AI services provider Unisound dropped 12.2% in Hong Kong grey market trading.

The stock is set to make its trading debut on June 30.

Unisound provides AI products and services designed to help healthcare and more general clients from sectors like hospitality and transportation, run their operations more efficiently. It’s growing at a respectable, though not eye-popping, rate, including 29% revenue growth last year.

Unisound’s cash reserves tumbled to just 156 million yuan by the end of last year, down by more than half from 379 million yuan at the end of 2023, as the company reported 319 million yuan in cash outflow during the year, according to its prospectus first filed in March. Its IPO will provide some relief by providing roughly another 275 million yuan in new cash. But that’s still not too much, considering its current rate of cash burn.

“We believe that we possess sufficient working capital, including sufficient cash and liquidity assets, to meet our present needs and for the next 12 months from the date of the document,” the company said in its listing document, reflecting its tenuous situation. Of course, it’s quite likely Unisound will sell more shares to raise additional cash through secondary offerings, especially if the initial offering gets a positive reception. But that’s far from guaranteed.

Despite the cautionary signs, Unisound is still aiming for a relatively high valuation compared with its peers. Its price-to-sales (P/S) ratio would range from 11 to 14, depending on how its shares price. But even a pricing at the low end of that range would be equal to the P/S ratio of 11.5 for SenseTime (0200.HK), and is well ahead of the 3.82 for Fourth Paradigm (6682.HK), two other AI companies that are both much larger.