SenseTime Group Inc. plunged its most in more than a year after its co-founder’s surprise death spooked investors already grappling with the fallout from slowing growth and US sanctions.
The Chinese AI firm slid as much as 18% in Hong Kong before recouping some of those losses to finish Monday 11% lower.
SenseTime disclosed that co-founder and major shareholder Tang Xiao’ou died on Friday after an illness. Born in 1968, the Massachusetts Institute of Technology graduate and Hong Kong professor was regarded as a pioneer in China’s AI sector, helping create one of the nation’s leaders in facial and image recognition.
His company, earlier backed by Alibaba Group Holding Ltd., listed in Hong Kong in one of the most highly anticipated debuts of 2021. Tang had a 21% stake in SenseTime, according to the firm’s 2022 annual report. His net worth last stood at $1.1 billion, the Bloomberg Billionaires Index shows.
The Chinese firm’s growth has slowed dramatically in the face of rapidly intensifying competition. The US government blacklisted the company in 2019 on allegations related to human rights violations in Xinjiang. That restricted its access to capital and crucial US tech components, compounded in recent months by new curbs on the sale of advanced AI chips and chipmaking equipment to Chinese firms.
Its shares have fallen in recent weeks after short-seller Grizzly Research accused the firm of inflating revenues, which SenseTime has denied. Before Monday, the stock traded at HK$1.26 — less than a third of its listing price.
Tang’s sudden death may influence control of the company given the large slice of SenseTime he owns, particularly of the Class A stock he and his three co-founders hold. The outcome of his shareholding for now remains unclear, though SenseTime on Monday stressed that Tang’s death should have no material impact.
“The direct reason (for the stock slump) is the sudden death of the co-founder,” said Willer Chen, a senior analyst at Forsyth Barr Asia. “The voting power of other co-founders and directors may change accordingly. So for sure that could affect the business.”
SenseTime’s focus this year turned from its traditional strengths in facial recognition to generative AI. It was among the first Chinese tech firms to receive government approval to publicly roll out ChatGPT-like services.
China’s AI arena has experienced an influx of capital and talent. But rivalry is fierce as startups and big companies from Baidu Inc. to SenseTime compete to develop their own solutions. SenseTime was considering raising funds and carving out its autonomous driving and health care units, Bloomberg News reported this month.
In its statement, SenseTime did not specify Tang’s illness but paid tribute to his contributions.
Tang hailed from the world of academia and had long been involved in developing the artificial intelligence required for facial recognition. He got his PhD from MIT in 1996, where he studied underwater robotics and computer vision.
Tang worked for Microsoft Research Asia for a few years before co-founding Shanghai-based SenseTime in 2014 with Xu Li, then a research scientist at Lenovo Group Ltd.
“The spirit and achievements of Prof. Tang will live on. The directors and all employees of the company are committed to completing his mission, never forgetting the company’s original aspiration, and forging ahead,” the company said in its statement.
