Xiaohongshu Hong Kong IPO Hit by Former Employee Complaints as VIE Structure Ambiguity Faces Scrutiny
Miles Bennett
A former RedNote ad-sales executive filed a complaint with the Hong Kong Stock Exchange, alleging the company contradicted itself on how its VIE structure works — a case that surfaces a long-standing ambiguity affecting every Chinese tech firm listed offshore via the same architecture.
What exactly did the former employee complain about?
Former ad-sales head Chen Hao says RedNote terminated his contract, then refused to honor stock options granted by its offshore entity — arguing the onshore and offshore entities are independent of each other.
He contends this contradicts VIE disclosure logic — a VIE (variable interest entity, a contractual arrangement that lets Chinese companies list offshore despite foreign-ownership restrictions) typically tells investors the offshore holdco exercises contractual control over the onshore operator.
This means → the company gave two opposite accounts of the same structure: "independent" when facing the employee, "controlled" when facing investors.
How did RedNote respond?
RedNote told Reuters that reports of a confidential IPO filing are untrue, and that the complaint has not stalled its listing process.
The company declined to comment on future listing plans.
HKEX declined to comment; Hong Kong's SFC did not respond — This means → no regulator has confirmed or denied how the complaint is being handled.
Why is ambiguity built into VIE structures?
Robin Huang, a law professor at the Chinese University of Hong Kong, says the VIE serves two conflicting purposes: proving to Chinese regulators that the business is controlled by a domestic entity, while proving to offshore investors that the listed offshore shell is the one in charge.
In plain terms = the same structure tells Beijing "I'm a Chinese company" and tells Wall Street "you own the real boss" — it has to be vague, because both claims cannot be literally true at once.
Huang adds that whenever RedNote attempts to list, this issue must be addressed head-on: "Nobody had spelled out this ambiguity before, but now it's on the table — you can't pretend it isn't there."
What does this mean for Chinese tech listings in Hong Kong more broadly?
HKEX has historically relied on legal opinion letters to confirm VIE compliance with Chinese law; this complaint may subject that practice itself to greater scrutiny.
The backdrop: Chinese regulators have grown increasingly cautious on red-chip and VIE structures. Year-to-date, only one VIE-structured company has completed a Hong Kong listing — Hangzhou-based AI cloud-design firm Manycore Tech (0068.HK).
This reflects a risk far beyond RedNote alone: Alibaba, JD.com, and NetEase all listed offshore via VIE structures. If VIE compliance standards tighten further, the entire channel through which global investors access Chinese tech assets faces heightened uncertainty.
Content is for reference only, not financial advice.