What's going on?
SenseTime announced plans to list on Hong Kong’s stock market on Monday, and China’s biggest AI firm thinks anyone who buys in will be very – processing… – happy.
What does this mean?
SenseTime – which specializes in facial recognition software – saw massive demand for its services last year, primarily from a Chinese government that wanted to keep lockdowns locked tight. And unlike many of its rivals, the company hasn’t been the subject of any cybersecurity reviews from the country’s regulators either.
Put those two favorable circumstances together, and SenseTime’s decided that now’s the time to go public. The company has previously said it was looking to raise up to $2 billion, but the company knows full well that investors – burned by government crackdowns – are wary of Chinese stocks these days. Now, then, it’s looking for nearly $800 million, which would value the company at “just” $17 billion.
Why should I care?
For markets: SoftBank needs a win.
SoftBank will certainly be hoping SenseTime does well: the Japanese conglomerate – which owns 15% of the company – saw its shares fall for the seventh consecutive day on Monday, bringing the decline to nearly 20% in the last week. Some of its biggest holdings have been struggling, after all: crackdown-battered Alibaba has seen its stock plummet, ride-hailing company Didi is being forced to leave the US stock market, and British chip designer Arm is proving more than a little difficult to sell.
Zooming out: China needs to spend.
China’s been (relatively) quiet on the crackdown front lately, which might be because the country has bigger fish to fry – namely managing a slowdown in its economic growth. That might be why it said on Monday that it’ll cut the amount of cash its banks have to set aside for a rainy day. The move will give them more to lend out to people and businesses, which should encourage them to spend, spend, spend.