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Shan Jizhang, cofounder and CEO of Black Sesame International speaks during 2021 World New Energy Vehicle Congress at Hainan International Convention and Exhibition Center on September 17, 2021 in Haikou, Hainan Province of China.
China News Service via Getty Images
Shares of Black Sesame International Holding, a Chinese startup that designs chips for self-driving systems, plunged 27% in their Hong Kong stock exchange debut Thursday, giving the company a market capitalization of $1.5 billion.
Black Sesame finished its first day of trading at HK$20.45, down from the HK$28 per share it set for its initial public offering. Based in Wuhan, a transportation hub and center for auto manufacturing, the company raised more than HK$1 billion (about $130 million) in its listing which sold 37 million shares at the bottom end of a marketed range.
In its prospectus, Black Sesame said it will use the proceeds to fund its research and development efforts over the next five years, as well as to improve its commercialization capability.
Founded in 2016, Black Sesame has so far provided its self-driving chips to 85 domestic and overseas companies, including Chinese billionaire Robin Li’s tech giant Baidu, which has launched driverless robotaxis; billionaire Eric Li’s car behemoth Geely; state-owned automaker Dongfeng Motor and German auto parts manufacturer Bosch.
The company’s most recent funding round was closed in June last year, when it raised $218 million at a $2.2 billion valuation. Black Sesame is backed by the likes of U.S. venture capital firm Northern Light Venture, whose portfolio includes Drive.ai, a self-driving car startup acquired by Apple; Chinese billionaire Lei Jun’s smartphone maker Xiaomi, which has recently ventured into electric vehicles; Chinese tech giant Tencent; NIO Capital, the investment arm of Chinese EV manufacturer NIO; and Korean billionaire Chey Tae-won’s SK Group.
Black Sesame’s listing comes on the backdrop of a reported U.S. ban on Chinese software in self-driving vehicles. U.S. President Joe Biden’s administration is said to be proposing rules that would bar Chinese software in high-level autonomous cars in the U.S., which would effectively also ban testing on U.S. roads of autonomous cars manufactured by Chinese companies, reported Reuters on Sunday.
Black Sesame is a relatively small player in the autonomous driving chip industry—the company said in its prospectus it has a market share of 2.2%. Larger rivals include Intel-backed Mobileye in Israel, AI chip giant Nvidia and chipmaker Texas Instruments in the U.S., as well as Horizon Robotics in China.
“To win in this space as a supplier, you don’t necessarily need to have the best technology,” says Eugene Hsiao, head of China autos at Macquarie Capital, in an interview. “You just need to have good enough technology at the right price.”
“If you are Horizon Robotics and Black Sesame, the goal isn’t to try to beat Nvidia. I think that’s very difficult.” adds Hsiao. “The goal is to say, ‘hey, I can work with a lot of these Chinese auto companies that are very big, sell hundreds of thousand cars a year, and I might sell a cheaper chip, but I’m selling millions of them.’”
Black Sesame’s revenue jumped 89% year-on-year to 312 million yuan ($43.6 million) in 2023, with most of it coming from its autonomous driving products and solutions. The company generated the rest of its sales from artificial intelligence-powered solutions for image enhancement, such as portrait beautification and facial identification. It attributed the revenue growth to the mass production of its chips in late 2022, shipping more than 156,000 units as of March.
However, Black Sesame’s net loss widened to 4.9 billion yuan from 2.8 billion yuan during the same period. The company expects 2024 to continue to be loss-making due to substantial R&D expenses.
Black Sesame is the second company to go public under a new Hong Kong listing rule for specialist technology companies with a smaller market cap and lower revenue. The first was Chinese AI drug discoverer Xtalpi, formally known as QuantumPharm, whose shares rose more than 8% since its debut in June as of Thursday. The new rule was introduced more than a year ago to revive the city’s sluggish IPO market.
Meanwhile, Black Sesame’s domestic competitor Horizon Robotics also filed for a Hong Kong IPO in March, without disclosing any details. The startup, backed by Hillhouse and HongShan, is said to be raising about $500 million, Bloomberg reported in March.
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