After the second IPO, SenseTime has successfully listed a market value of more than HK$130 billion

Photo: Ni Yuqing

Source: 21tech

Author: Poplar

Editor: Zhang Weixian

On December 30, SenseTime was officially listed on the Hong Kong Stock Exchange with an opening price of 3. HK$91, closing at HK$4.13, with a total market capitalisation of approximately HK$137,456 million.

At the listing ceremony, Xu Li, co-founder, chairman and CEO of SenseTime, said, "Enterprises in each era carry different hopes and responsibilities, and our proposition is how to go from survival and catch-up to development and creation. When we see a huge breakthrough in technology, SenseTime hopes to promote the landing of technology, use technological breakthroughs to redefine scenes and patterns, and refresh the public's understanding of artificial intelligence. ”

In this IPO, SenseTime issued a total of 1.5 billion shares, raising a total of about HK$5.8 billion. For the use of this fund, SenseTime said that 60% of it will be used to enhance R&D capabilities; 15% will be used to invest in emerging business opportunities, as well as to improve the adoption and penetration of products and services at various vertical industries and enterprise levels at home and abroad; and 15% will be used to seek strategic investment and acquisition opportunities, and cultivate ecosystems and further expand industry influence.

Secondary offering

Unlike the IPO process of most companies, SenseTime has conducted two offerings. After passing the listing hearing on the Hong Kong Stock Exchange on November 22 this year, SenseTime originally planned to conduct a global offering from December 7 to December 10, and then list on December 17.

However, on the last day of the initial offering (December 10), the U.S. Treasury Department included SenseTime Group Limited in the "Non-SDN China Military Complex Enterprise List" (the "NS-CMIC List") under Executive Order No. 13959 and designated it as a Chinese Military Complex Enterprise ("CMIC").

For companies on the NS-CMIC list, this is also equivalent to an investment ban, as it would prohibit U.S. people from investing in the company.

On December 11, SenseTime issued a statement expressing strong opposition, arguing that the DECISION of the US Treasury Department is groundless with the relevant allegations and reflects a fundamental misunderstanding of the company. Despite this, on December 13, SenseTime officially announced that its global offering and listing would be delayed.

Just when the outside world thought that SenseTime's IPO plan would be put on hold for the time being, on December 20, SenseTime announced the news of restarting the global IPO.

In the supplementary prospectus, SenseTime said that although SenseTime Group Limited, which is included in the NS-CMIC list, is only a wholly-owned subsidiary of SenseTime and has no impact on SenseTime, SenseTime still decided to exclude U.S. investors from the scope of global offerings.

However, the SUPPRESSION OF THE US GOVERNMENT HAS NOT AFFECTED SENSE SENSE'S SECONDARY TRADING PROCESS, AND FROM THE FINAL RESULT, SENSETIME'S MARKET SUBSCRIPTION MULTIPLE IN THE HONG KONG PUBLIC OFFERING WAS 5.18 TIMES, AND THE SUBSCRIPTION MULTIPLE OBTAINED IN THE INTERNATIONAL OFFERING WAS ABOUT 1.5 TIMES.

In addition, SenseTime also replaced the cornerstone investors in the second IPO. According to the Supplementary Prospectus, SenseTime's latest list of cornerstone investors includes 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, and Taizhou Cultural Tourism. The total number of shares subscribed by New Cornerstone investors also increased from approximately $450 million to approximately $510 million compared to the initial offering.

Started at the University of Chinese, Hong Kong

The birthplace of SenseTime is the University of hong kong Chinese. In January 1998, Tang Xiaoou began to serve as a professor in the Department of Information Engineering at the University of Chinese in Hong Kong, and in 2001, he set up a multimedia laboratory at the University of Chinese in Hong Kong, from which SenseTime's founding team originated.

In March 2014, Tang Xiaoou released a face recognition algorithm with an accuracy rate of 98.52%, surpassing the human eye recognition capability (97.53%) for the first time in the world. In June of the same year, Tang Xiaoou's team further released the DeepID series of algorithms, and gradually increased the accuracy of face recognition to 99.55%.

It is the breakthrough of these technologies that has opened the prelude to the landing of technology in the face recognition industry, and at the same time, SenseTime technology has also been born.

The founding team of SenseTime, in addition to Tang Xiaoou, also includes four co-founders, including Xu Li, Wang Xiaogang, Xu Bing and Yang Fan. Among them, except for Yang Fan, the other three have intersected with the University of hong kong Chinese.

The 39-year-old Xu Li is the executive chairman, executive director and chief executive officer of SenseTime, responsible for the company's vision strategy, business development and day-to-day operations.

In December 2010, Xu Li received his Ph.D. in Computer Science and Engineering from the University of Chinese, Hong Kong, and from October 2010 to July 2013, He was a postdoctoral researcher at the University of Chinese, Hong Kong, focusing on computer vision and computational imaging.

Xiaogang Wang, 44, is the executive director and chief scientist of SenseTime, responsible for the overall planning and management of the company's research team.

He received his Master's Degree in Research from the University of Chinese, Hong Kong in December 2003 and joined the Department of Electrical Engineering at the University of Chinese as an Assistant Professor in August 2009 and has been a Professor since August 2020. In addition, according to the prospectus, Wang Xiaogang is also Tang Xiaoou's brother-in-law.

