The market capitalization on the first day of listing was once close to HK$160 billion! What is the story of "AI First Shares"?

Text | Lee Joo-woo

The first shares of AI that the head companies are grabbing will eventually spend SenseTime.

At the end of the year and the beginning of the year, SenseTime finally realized its dream of capital markets. On December 30, SenseTime officially landed on the Hong Kong Stock Exchange, and its stock price rose by more than 20% to a maximum of HK$4.74 per share, and its market value was close to HK$160 billion. As of the close of the day, SenseTime was trading at HK$4.13 per share.

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

The listing process was suspended for a time

SenseTime's listing process can be described as a lot of good things.

On the evening of August 27, SenseTime, an artificial intelligence software company, publicly submitted a prospectus to the Hong Kong Stock Exchange, officially opening the listing journey. With the progress of the listing process, SenseTime has preliminarily proposed a listing date of December 17.

Then, at the critical moment when it was about to land on the capital market, SenseTime was sanctioned by the United States again. On December 10, local time, the U.S. Treasury Department included China SenseTime Technology Co., Ltd. in the so-called "list of military-related enterprises" and imposed investment restrictions. This is the second time that the US government has implemented crackdown measures on SenseTime after a number of companies such as SenseTime were included in the entity list by the US side in 2019.

At noon on December 13, SenseTime announced the suspension of the listing process, refunding all applications to all applicants without interest, and committing to "complete the global offering and listing as soon as possible".

A few days later, on December 20, SenseTime announced the resumption of its public offering and successfully landed on the capital markets 10 days later.

In order to make this listing, SenseTime also spent efforts on the listing ceremony. On the same day, SenseTime held a listing celebration ceremony in Shanghai and Hong Kong. During the ceremony, SenseTime specially used AR technology innovation to create an "AR Gong" link, so that guests who attended the ceremony and failed to arrive at the scene could participate together through the combination of virtual and real.

Talking about the "AR gong" link, Xu Li said, "I hope that every colleague who watches online can participate in the action of banging the gong." At the same time, this move is also intended to show his understanding of SenseTime's positioning. In his view, SenseTime's artificial intelligence technology focuses on the boundary between the virtual and the real world, on the one hand, to promote the full digitization of the real world, bringing about a jump in productivity; on the other hand, to project digital content into our reality perception to enhance the experience of life.

The capital process of AI enterprises is accelerating

SenseTime has become the first public company of AI companies in the capital market, but it will never be the last.

At present, Megvii Technology is promoting the listing process of the Science and Technology Innovation Board; the IPO application of Geling Deep Pupil and Yuncong Science and Technology Innovation Board has been accepted... With the listing of SenseTime, the battle for the first AI share has since ended, but who will become the first AI stock in the A-share market is still in suspense, as the aforementioned companies continue to promote the listing process, perhaps in the near future in 2022, the capital market will usher in the wave of AI companies listing.

"At present, the first wave of artificial intelligence listing tide has hit." Lu Yanxia, assistant research director of IDC China, told the Securities Daily reporter, "Many of the head start-ups that have been established for more than 5 years have already disclosed their prospectuses. These AI startups have developed to a certain scale and have the accumulation of products and market resources. Competition in the market is also becoming increasingly fierce, and early-stage start-ups are also facing the pressure of continuous growth and access to sources of funds. This point in time is a very good window period for AI startups, I think the artificial intelligence market will continue to grow, with the continuous enrichment of the industrial ecology, there will be a new round of listing tide."

SenseTime's successful listing and the first day of stock price increases are also a certain recognition of the high growth of enterprises by the capital market.

According to the data, SenseTime achieved operating income of 1.85 billion yuan, 3.03 billion yuan and 3.45 billion yuan in 2018, 2019 and 2020 respectively; in the first half of 2021, SenseTime's revenue was 1.65 billion yuan, an increase of 91.8% over the same period last year. While the market scale is expanding, the company's R & D investment is also growing rapidly. According to the data, SenseTime's three-and-a-half-year cumulative research and development expenditure was 6.99 billion yuan. R&D expenditure in 2018, 2019, 2020 and the first half of 2021 was $850 million, $1.92 billion, $2.45 billion and $1.77 billion, respectively. According to the prospectus, 60% of the funds raised in this public offering will be used for research and development.

According to a previous report released by third-party consulting firm Frost & Sullivan, SenseTime is the highest-revenue AI company in Asia in 2020, accounting for 11% of the market share in china's computer vision market.

"It is normal for AI companies to go public and go public." Lu Yanxia pointed out that many AI companies are still deeply mired in losses, on the one hand, AI computing power, hardware costs are high; on the other hand, the cost of technical talents is high; at the same time, market competition is fierce, these factors have brought challenges to the profitability of AI companies.

According to Lu Yanxia, the successful listing of AI companies has not only injected development power into the listed companies themselves, but also enhanced the confidence of the industry.

"We have the world's largest manufacturing industry and the second largest consumer market." Hu Qimu, chief researcher of the China Steel Economic Research Institute, told the Securities Daily reporter, "Whether it is the industrial end or the consumer side, there is a huge market space for intelligent transformation, and AI companies, as enterprises that master core technologies and can transform these technologies into enterprise productivity and consumer experience improvement, will be the object of capital pursuit."