Traders are warning the pricing of SenseTime’s listing in Hong Kong could be delayed as investor unease grows ahead of an expected US move to put the Chinese artificial intelligence company on an investment blacklist.
Shares in the company, which specialises in facial recognition software, were expected to price on Friday in Hong Kong, with the company seeking a valuation of up to $17bn.
The initial public offering was expected to raise as much as $767m in the city’s largest new stock listing in months, providing a test for investor appetite for Chinese technology companies.
SenseTime had hoped to raise as much as $2bn earlier this year but had delayed its roadshow because of an intensifying crackdown on China’s tech sector by Beijing.
The downsized IPO has come under increased scrutiny following a Financial Times report that the US was planning to put the company on a blacklist the same day its shares were going to price.
Traders in Hong Kong on Friday afternoon said that, based on client feedback, they expected the SenseTime listing would be delayed if the blacklisting went through. Trading was slated to begin on December 17.
One veteran trader in Hong Kong not involved directly in the deal told the FT that clients with orders for shares in SenseTime had warned they could pull out of the listing.
“Clients said if it [the blacklisting] comes, they were out — they have to be,” the trader said. “It looks like unfortunately now that [plan] has pretty much caused the whole deal to be delayed yet again.”
He added that the blacklisting plans, which would forbid US investment in SenseTime, had “pretty much put the kibosh on most of the long-only community” investing in the IPO.
The head of another brokerage said that while his clients had not said they would pull out of the deal, expectations of a delay were widespread.
SenseTime declined to comment.
Washington has accused SenseTime of enabling human rights abuses against Muslim Uyghurs in the Chinese region of Xinjiang. The company has denied the allegations.
The Uyghur controversy had already been enough to turn US investment banks off the deal, with HSBC serving as the only western bookrunner for the Hong Kong listing.
Investor concerns over a potential delay comes despite extensive support from cornerstone investors, who had pledged to buy $450m worth of shares, including a $200 investment from a fund led by China Chengtong Holdings Group, a state-run investor. That had left just $300m to cover by institutional and retail investors this week.
Additional reporting by Ryan McMorrow in Beijing