Moonshot in Settlement Talks Before Its IPO: A Claim Above $700 Million Dating to a Spin-Out

What happened

Citing people familiar with the matter, Reuters said Moonshot CEO Yang Zhilin and CTO Zhang Yutao are negotiating a settlement with Recurrent. Recurrent is an AI software company that Yang and Zhang helped found in 2016; they set up Moonshot in 2023 and still sit as directors of Recurrent's holding company.

According to Reuters, a March 11 letter from Recurrent's lawyers to Moonshot investors accused the two executives of founding Moonshot without authorisation from Recurrent's board, making inaccurate statements to investors and benefiting personally at Recurrent's expense. The letter also said servers holding key large-language-model data were moved to a Moonshot subsidiary in April 2023 without authorisation, and that some key data was deleted in September 2024 on Zhang Yutao's instructions. Reuters said the letter offered no evidence on the server and data points, and that it could not independently verify the letter's claims.

The same letter said Recurrent and its investors are considering a separate action in the Cayman Islands against Moonshot President Zhang Yutong. Zhang Yutong left Recurrent's board in 2022; the letter said she holds a sizeable stake in Moonshot that was not disclosed to Recurrent shareholders. Reuters said it could not confirm that account, and Zhang Yutong did not respond to requests for comment sent through Moonshot.

Yang has previously denied the allegations in public. Chinese outlets including The Paper, LatePost and Tencent News reported that in a 2024 post on his personal WeChat account, Yang said the founding of Moonshot had been arranged with Recurrent board members and that Zhang Yutong's pay reflected her professional ability; Reuters said it could not access the original post. A lawyer representing Yang, Zhang Yutao and Moonshot told Chinese media in November 2024 that the case had neither legal nor factual basis and would be contested. Moonshot and Recurrent did not respond to Reuters' requests for comment for this report, and people familiar with the dispute said it was unclear whether a settlement was close.

Key facts

1. The claim: Recurrent received 9.5% of Moonshot's original shares at founding and now seeks compensation equal to 10.5% of the original shares; at the $30 billion valuation from Moonshot's June fundraising, that exceeds $700 million.
2. Arbitration: The dispute has been in arbitration in Hong Kong since 2024. The Hong Kong exchange and the Securities and Futures Commission declined to comment; the China Securities Regulatory Commission and the Cyberspace Administration of China did not respond to Reuters.
3. IPO progress: Reuters reported on Sept 3 that Moonshot had confidentially filed with the Hong Kong exchange, with one person citing a fundraising target of about $3 billion; banks on the deal include Goldman Sachs, CICC and Deutsche Bank, and timing depends on regulatory approvals, with size and other details still subject to change.
4. Valuation and funding: Reuters reported in September that Moonshot was valued at $50 billion in an ongoing round; the company raised more than $2 billion in May from investors including Meituan and China Mobile, taking total fundraising above $5.5 billion.
5. Product: Moonshot released Kimi K3 in July, a 2.8 trillion-parameter model the company describes as the largest open-weight system to date. Moonshot first gained users with the Kimi chatbot and long-document handling, then expanded into coding, reasoning and agent products; backers include Alibaba, Tencent, Meituan and China Mobile.

Background

Moonshot was founded in Beijing in 2023 by Yang Zhilin, who pursued doctoral studies at Carnegie Mellon University. The company first gained users with the Kimi chatbot, and backing from Alibaba raised its profile. Reuters reported in September that Moonshot was also in talks with Microsoft, Amazon and Google on revenue-sharing arrangements under which the US cloud firms would host Kimi models; no outcome has been announced. Before filing, Moonshot unwound its offshore incorporation structure and moved to an onshore China domicile to meet regulatory requirements for the listing.

The overlap between the two companies sits at the start of the dispute: Recurrent and Moonshot share founders, and Moonshot's early work was adjacent to Recurrent's business. After Recurrent's side began arbitration in 2024, the two sides have given different accounts of whether the spin-out had board authorisation and whether the share arrangements were disclosed; the public record includes Recurrent's lawyers' letter dated March 11 and Yang's 2024 WeChat post.

In Hong Kong, LSEG data cited by Reuters put funds raised through listings at $41.2 billion as of mid-August, up 142% year on year, with Chinese technology companies accounting for most of it. Zhipu, now Z.AI, and MiniMax listed in Hong Kong earlier this year; Reuters reported in September that DeepSeek was valued at about $74 billion according to sources, and Z.AI had a market capitalisation of about $66 billion. Moonshot filed two months after the Kimi K3 release.