China AI giant SenseTime shares dive as much as 51% as lockup expires

SenseTime was one of the highest-profile targets of sanctions from Washington aimed at containing China's tech rise. PHOTO: REUTERS

HONG KONG (BLOOMBERG) - Chinese artificial intelligence software maker SenseTime Group slumped as much as 51 per cent in Hong Kong on Thursday (June 30), after a lockup of its shares expired following its initial public offering (IPO). 

The company dropped to trade at as low as HK$2.91 apiece, the lowest ever and below its IPO price of HK$3.85. A lockup on a portion of the stock owned by cornerstone investors and shareholders - amounting to 23.4 billion of shares - expired on Wednesday. 

SenseTime closed down 49.3 per cent at HK$2.98.

"SenseTime's average liquidity looks very low, and it's also subject to US sanctions. That means its investor base is probably more concentrated, so the impact of lockup expiry is higher," said Mr Ling Vey-Sern, senior analyst at Union Bancaire Privee.

SenseTime joined a list of technology companies that have seen insiders selling their shares after a strong rebound since mid-March. This week, Tencent Holdings' major backer announced it will further cut its stake in the company. In May, JD Health International controller Richard Liu sold his stake in the company.

Selling pressure is not removed for SenseTime as another block of shares owned by its shareholders is set to expire near the end of this year, Bloomberg-compiled data shows.

The stock has rallied 18 per cent since mid-April through Wednesday.

It shows that stakeholders are not optimistic on SenseTime's outlook said Mr Marvin Chen, a strategist at Bloomberg Intelligence.

"There were concerns on growth outlook and earnings potential during the IPO. Also, early IPO investors in SenseTime should have been well aware of the potential risks and volatility due to potential US blacklists and bans."

SenseTime, China's most valuable private AI firm, was one of the highest-profile targets of sanctions from the United States aimed at containing China's tech rise.

Like Huawei Technologies and Semiconductor Manufacturing International Corp, the company was regarded as a national champion, a leader in a burgeoning field considered key to establishing China's tech credentials globally.

Bloomberg reported in December that SenseTime secured funding from nine cornerstone investors including state-backed Mixed-Ownership Reform Fund and Shanghai Xuhui Capital Investment Company.

SenseTime went public at the end of December after the original share-sale schedule was derailed after a move by the US Treasury Department to sanction the company for its alleged role in creating facial-recognition software used in the oppression of Uighur Muslims in the Xinjiang autonomous region of western China.

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