Billionaire Professor Reaps More Gains From SenseTime IPO
Tang Xiao’ou, the billionaire professor who co-founded artificial intelligence giant SenseTime seven years ago, is poised to boost his wealth by almost 50% as the company moves closer to a initial public offering in Hong Kong.
Tang, 53, now has a net worth of at least $3.4 billion, according to Fintech Zoom estimates. That is a 48% jump from the $2.3 billion in August, when SenseTime first filed for a listing in the Asian financial hub.
The company, based in both Shanghai and Hong Kong, announced on Monday that it is seeking to raise up to HK$5.78 billion ($770 million) by selling 1.5 billion shares at a range of HK$3.85 to HK$3.99 apiece, with about two thirds of the proceeds being planned for research and development purposes. Tang, an executive director at the company, is the largest individual shareholder, owning at least 21.7% of the company and possibly as much as 27%.
The value of his stake went up alongside that of SenseTime, which is now worth $15.7 billion based on the lower end of the proposed range. The company, scheduled to list on Dec. 17, has secured nine cornerstone investors, including the government-owned Mixed Ownership Reform Fund, Shanghai AI Fund and Hong Kong-based Pleiad Funds, which agreed to subscribe for a combined $450 million, or close to 60% of the deal.
A SenseTime representative declined to comment on Tang’s wealth increase. The professor, who continues to teach courses such as image processing and signal analysis at the Chinese University of Hong Kong, remains low key. He wasn’t seen during a Monday press conference held online, leaving other co-founders and his Ph.D. students Xu Li and Xu Bing to field questions from reporters.
“We have a clear and visible path to profitability, ” said 39-year-old Chief Executive Xu Li. “Now is the prime time for us to go public.”
But market conditions are less than ideal. The Hang Seng Tech Index, which tracks the 30 largest technology companies listed in Hong Kong, has plunged more than 30% this year amid China’s crackdown on the sector. Cloud Village, the music streaming business owned by Chinese billionaire William Ding’s gaming and entertainment giant NetEase, fell in its debut in the city, and its shares still trade below the IPO price of HK$205 each.
SenseTime says in its prospectus that the company hasn’t been involved in any investigations during a cybersecurity review conducted by the Cyberspace Administration of China (CAC), or received “any inquiry, notice, warning, or sanctions in such respect.” CAC is the powerful Chinese government department that is widely reported to have asked Chinese ride-sharing giant Didi Global to delist from the New York Stock Exchange over data and national security concerns, a move that subsequently triggered the plunge of many U.S.-listed Chinese companies.
But SenseTime has been in the crosshairs of U.S. regulators. Its subsidiary, Beijing SenseTime, was added to a U.S. trade blacklist in 2019 and now faces restrictions in accessing American supplies and technology. Analysts, meanwhile, have raised questions over its profitability prospects.
“The fundamentals are mixed as high growth is accompanied by high customer concentration, an uncertain path to profitability, cash burn and moral concerns around ‘ethnic profiling software,’” Global Equity Research analyst Arun George wrote in a Nov. 28 note published via research platform Smartkarma.
In the first half of this year, SenseTime generated 1.65 billion yuan($260 million) in revenues, a 92% surge from the same period a year ago. Losses widened to $583 million, which also included fair value changes of certain preferred shares. Almost half of its sales came from so-called smart city initiatives, where the Chinese government buys or licenses the company’s software for purposes such as pandemic control and traffic management.
Company management says they are confident that SenseTime would eventually be in the black, pointing to factors such as its leading position in China’s AI software market and high growth in gross profit, which doesn’t take into account expenses related to selling, marketing, R&D as well as fair value losses of preferred shares.
“As long as our gross profit can grow rapidly and we can effectively control personnel cost, we will realize our clear and viable path of profitability,” Chief Financial Officer Wang Zheng said during Monday’s press conference.