HONG KONG, April 13 (Reuters) – Chinese AI agent StepFun is unwinding its offshore incorporation structure to pave the way for a planned Hong Kong initial public offering, three sources said, as Beijing tightens scrutiny of a system widely used for overseas fundraising.
China’s securities regulator said last month it had instructed some so-called “red-chip” companies that are registered abroad, mainly in tax havens, but hold assets and businesses in China via equity ownership, to unwind the structure nL1N40505Y.
Experts have said the move could delay some listings https://www.reuters.com/sustainability/boards-policy-regulation/hong-kong-ipo-pipeline-set-suffer-amid-beijings-scrutiny-red-chip-listings-2026-03-18/ as red-chip companies scramble to change their domicile back to China, and some might even have to abandon their IPO plans as changing the legal structure of the company could be cost-prohibitive.
Shanghai-based StepFun, which develops general-purpose foundation models, has decided an onshore corporate structure would be more appropriate as it is heavily backed by state capital, said two of the sources with knowledge of the move.
Its structure had involved the Cayman Islands, according to corporate records.
All of the sources declined to be named discussing StepFun’s change of corporate structure because the information was not public. StepFun did not respond to Reuters’ requests for comment.
StepFun’s investors include investment vehicles of the Shanghai municipal and district governments as well as Qiming Venture Partners and Chinese technology giant Tencent Holdings, according to public disclosures and media reports.
Founded in April 2023 by former Microsoft Vice President Jiang Daxin, StepFun is regarded as one of China’s leading AI startups that have successfully developed large-language foundation models.
REGULATORY GUIDANCE
The move by StepFun highlights how some Chinese companies are rushing to meet the new regulatory guidance to keep offshore listing hopes alive and tap into strong investor demand for new shares issued by Chinese AI and semiconductor firms, among others.
After a bumper IPO year for Hong Kong in 2025 with funds raised surging 231% to $37 billion, more than 530 companies have filed applications as of last month to list, most of them Chinese, stock exchange data shows.
It was not clear how many are red-chip companies. But last year, one-fifth of 131 Hong Kong listings China approved involved offshore holdings, the majority of which used the red-chip structure, according to Chinese law firm Hankun.
Chinese publication Caijing reported in February StepFun planned to raise 2 billion yuan ($293 million) to 3 billion yuan in a pre-IPO funding round at a valuation of up to $6 billion.
The firm planned to file for a Hong Kong IPO by the end of June at a valuation of $10 billion for anchor investors, the Caijing report said.
Since its launch in February, StepFun’s Step 3.5 Flash has consistently ranked among the three most-used models on OpenClaw, the popular AI agent platform, alongside MiniMax M2.5 and Kimi K2.5.
Its models have been adopted into mobile phone and automobile operating systems via partnerships with OPPO and Geely, according to public disclosures.
In February, StepFun hired Yin Qi, founder of facial recognition company Megvii Technology, to be its president to enhance its core management team.
OTHERS CONSIDER CHANGE OF DOMICILE
Since the red-chip structure has been put under the spotlight, a number of Chinese companies, mostly in the tech sector, have started deliberating whether they should follow regulators’ guidance and change their domicile to China, according to investors and lawyers.
AI startup Moonshot, for example, is weighing the necessity of dismantling its offshore incorporation structure and has yet to come to a decision, three people with knowledge of the discussions said. Its structure involved the Cayman Islands, according to corporate records.
The company, which developed popular large language model Kimi, is currently seeking to raise $1 billion in a fresh funding round at a valuation of $18 billion and could kick off a Hong Kong IPO process later this year, said the sources, who declined to be named as the information was confidential.
Moonshot’s last fundraising, completed in February, valued the firm at $10 billion, more than double a December round that valued it at $4.3 billion, according to Chinese corporate information database Qichacha.
Moonshot declined to comment.
($1 = 6.8304 Chinese yuan renminbi)
(Reporting by Hong Kong and Beijing newsrooms; Editing by Jamie Freed)
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