SenseTime IPO could help HSBC gain recognition

SenseTime surveillance software identifying details about people and vehicles runs as a demonstration at the company’s office in Beijing, China, October 11, 2017. Picture taken October 11, 2017. REUTERS/Thomas Peter

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HONG KONG, Nov 26 (Reuters Breakingviews) – Some deals are about more than just the money. A successful market debut by artificial-intelligence dragon SenseTime could go a long way to uncovering interest in politically sensitive Chinese technology. And it might do almost as much for HSBC (HSBA.L), (0005.HK), the issuer’s only Western lead financial adviser, as it tries to showcase renewed investment banking ambitions.

SenseTime recently secured approval read more in Hong Kong for its initial public offering, which might raise as much as $2 billion. The facial recognition and metaverse software developer is likely to be the first company on the U.S. Commerce Department’s so-called Entity List to attempt an international stock listing. It will be the biggest overseas IPO by a Chinese company since Didi Global’s (DIDI.N) disastrous $4 billion IPO in July triggered a regulatory crackdown that hit Chinese stocks hard. SenseTime owes its place on the blacklist, which prohibits unapproved component sales, to a joint venture in Xinjiang, the regional home of the Uyghur minority, that it ended in 2019.

HSBC is known less for its work on bold deals than for serially hiring industry high-flyers from John Studzinski to Matthew Westerman to bulk up in the business of doing so. The bank has squeaked into the top 10 dispensers of equity capital markets advice just once in the past decade in Asia, excluding Japan, and fared no better in its second home, Britain, per Dealogic data. It also hasn’t cracked the top five in Asian M&A league tables since 2015.

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Fresh aspirations are stirring as HSBC boss Noel Quinn targets more fee-paying income. A June presentation advertised the priority of making its Global Banking and Markets division a top-five global financing house and elevating its advisory work for clients. The bank is moving Greg Guyett, the unit’s co-head, to Hong Kong, and recruited several industry bankers in the region to bolster its boardroom-level access.

Alongside HSBC for the SenseTime IPO are Chinese peers China International Capital Corporation (3908.HK) and Haitong International (0665.HK). The sensitivities will make it a tougher sell, especially to fund managers attuned to environmental, social and governance matters. Although Quinn isn’t making a big deal about his investment banking push, successfully peddling some risky AI could help it gain recognition.

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CONTEXT NEWS

– Chinese artificial intelligence start-up SenseTime secured approval on Nov. 19 for an initial public offering in Hong Kong, according to multiple media sources. The company develops image recognition for cities and autonomous driving, among other applications, and designs software for the metaverse, a newly popular investment area.

– SenseTime is one of several companies on a U.S. blacklist that requires component makers to obtain official approval before they can sell their products to them.

– The company has not yet provided a fundraising target, but is expected to raise up to $2 billion, according to multiple media reports.

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Editing by Jeffrey Goldfarb and Katrina Hamlin

Our Standards: The Thomson Reuters Trust Principles.

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