- SenseTime experienced a significant drop in its stock value, plunging by up to 9.7% on Tuesday following allegations by the U.S. short seller Grizzly Research that the Chinese artificial intelligence company had overstated its revenue figures.
- In response to the accusations made by Grizzly Research, SenseTime issued a statement dismissing the claims as baseless and misleading, emphasizing that the report lacked credibility and proper understanding of the company’s financial structure.
- Previously hailed as a pioneering AI entity in China, SenseTime garnered recognition for its advanced computer vision capabilities, particularly in the realm of facial recognition technology.
The stock of SenseTime tumbled by 9.7% on Tuesday after Grizzly Research, a U.S. short seller, accused the Chinese AI giant of inflating its revenue figures.
SenseTime managed to recover some of its losses in the Hong Kong market, ultimately closing the day with a 4.86% decrease in its stock price.
Grizzly Research’s report on Tuesday alleged that SenseTime was involved in what is known as a “revenue round-tripping” scheme.
According to Grizzly Research, SenseTime allegedly provided funds directly or through intermediaries to customers, who then used the money to purchase goods from SenseTime, even though the goods might not have been delivered. This information was reportedly obtained from two court cases in China that detailed the scheme.
Response from SenseTime
SenseTime responded through a filing on the Hong Kong Stock Exchange, stating that they are currently reviewing the allegations and determining the appropriate actions to protect the interests of their shareholders.
The company refuted Grizzly Research’s claims, asserting that the report was unfounded and contained misleading conclusions and interpretations. SenseTime highlighted that the report demonstrated a lack of comprehension regarding the company’s business model and financial reporting structure, as well as a failure to thoroughly examine the company’s public disclosures.
SenseTime also mentioned that Grizzly Research did not reach out to them to verify the information before publishing their report.
Challenges for SenseTime
Despite being recognized as a leading AI company in China, SenseTime has faced challenges, particularly from the U.S. government. In 2019, SenseTime was included in the Entity List by Washington, which imposed restrictions on American companies engaging with it. The U.S. government alleged that SenseTime was associated with human rights abuses in China’s Xinjiang region.
SenseTime clarified that it had no business operations in Xinjiang nor was its technology knowingly utilized in the region.
Although SenseTime initially planned an IPO in Hong Kong in mid-2021, the listing was postponed after the company was added to a list of “Chinese military-industrial complex companies” by the U.S. government. Eventually, SenseTime went public at the end of December, pricing its shares at 3.85 Hong Kong dollars ($0.49). However, the stock closed at 1.37 Hong Kong dollars on Tuesday, significantly below its IPO price.
Grizzly Research, in its report, highlighted the limited market potential for SenseTime due to the U.S. government sanctions, stating that the company’s future prospects appeared bleak.
The short seller also criticized SenseTime’s technology, claiming that its facial recognition software lacked a competitive edge in the AI landscape and that its other AI research projects had minimal potential for profitable scalability.
