In late June 2026, Xiaohongshu quietly filed for a Hong Kong listing. Backed by Goldman Sachs and CICC, the move would mark one of the largest Chinese internet company IPOs in Hong Kong in nearly a decade — with a potential valuation of $30–50 billion. Note the currency: US dollars. Earlier deals by MiniMax and Zhipu were priced in Hong Kong dollars and were significantly smaller in scale.
But shortly after the filing, a whistleblower letter from a former employee landed at both the Hong Kong Stock Exchange’s listing division and the Securities and Futures Commission. Regulators have confirmed receipt of the email.
The sender, Chen Hao, previously headed Xiaohongshu’s South China commercial direct-sales team. He holds a court judgment that found the company unlawfully terminated his employment — plus evidence that could directly challenge the integrity of its VIE structure.
1. Xiaohongshu’s Long Road to IPO
The company had been preparing for years. Back in 2018, a co-founder told Bloomberg it might list within two to three years. In 2021 it hired a former Citi executive as CFO and was reportedly preparing a US roadshow to raise $500–1,000 million.
Then Didi’s troubled US listing triggered tighter scrutiny on Chinese companies. Xiaohongshu paused its US plans, along with several other high-profile names including Soul, Huolala, Keep, and Himalaya.
For the next few years, rumors of a Hong Kong listing kept surfacing — and Xiaohongshu repeatedly denied them (the market started calling it the “three denials”). Only in 2025 did it rent office space in Hong Kong, build out a major commercial team, and clean up its financials. The secret filing finally came at the end of June 2026.
2. Why Rush to File Before June 30?
A listing application needs audited financial statements, and those statements are generally valid for only six months. Xiaohongshu was working with its fully audited 2025 annual results. It had to submit before the end of June — otherwise the audit would expire and the company would need to start over.
For a company of this size, redoing an audit is expensive and time-consuming. That’s why many firms sprint to file by June 30: it’s not always about market sentiment, but about a hard document deadline.
3. A “Bleeding” Listing?
In the secondary market, Xiaohongshu shares had been bid up to roughly $50 billion in valuation. Yet the IPO range is being discussed at $30–50 billion.
The gap exists because today’s Hong Kong market favors AI, robotics, and chip-related stories. Xiaohongshu’s core business — social commerce, livestreaming, and advertising — belongs to an earlier internet era. At this moment, it may have to accept a lower valuation to get listed while the window is still open. Market watchers sometimes call this a “bleeding IPO.”
It’s not unique to Xiaohongshu. Many companies outside the hottest tech themes face the same pressure right now.
4. ChenHao’s Whistleblower Letter: Three Sharp Questions
ChenHao joined in June 2022. According to him, he quickly lifted team performance, exceeded targets by 20% in 2023, won a company innovation award, and signed a 30,000-share option agreement with founder and CEO Mao Wenchao (vesting over four years: 50/25/25).
In December 2023 the company fired him for “incompetence.” Because he hadn’t completed two years, the first 50% of options were cancelled under standard policy. He received statutory severance, but believed the dismissal lacked proper grounds and took the case to arbitration.
Guangzhou’s Tianhe District Court ruled in his favor in both the first and second instance, finding the termination unlawful. Xiaohongshu was ordered to pay roughly 800,000 RMB (including the option portion). For a company heading toward a multi-billion-dollar valuation, the amount itself is small. The real problem is the unresolved loose end it left behind.
ChenHao’s letter raises three main issues:
i. VIE structure clarity (the most sensitive)
ChenHao’s employment contract was with “Shu Yi Shu Er Culture Media,” a domestic Chinese company. To defend itself in the labor case, Xiaohongshu submitted documents stating that this entity had “no direct relationship and no contractual control” with its offshore structure.
That statement touches the heart of the VIE model.
VIE structures (first popularized by companies like Sohu) let Chinese internet firms list overseas while complying with rules that restrict foreign investment in sensitive sectors. An offshore holding company (usually in the Cayman Islands) lists on the stock exchange. It controls a domestic licensed entity through a series of agreements so that profits can flow upward to foreign shareholders.
The critical link is that the domestic company’s revenue must be fully captured by those agreements. If one domestic entity is shown to sit outside the control chain, regulators may question whether the structure is watertight — and whether shareholders can actually receive the economic benefits they expect.
ChenHao’s evidence points straight at this potential weak spot.
ii. Disclosure of the labor dispute
Since a court has already ruled the termination unlawful, did Xiaohongshu fully disclose the case and its potential impact in the listing documents? Incomplete disclosure would be a straightforward regulatory issue.
iii. ESG and labor compliance
Public companies are expected to meet labor standards. Systemic employment problems can hurt ESG assessments and investor confidence. Once shares are sold to the public, any later penalty or scandal over past labor practices would be borne by ordinary shareholders. Regulators therefore examine this area closely.
5. Can It Still Get Through? Time Is the Real Test
These issues are unlikely to cause an outright rejection. The exchange and regulator will probably send written questions and ask for more information or clarification.
That process carries two costs:
- Money:
Lawyers, accountants, and sponsors will need to review everything again — potentially several million RMB in extra fees. - Time:
The back-and-forth could take two to three months. If Xiaohongshu misses its original window, it may need a fresh audit and could lose the current positive sentiment around tech-related listings in Hong Kong.
Right now the market is excited about AI-related names like MiniMax and Zhipu. Xiaohongshu hoped to ride that wave. If momentum fades — or if external shocks hit — the valuation or even the ability to complete the deal could suffer.
6. A Lesson Before Listing: Don’t Leave Loose Ends
Xiaohongshu’s situation sends a clear message to any company planning to go public: once you step into the public markets, historical problems must be cleaned up.
If you need to let people go, do it properly with full documentation. If you don’t want to do that, settle the matter cleanly. Leaving a “landmine” behind means it can explode at the most vulnerable moment — right when regulators and investors are scrutinizing everything.
Listing isn’t the finish line. It’s the start of public accountability. Any unfinished business tends to surface under that spotlight. Handling the small things properly is what actually keeps the process on track.
Many Chinese internet companies use a structure called VIE to list overseas while obeying China’s foreign investment rules.
回复删除China generally does not allow foreign companies to own businesses that hold key licenses in sectors like the internet, online media, or education. At the same time, founders want to raise global capital and list in New York or Hong Kong. VIE is the workaround.
Here’s how it usually works:
A company is set up in the Cayman Islands — this is the listed entity whose shares foreign investors buy.
Below it are holding companies (often in BVI, Hong Kong or Singapore).
These control a Wholly Foreign-Owned Enterprise (WFOE) inside China.
The actual operating company that holds the licenses (ICP license etc.) must be 100% Chinese-owned by law.
Instead of owning the Chinese company directly, the offshore group signs a series of contracts with it. These agreements give the listed company the right to receive almost all the profits and to control major business decisions. This is called “contractual control.”
In the Xiaohongshu case, the whistleblower’s evidence highlighted a potential weak link: the company had told a Chinese court that one domestic entity had “no direct relationship and no contractual control” with the offshore structure. If true, it could break the chain that allows profits and control to flow upward.
For Western investors, the key point is this: when you buy shares in a VIE-structured Chinese company, you are not buying direct equity in the China business. You are relying on contracts governed by Chinese law. The structure has worked for over 20 years and enabled many big listings, but it carries more regulatory and enforcement risk than normal ownership.
That’s the basic idea behind the term that keeps appearing.