SenseTime, a Chinese AI firm, sees its stock drop by 9.7% following allegations of revenue inflation by U.S. short seller Grizzly Research.
SenseTime’s Stock Falls After Allegations
SenseTime, a Chinese artificial intelligence company, has seen its stock drop by as much as 9.7% in Hong Kong after U.S. short seller Grizzly Research alleged revenue inflation by the company. The allegations have led to concerns among investors and have caused the stock to close 4.86% lower in the afternoon.
Allegations of ‘Revenue Round-Tripping’ Program
Grizzly Research’s report accused SenseTime of engaging in a ‘revenue round-tripping’ program, where the company allegedly provided funds to customers, directly or through intermediaries, to purchase goods from SenseTime that may have never been delivered. The short seller claimed to have obtained this information from court cases in China that described the scheme.
In response to the allegations, SenseTime stated that it is reviewing the claims and considering appropriate actions to protect the interests of its shareholders. The company dismissed Grizzly Research’s report as unfounded, citing a lack of understanding of its business model and financial reporting structure. SenseTime also mentioned that Grizzly Research did not reach out to verify the information before publishing its report.
Challenges Faced by SenseTime
SenseTime, known for its computer vision technology and facial recognition software, has faced challenges, including being added to the U.S. Entity List due to alleged links to human rights violations in China’s Xinjiang region. The company, which went public in Hong Kong at the end of 2021, has seen its stock price decline substantially, partly due to its blacklisting by the U.S. government.
Outlook and Criticisms
Grizzly Research criticized SenseTime’s technology, claiming that it lacks a competitive advantage in the AI space. The short seller also expressed skepticism about the company’s future profit potential, particularly regarding its facial recognition software business and additional AI R&D projects.