StepFun, a Chinese developer of general-purpose foundation models, is in the process of unwinding an offshore incorporation arrangement and shifting toward an onshore corporate structure to facilitate a planned initial public offering in Hong Kong, three people with knowledge of the matter said. The move comes as Chinese regulators increase scrutiny of the red-chip model often used by firms that are registered abroad but hold assets and businesses in China.
Under the red-chip approach, many companies place their legal domicile in overseas jurisdictions - often tax havens such as the Cayman Islands - while operating primarily through asset ownership and equity structures inside China. Chinese securities authorities last month instructed some of these so-called red-chip companies to dismantle that structure in order to comply with updated guidance, a shift that market participants say could affect the timing and prospects of planned overseas listings.
Two of the sources said StepFun determined that an onshore corporate structure would better reflect its ownership profile, in particular because the company is heavily backed by state capital. Corporate records indicate StepFun previously used a Cayman Islands structure. All three sources declined to be named because the information has not been publicly disclosed. StepFun did not respond to requests for comment.
Public disclosures and media reports list the company’s investors as including investment vehicles affiliated with the Shanghai municipal and district governments, as well as private investors such as Qiming Venture Partners and technology conglomerate Tencent Holdings. Founded in April 2023 by Jiang Daxin, a former Microsoft vice president, StepFun is regarded as one of China’s leading AI startups active in developing large-language foundation models.
Regulatory context and market backdrop
The StepFun change of domicile illustrates how some Chinese technology companies are moving quickly to align with regulatory guidance that appears intended to restrict the widespread use of offshore listings. Market firms have said this guidance could delay or complicate IPO plans for companies that rely on the red-chip structure, with some businesses potentially concluding that restructuring costs make an IPO impractical.
Hong Kong experienced a robust IPO year in 2025, with funds raised up 231% to $37 billion. Stock exchange filings show that more than 530 companies had submitted applications to list as of last month, the majority of them Chinese. It was not clear how many of those applicants used red-chip structures. Last year, one-fifth of the 131 Hong Kong listings approved by Chinese authorities reportedly involved offshore holdings, with the red-chip arrangement used in the majority of those cases, according to a Chinese law firm.
StepFun’s business and financing plans
Reports in Chinese financial media have said StepFun planned a pre-IPO fundraising round targeting between 2 billion yuan and 3 billion yuan, and that the company had discussed a valuation point of up to $6 billion for that round. The same reports indicated StepFun aimed to file for a Hong Kong IPO by the end of June and had pitched a $10 billion valuation for anchor investors.
On the product side, StepFun’s model Step 3.5 Flash has rapidly gained traction on the OpenClaw AI agent platform, where it has consistently ranked among the three most-used models alongside MiniMax M2.5 and Kimi K2.5 since its launch in February. The company has also publicly disclosed integration deals that place its models into mobile phone and automobile operating systems through partnerships with OPPO and Geely.
In February, StepFun appointed Yin Qi, the founder of facial recognition firm Megvii Technology, as its president, a personnel move intended to strengthen its core management team.
Broader corporate responses
The spotlight on red-chip arrangements has prompted a number of technology companies to consider whether to change their legal domiciles. One AI company, Moonshot, is reportedly evaluating whether to dismantle its offshore structure, which also involved the Cayman Islands. Sources say Moonshot, the developer of the Kimi large language model, is in talks to raise $1 billion in a fresh funding round at a potential $18 billion valuation and could launch a Hong Kong IPO process later this year.
According to a corporate information database, Moonshot’s most recent fundraising in February valued the firm at $10 billion, which was more than double a December round that valued the company at $4.3 billion. Moonshot declined to comment on its domicile discussions.
Implications for capital markets
Companies that decide to unwind offshore structures face operational and legal considerations that could influence their IPO timetables. Market observers say changing a legal domicile can introduce additional costs and regulatory steps that may delay listings or alter the financial calculus for issuers and their investors. For state-backed firms, aligning corporate domicile with domestic ownership may be a logical option that reduces jurisdictional complexity.
How many prospective Hong Kong listings will alter their structures, postpone filings, or abandon IPO plans entirely remains unclear. The authorities’ recent guidance signals an intent to reconfigure the regulatory terrain around overseas listings, and companies with significant domestic state ownership appear particularly motivated to respond.
Currency conversion note: $1 = 6.8304 Chinese yuan renminbi.