion, a 57% reduction.
The fundraising of cornerstone investors did not fall but rose. The first batch of Cornerstone investors subscribed for US$450 million, and the second batch of Cornerstone investors reached US$5.116 (about HK$3.99 billion), an increase of 13.7%.
A group of scientists on a business venture
The story of SenseTime began in 2014, in the middle of that year, Tang Xiaoou, a professor at the University of Chinese of Hong Kong, founded the company, and several core members of the founding team, Tang Xiaoou, Xu Li, Wang Xiaogang, Xu Bing, etc. are well-known scientists in the field of artificial intelligence, Tang Xiaoou and Wang Xiaogang are doctors who graduated from the Massachusetts Institute of Technology, and Xu Li and Xu Bing are doctors from the University of Chinese in Hong Kong.
The Shang Tang period before 1600 AD was the first written dynasty in China, and Tang Xiaoou hoped that with the pioneering nature of this dynasty, it would imply the company's original spirit of technology, which is the origin of the name Shang Tang. However, there is also a circulating version that "Teacher Tang" is in business, so it is called Shang Tang.
Behind this ridicule is the unique academic temperament of the founding team of SenseTime. Many of SenseTime's executives and mid-level employees are students of Tang Xiaoou, and to this day, SenseTime regularly organizes employees to read papers, mainly authors from within the company and joint laboratories.
Tang Xiaoou believes in the longboard theory, and at the beginning of its establishment, SenseTime built a moat by recruiting a large number of top talents. SenseTime insiders have told DeepNet that this approach was tortured by investors in the early days because SenseTime was more of a research institute than a company. After 2016, the popularity of the AI industry has made the cost of recruiting technical talents rise, and SenseTime's early talent investment has created the first competitive barrier for the company.
The founding team's scientist aura and the AI industry boom have allowed this company focusing on computer vision and deep learning original technologies to continue to gain capital support, from 2014 to the pre-listing, SenseTime has received a total of $5.2 billion in financing, and the valuation in the primary market before 2020 has reached tens of billions of dollars.
Scholar-type entrepreneurs often fall into the dilemma of heavy research and development and light market. However, SenseTime CEO Xu Li said in an interview with Caiy You in August last year that although he also came out of the laboratory, the focus of his work was not on technology research and development, but on promoting commercial landing projects and being responsible for growth.
The birth of technology in the laboratory and the industrialization of technology are two different things. Artificial intelligence is not a new technology, the Dartmouth Conference in the summer of 1956, opened the starting point of global artificial intelligence research, since then, although the artificial intelligence boom has erupted several times around the world, but for a long time, artificial intelligence is only an academic term, not an industry.
Xu Li proposed the concept of "industrial red line" to explain this phenomenon. Over the past 60 years, it has been difficult for AI to cross this industrial red line. It wasn't until 2010 that neural networks began to emerge, and by 2014, many verticals had surpassed human accuracy, which meant that artificial intelligence had the potential for industry applications.
Xu Li said that this judgment is the core reason for the establishment of SenseTime, so what SenseTime has to do is to adhere to the original technology and make the technology beyond the industrial red line.
The listing is a phased summary of the commercial adventures of this group of scientists. According to the prospectus, as of the IPO, founder Tang Xiaoou held 21.73% of the shares, Xu Li held 0.9% of the shares among the executives, Wang Xiaogang held 0.73%, Xu Bing held 0.33%, and SenseTalent (Class B shares held by Xu Li, Wang Xiaogang and Xu Bing) held 12.17%.
Can metacosm alleviate profit anxiety?
Over the past few years, the mystery of AI technology has been unveiled, the capital boom has faded, and survival has become the primary problem for startups. A significant change is that in 2018, which is known as the first year of AI business landing, both capital and startups have changed from simply focusing on technology to paying more attention to the commercial landing of artificial intelligence.
SenseTime has always emphasized its platform strategy of "1 (basic research) + 1 (products and solutions) + X (industry)" and put forward the goal of using AI to empower hundreds of industries.
