Shanghai-based StepFun, a developer of general-purpose foundation models, is restructuring its corporate framework by unwinding its offshore incorporation as it prepares for a potential Hong Kong initial public offering (IPO). The move comes amid tightening regulatory scrutiny in China over offshore fundraising structures widely used by domestic firms.
Co-Founded in April 2023 by Jiang Daxin, StepFun has quickly emerged as one of China’s leading AI startups, successfully building large language foundation models. However, the company is now shifting toward an onshore corporate structure, which sources indicate is more suitable given its strong backing from state capital.
Previously, StepFun operated through an offshore structure involving the Cayman Islands—a common setup among “red chip” companies. These entities are typically registered abroad, often in tax havens, while maintaining their core business operations in China through equity ownership. However, China’s securities regulator recently directed several such firms to dismantle these structures, signaling stricter oversight.
As a result, StepFun’s restructuring highlights a broader trend across China’s tech sector. Companies are increasingly reassessing their corporate domiciles to align with evolving regulatory expectations, especially if they intend to pursue overseas listings. While this shift helps maintain IPO ambitions, experts warn that changing legal structures can be both complex and costly, potentially delaying or even derailing some listing plans.
StepFun’s investor base includes state-backed investment vehicles from Shanghai’s municipal and district governments, along with prominent players such as Qiming Venture Partners and Tencent Holdings. This strong institutional backing further explains the company’s decision to adopt a domestically aligned structure.
Meanwhile, the timing of this move is significant. Hong Kong witnessed a robust IPO market in 2025, with total funds raised surging 231% to $37 billion. Building on this momentum, more than 530 companies—primarily Chinese—have already filed for listings, reflecting strong investor appetite, particularly in high-growth sectors such as AI and semiconductors.
According to reports, StepFun is targeting a pre-IPO funding round of 2–3 billion yuan (approximately $293–$440 million), potentially valuing the company at up to $6 billion. Furthermore, it plans to file for a Hong Kong IPO by mid-year, aiming for a valuation of around $10 billion for anchor investors.
On the product front, StepFun continues to gain traction. Its Step 3.5 Flash model has consistently ranked among the top three most-used models on OpenClaw, alongside competitors like MiniMax M2.5 and Kimi K2.5. Additionally, the company has secured strategic partnerships with OPPO and Geely, integrating its AI models into mobile and automotive operating systems.
In a move to further strengthen its leadership team, StepFun appointed Yin Qi, founder of Megvii Technology, as president earlier this year.
Importantly, StepFun is not alone in reconsidering its structure. As regulatory pressure mounts, several Chinese tech companies are now evaluating whether to abandon offshore setups and relocate their domicile back to China. Consequently, this shift could redefine how Chinese firms approach global capital markets in the coming years.
StepFun’s decision to unwind its offshore structure underscores a pivotal shift in China’s regulatory and capital market landscape. While the transition may introduce short-term complexities, it ultimately positions the company to align with domestic policies and capitalize on strong investor demand in Hong Kong’s IPO market, particularly within the rapidly evolving AI sector.
