Chinese artificial intelligence startup Moonshot is holding discussions to resolve a legal dispute with one of its shareholders as the company prepares for a planned stock market listing in Hong Kong. The negotiations involve allegations of misconduct against senior executives and a demand for financial compensation, according to people familiar with the matter.
The dispute centres on Recurrent.ai, an artificial intelligence software developer, and its investors, who have raised allegations against Moonshot Chief Executive Officer Yang Zhilin and Chief Technology Officer Zhang Yutao. The claims include allegedly providing misleading information to investors and obtaining personal financial benefits at the expense of Recurrent. The allegations have not been independently established, and Yang has previously denied wrongdoing.
Yang and Zhang Yutao established Recurrent.ai in 2016 before founding Moonshot in 2023. Both reportedly remain directors of Recurrent's holding company, according to corporate records. The current settlement discussions are aimed at addressing the longstanding disagreement as Moonshot moves towards its proposed initial public offering.
The legal conflict has been under arbitration in Hong Kong since 2024. According to a letter sent by Recurrent's lawyers to Moonshot's investors in March, the company has alleged that Moonshot was established without proper authorisation from Recurrent's board. The letter also raised concerns about representations made to investors and the handling of company assets and information.
The letter further alleged that servers containing important data related to large language models were transferred from Recurrent to a Moonshot subsidiary without authorisation in April 2023. It also claimed that certain key data was deleted in September 2024. These allegations were presented without supporting evidence in the letter and have not been independently verified.
Recurrent and some of its investors are seeking compensation equivalent to 10.5% of Moonshot's original shares, according to a person familiar with the matter. Based on the startup's reported valuation of $30 billion following a fundraising round in June, the amount sought could exceed $700 million. Recurrent reportedly received 9.5% of Moonshot's original shares when the startup was established.
A separate potential legal action in the Cayman Islands is also being considered against Moonshot President Zhang Yutong. The allegations concern her reported shareholding in Moonshot and whether the arrangement was adequately disclosed to Recurrent's shareholders. These claims have not been independently confirmed.
Moonshot and the executives have previously challenged the accusations. Yang has denied allegations of wrongdoing, while a senior partner at the law firm representing the company and its executives described the case in 2024 as lacking a legal and factual basis. Moonshot has declined to comment on the latest settlement discussions, and Recurrent has not responded to requests for comment.
Despite the ongoing disagreement, the shareholder dispute is not currently expected to derail Moonshot's planned Hong Kong listing. However, unresolved questions about ownership rights, corporate governance and the disclosure of legal risks could complicate the listing process and influence how potential investors assess the company.
Beijing based Moonshot has emerged as a prominent competitor in China's artificial intelligence sector through its Kimi chatbot, which gained attention for its ability to process lengthy documents. The company has since expanded into AI coding tools, reasoning systems and agent based applications as competition among Chinese and international AI developers intensifies.
The startup has attracted backing from major investors, including Alibaba, Tencent Holdings, Meituan and China Mobile. Its growing business and the popularity of its AI products have helped strengthen investor interest as it prepares for a potential public offering.
In July, Moonshot introduced its Kimi K3 model, a large scale AI system that the company said was among the world's largest open weight models. The launch further highlighted its ambitions to compete with leading AI developers in the United States and China.
The outcome of the shareholder negotiations could become an important factor in Moonshot's preparations for the stock market. Although the timing of a possible settlement remains uncertain, resolving the dispute could help address concerns about corporate governance and provide prospective investors with greater clarity before the planned listing.