Its business is based on the artificial intelligence software platform SenseCore, senseTime applies SenseCore to commercial, urban, living and automobile scenarios, thereby collecting software licensing fees and selling software and hardware integrated products.
Artificial intelligence software is a fast-growing market. According to the Sullivan report, the global market size of artificial intelligence software will reach $121.8 billion in 2025, with a compound annual growth rate of 31.9% from 2020. China's computer vision software market is expected to grow at a CAGR of 43.5% from RMB16.7 billion in 2020 to RMB101.7 billion in 2025.
However, due to the difficulty of landing, the overall revenue growth of SenseTime in the past two years has been relatively slow. According to the prospectus, in 2018, 2019, 2020 and the first half of 2021, SenseTime's operating income was 1.853 billion yuan, 3.026 billion yuan, 3.446 billion yuan and 1.652 billion yuan, respectively, of which the revenue growth rate in 2020 was 13.8%.
SenseTime's revenue mainly comes from the ToG business with a long collection cycle. According to the prospectus, in the first half of 2021, the four major businesses of smart business, smart city, smart life and smart car accounted for 39.2%, 47.6%, 8.9% and 4.3% of the total revenue, respectively, and the revenue of smart city business for the government and its departments accounted for nearly half.
This business model has resulted in Higher SenseTime's accounts receivable being relatively high. The prospectus discloses that as of the end of June 2021, SenseTime's accounts receivable and notes reached 4.04 billion yuan (even higher than the annual revenue in 2020), corresponding to a provision of 785 million yuan of bad debts. SenseTime mentioned in the prospectus, "Our trade receivables turnover days are longer, mainly due to the fact that most of our revenue comes from the public sector and the payment cycle is generally longer. ”
In addition, SenseTime's R&D investment is huge. According to the prospectus, in 2018, 2019, 2020 and the first half of 2021, SenseTime's R&D expenditure was 850 million yuan, 1.92 billion yuan, 2.45 billion yuan and 1.77 billion yuan, accounting for 48.9%, 63.5%, 71.1% and 107.3% of the total revenue, respectively.
As a technology-led company, SenseTime's high R&D investment is naturally not a problem. SenseTime has a large technology research and development team, and the prospectus discloses that as of the end of June 2021, SenseTime has 40 professors leading the R&D work and 3593 R&D members.
Long-term R & D investment has also accumulated the corresponding technical strength, the prospectus discloses that SenseTime has won more than 70 championships in various global competitions, published more than 600 top academic papers, and has more than 8,000 artificial intelligence patents and patent applications.
However, coupled with factors such as accounts receivable, SenseTime's cash flow situation is tight. According to the prospectus, in 2018, 2019, 2020 and the first half of 2021, SenseTime's net operating cash flow was -750 million, -2.87 billion, -1.23 billion and -830 million, respectively.
In the prospectus, SenseTime said, "Our net cash from operating activities decreased by 57.2% from RMB2869.4 million in 2019 to RMB1228.8 million in 2020. ”
It is not easy to commercialize AI, and SenseTime tells a new metaverse story in the prospectus. According to the statistics of "Deep Net", SenseTime mentioned the meta-universe 49 times in its latest prospectus.
For example, when introducing the smart life business, SenseTime defines itself as one of the largest meta-universe empowerment platforms. "Metacosm means the fusion of the physical world, augmented reality and virtual reality in the digital world. Our SenseMARS software platform contains 3,500 AI models that support perceptual intelligence and mixed and augmented reality systems (MARS), creating a new metaverse experience. Shang Tang wrote.
SenseTime also mentioned business scenarios such as "smart city metacosmity and IoT device metacosm" in the prospectus, and said that it will continue to develop and promote the commercialization of metacosm-related services." Continue to improve the functions and capabilities of artificial intelligence, augmented reality and mixed reality on SenseMARS, consolidate the customer base, and establish a more complete R&D ecosystem to consolidate the company's leading position in the meta-universe field. ”
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![The company suffered a huge loss of 24.2 billion yuan, and the annual salary of three executives was nearly 1.2 billion! What exactly can sensetime's listing bring?[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)