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China AI Giant SenseTime Dives as Much as 51% as Lockup Expires

(Bloomberg) -- Chinese artificial intelligence software maker SenseTime Group Inc. slumped as much as 51% in Hong Kong on Thursday, after a lock-up of its shares expired following its December initial public offering.

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The shares ended the day down 47% at HK$3.13, their lowest ever, and below their IPO price of HK$3.85. A lock-up on a portion of the stock owned by cornerstone investors and shareholders -- amounting to 23.4 billion of shares -- expired on Wednesday.

“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 Vey-Sern Ling, senior analyst with Union Bancaire Privée.

SenseTime joins a list of technology companies that have seen insiders selling their shares after a strong rebound since mid-March. This week, Tencent Holdings Ltd.’s major backer announced it will further cut its stake in the company. In May, JD Health International Inc.’s 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 show.

The selloff shows that stakeholders are not optimistic on SenseTime’s outlook, said 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.”

Chen does not think SenseTime’s move has broad implications on China tech.

SenseTime, China’s most valuable private AI firm, was one of the highest-profile targets of sanctions from Washington aimed at containing China’s tech rise. Like Huawei Technologies Co. and Semiconductor Manufacturing International Corp., the company was regarded as a national champions, a leader in a burgeoning field considered key to establishing China’s tech credentials globally.

SenseTime’s plummet takes the on-paper loss for SoftBank’s Vision Fund, which holds about 4.7 billion shares, to about $1.5 billion in a single day, Redex Research analyst Kirk Boodry estimated.

Bloomberg reported in December that SenseTime secured funding from nine cornerstone investors including state-backed Mixed-Ownership Reform Fund and Shanghai Xuhui Capital Investment Co. When it raised about HK$6.6 billion ($851 million) in the IPO, SenseTime allocated about 60% of the offering to cornerstone investors, who were subject to lockup periods.

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 Uyghur Muslims in the Xinjiang autonomous region of western China.

READ: How Huawei Landed at the Center of Global Tech Tussle: QuickTake

(Updates with closing price and adds more details in the penultimate paragraph. An earlier version of the story corrected number of shares in second paragraph.)

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