Chinese AI Startups Reevaluate Red-chip Structure Like Moon's Dark Side

According to Benchmark Studio citing insiders, the dark side of the moon (Moonshot AI) and Yuanrong Qihang (DeepRoute.ai) are currently evaluating whether to adjust their corporate structure, shifting from overseas holding to domestic registration. The background of this change is that securities regulatory authorities have signaled a cautious approach to approving IPOs of local companies that are registered overseas but primarily operate domestically.

This is not an issue of legal structure for individual companies, but rather a change in the financing path for Chinese tech startups. The red-chip structure used to be advantageous for US dollar financing, overseas listings, founder voting rights arrangements, and employee stock option design, but regulatory concerns are now shifting towards jurisdiction and capital flows. The deal where Meta Platforms acquired AI agency company Manus for $2 billion has rapidly escalated such concerns, and relevant departments last week ordered the cancellation of the acquisition.

The commonality between Moonshot and DeepRoute is that they are both in sensitive technology sectors and have also been mentioned to have plans to list in Hong Kong. Regulatory authorities have raised inquiries about the two companies being held by overseas holding companies, forcing businesses to re-evaluate the speed of listing, financing efficiency, and regulatory acceptability. StepFun's choice provides a reference— insiders say that this Shanghai AI model developer voluntarily began dismantling its overseas shareholding structure earlier this year, as the company judged that moving back to China registration could shorten the time to obtain regulatory approval for Hong Kong IPO later this year.

Multiple lawyers who have handled related cases have said, the process of dismantling red-chip structures typically takes six months to a year. Companies must first repurchase the equity of investors in the offshore holding entities, then establish joint ventures with foreign investors in China, and complete the new shareholding arrangements. This will directly affect the IPO timetable and the sources of funding. If some foreign investors choose not to participate in the restructuring due to foreign exchange restrictions, tax costs, or procedural complexity, the company may need to find new investors to fill the gaps, and may also face financing gaps.