Chinese artificial intelligence startup StepFun is unwinding its offshore incorporation structure as it prepares for a potential Hong Kong IPO, according to three sources familiar with the matter.
The move comes as Chinese regulators tighten scrutiny over “red-chip” structures commonly used by companies to raise funds overseas.
China’s securities regulator said last month it had instructed certain companies registered abroad, often in tax havens but with primary operations in China, to dismantle such arrangements.
These structures typically allow firms to access foreign capital markets while maintaining domestic business operations.
Industry experts have warned that the new regulatory stance could delay listing timelines for affected firms.
Companies may face significant legal and financial hurdles in shifting their domicile back to China, and some could abandon IPO plans altogether if restructuring proves too costly.
According to Reuters, in StepFun’s case, sources revealed that the company has determined that adopting an onshore corporate structure would be more suitable given its strong backing from state-linked investors.
Corporate records indicate that its previous structure involved the Cayman Islands.
All sources declined to be identified as the information is not public, and StepFun did not respond to requests for comment.
Strong investor backing and AI positioning
StepFun counts investment vehicles affiliated with Shanghai municipal and district governments among its backers, along with Qiming Venture Partners and technology giant Tencent Holdings, according to public disclosures and media reports.
Founded in April 2023 by former Microsoft Vice President Jiang Daxin, the company has emerged as one of China’s prominent AI startups focused on developing large-language foundation models.
The firm’s restructuring highlights how Chinese companies are moving quickly to comply with regulatory guidance in order to preserve their overseas listing ambitions and capitalise on investor demand for AI and semiconductor stocks.
Robust IPO pipeline in Hong Kong
Hong Kong’s IPO market has seen a strong resurgence, with funds raised in 2025 surging 231% to $37 billion.
Exchange data shows that more than 530 companies, most of them Chinese had filed for listings as of last month.
While it remains unclear how many of these applicants are red-chip companies, legal data indicates that one-fifth of the 131 Hong Kong listings approved by Chinese authorities last year .
According to a February report by Chinese publication Caijing, StepFun had been planning to raise between 2 billion yuan and 3 billion yuan in a pre-IPO funding round at a valuation of up to $6 billion.
The report added that the company aimed to file for a Hong Kong IPO by the end of June at a valuation of $10 billion for anchor investors.
Product growth and leadership expansion
Since its launch, StepFun’s Step 3.5 Flash model has ranked among the three most-used models on the OpenClaw AI agent platform, alongside competitors MiniMax M2.5 and Kimi K2.5.
The company has also expanded its presence through partnerships, integrating its models into mobile phone and automobile operating systems via collaborations with OPPO and Geely.
In February, StepFun strengthened its leadership team by appointing Yin Qi, founder of facial recognition firm Megvii Technology, as president.
StepFun is not alone in reconsidering its corporate structure.
Several Chinese technology firms are evaluating whether to follow regulatory guidance and shift their domicile back to China, according to investors and legal experts.
AI startup Moonshot is among those assessing the need to dismantle its offshore structure, which also involves the Cayman Islands.
Three sources familiar with the discussions said the company has yet to reach a decision.
Moonshot is currently seeking to raise $1 billion in a new funding round at a valuation of $18 billion and could initiate a Hong Kong IPO process later this year.
Its most recent fundraising round in February valued the firm at $10 billion, more than double its December valuation of $4.3 billion, according to corporate database Qichacha.
The evolving regulatory landscape is expected to continue shaping listing strategies for Chinese firms seeking access to global capital markets.
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