The Information: After Manus was halted, a chain reaction occurred: Moon's Dark Side and Leap Star consider dismantling Red Chips to return domestically

According to Beating Monitoring and The Information reports, after Meta’s $2 billion acquisition of AI agent company Manus was halted by China’s National Development and Reform Commission, the China Securities Regulatory Commission has begun tightening approval for red-chip companies (Chinese companies holding domestic assets through overseas entities registered in places like the Cayman Islands) to list in Hong Kong. Several Chinese AI companies considering a Hong Kong IPO have started evaluating dismantling their overseas structures and returning to domestic entities.

Kimi Series Model Developer, Moon Shadow (月之暗面), is currently discussing restructuring with lawyers but has not made a decision. The company is close to completing a funding round valued at $18 billion. Zhaoyue Star (阶跃星辰) had proactively begun dismantling its overseas holding structure earlier this year, believing that converting to a domestic entity could shorten the Hong Kong IPO approval process. Investors in Zhaoyue Star include the Shanghai municipal government, and all investors support the restructuring. Autonomous driving company DeepRoute.ai is also engaged in similar discussions.

Dismantling a red-chip structure is a complex legal process that typically takes 6 to 12 months. The company must buy back all shares from investors in the overseas holding entity, establish a Sino-foreign joint venture in China, and then resell the shares to the original investors under the joint venture. Investors are required to pay capital gains tax according to Chinese regulations during this process. If some investors choose not to participate due to concerns like foreign exchange controls, the company will need to find alternative funding to fill the gap. Ultimately, at the time of listing, the lock-up period for existing investors will extend from 6 months to 12 months under the red-chip structure.

Currently, there is no comprehensive ban on red-chip structures, but the CSRC has inquired about the overseas holdings of companies like Moon Shadow. Several lawyers advise clients to wait and see, acting only once the CSRC clarifies requirements. The vast majority of Chinese tech giants (Alibaba, ByteDance, Tencent, Baidu) are still registered in the Cayman Islands.