The 31-year-old Xu Bing is the executive director and secretary of the board of directors of SenseTime, responsible for corporate development strategy and overall management of financing and strategic investment. In November 2012, Xu Bing received a double bachelor's degree in information engineering and mathematics from the University of Chinese, Hong Kong, and since August 2012, she has been a doctoral candidate in the Multimedia Laboratory of the University of Chinese, Hong Kong, focusing on deep learning and computer vision.

Fan Yang, from Tsinghua University, received his bachelor's and master's degrees in electrical engineering from Tsinghua University in July 2003 and July 2006. Prior to joining SenseTime, Fan Yang was a research-level software development engineer at Microsoft (China) Co., Ltd. from July 2006 to November 2014. Since November 2014, he has served as Vice President of SenseTime, where he is mainly responsible for SenseTime's strategic planning and corporate development.

The prospectus discloses that Tang Xiaoou, Xu Li, Wang Xiaogang and Xu Bing are the beneficiaries of different voting rights of SenseTime, and the A shares they hold in their hands can cast 10 votes per share.

In terms of shareholdings, Amid, which Tang Xiaoou actually controls, holds 6,906,080,602 Class A shares, accounting for 21.73%, and Amand also indirectly holds 1,891,820,000 Class B shares; while Xu Li holds 0.9% of Class A shares, Wang Xiaogang holds 0.73% of Class A shares, and Xu Bing holds 0.33% of Class A stocks.

In addition, Xu Li, Wang Xiaogang and Xu Bing also held 565,386,529 shares, 302,140,143 shares and 252,236,581 Class B shares through SenseTalent, respectively.

In corporate management, Tang xiaoou is mainly responsible for the design of SenseTime's research and innovation strategies, as well as promoting collaboration with leading universities and academic institutions to establish research partnerships. It can be seen that in the division of labor of the sensetime management team, Tang Xiaoou's main energy is still used for technology research, while the operation of enterprises at the industry level is handed over to other partners.

The leap from "learning" to "production"

According to the prospectus, SenseTime's revenue mainly comes from the sales of software platforms, including software licensing, artificial intelligence software and hardware integrated products and related services.

According to the source division, SenseTime's revenue mainly comes from four sectors, namely smart business, smart city, smart life and smart car. In 2018, smart business was the most important source of revenue for SenseTime, accounting for 46.1%, but in the following years, the proportion of revenue from smart cities continued to increase, and in the first half of 2021, SenseTime's revenue from smart cities reached 786 million yuan, accounting for 47.6%, exceeding the revenue of 647 million yuan in the smart industry.

As of June 30, 2021, SenseTime's software platform had more than 2,400 customers, including about 250 Fortune 500 companies and listed companies, 119 cities and more than 30 automotive companies, while SenseTime had empowered more than 450 million smartphones and more than 200 mobile applications, including 5 mobile applications with more than 500 million monthly active users.

Despite the increasing number of customers, SenseTime's dependence on head customers is becoming more and more obvious. According to the prospectus, as of 2018, 2019, 2020 and the first half of 2021, senseTime's largest customers accounted for 8.7%, 7.7%, 11.9% and 22.9% of the revenue, respectively, while the revenue of the top five customers accounted for 28.4%, 26.3%, 31.4% and 59.3% respectively in the same period.

In terms of overall revenue, in 2018, 2019, 2020 and the first half of 2021, SenseTime's revenue was 1.853 billion yuan, 3.027 billion yuan, 3.462 billion yuan and 1.652 billion yuan, respectively. The corresponding adjusted net loss was $220 million, $1,037 million, $878 million and $726 million, respectively.

From the perspective of revenue growth, SenseTime's revenue growth rate in 2019 was 63.3%, and the growth rate in 2020 dropped to 13.9%, which was mainly affected by the epidemic, and SenseTime's revenue in the first half of 2020 was 861 million yuan, which accounted for only 24.8% of the annual revenue in 2020.

Of course, it is also because of the low base in the first half of 2020 that the revenue growth rate in the first half of 2021 reached 91.87%. However, SenseTime's adjusted net loss in the first half of 2021 is also close to the full year of 2020.

In the AI industry, technical capabilities are the most core content of competition. Therefore, while promoting the landing of technology, SenseTime's investment in research and development is also continuing.

According to the prospectus, in 2018, 2019, 2020 and the first half of 2021, SenseTime's R&D investment was 849 million yuan, 1.92 billion yuan, 2.45 billion yuan and 1.77 billion yuan, respectively.

As of June 30, 2021, SenseTime's R&D team includes 40 professors plus 3,593 technical R&D personnel, including more than 250 phD and phD candidates, accounting for 68% of the company's total number of R&D teams.

Continuous investment in research and development has also helped SenseTime build certain competitive barriers. As of the first half of 2021, SenseTime has generated a total of 22,196 AI models, in addition, SenseTime has won more than 70 championships in various global competitions, published more than 600 top academic papers, and has 8,123 intellectual property portfolios, including 4,169 patent assets in China and 3,954 patent assets overseas.

For China's AI industry, the listing of SenseTime is just the beginning, and there may be more AI companies following in sensetime and launching an impact on the capital market in the future.

Editor: Lu Taoran