SenseTime, a leading Chinese AI company, denies allegations of revenue inflation made by research firm Grizzly, causing a significant stock drop and prompting a review of its business practices.
SenseTime Rejects Revenue Inflation Claims
SenseTime, a major Chinese artificial intelligence company, has refuted allegations made by research firm Grizzly Research LLC that it has falsely inflated its revenue. The company issued a statement to Hong Kong’s stock exchange dismissing the report’s merit and challenging the unfounded allegations and misleading conclusions.
Review of Allegations and Business Model
The company indicated that it is reviewing the allegations and considering the appropriate course of action to protect its shareholders’ interests. SenseTime is known for its facial recognition technology and recently launched a chatbot similar to ChatGPT to the public in August.
Grizzly’s Allegations and Response
Grizzly Research’s report accuses SenseTime of using revenue fabrication schemes to inflate its sales data and suggests lack of transparency in business operations. SenseTime countered that Grizzly misunderstood its business model and financial reporting structure. Reports by short-selling research companies like Grizzly generally focus on exposing corruption or fraud in the business world, often making ‘short’ bets against such targets to profit from falling share prices.
Stock Impact and Backing
SenseTime’s Hong Kong-traded stock initially plummeted by 9.7% following the release of Grizzly’s report but later recovered to close 4.9% lower. Notably, SenseTime has faced repercussions from both the U.S. government and its key backers, including Alibaba and SoftBank Group. The U.S. government blacklisted SenseTime in 2019, citing the alleged use of its facial recognition technology to oppress the Uyghur minority in China’s Xinjiang region. Additionally, its prominent backers, Alibaba and SoftBank Group, have reduced their stakes in the company.