Moonshot aims for meteoric valuation with a $3 billion Hong Kong IPO plan

Following back-to-back listings by Z.AI and MiniMax, the startup behind the Kimi chatbot is reportedly seeking a $50 billion valuation through a Hong Kong IPO

Key Takeaways:

• Moonshot has reportedly submitted a confidential filing for a Hong Kong IPO, seeking to raise $3 billion at an astronomical $50 billion valuation
• The move aims to tap into Hong Kong’s deep capital pool as the company behind the Kimi chatbot needs large funding to run its costly operations

By Warren Yang

When it comes to corporate naming, Chinese AI pioneer Moonshot AI certainly doesn’t lack ambition. Now, the Beijing-based startup behind the wildly popular Kimi chatbot is attempting a meteoric leap of its own.

Last week, Moonshot, founded just three years ago, reportedly submitted a confidential filing for a Hong Kong IPO, seeking to raise $3 billion at an astronomical $50 billion valuation. If successful, Moonshot will stand alongside peers Z.AI Co. Ltd. (2513.HK), also known as Zhipu, and MiniMax Group Inc. (0100.HK) as the leading-edge of Chinese large language model (LLM) startups going public.

The companies rely on private equity and capital markets to fund their hugely expensive operations, set apart from other major large model developers like Qwen and Doubao, which have the backing of internet giants like Alibaba and ByteDance.

Moonshot’s choice of Hong Kong over Shanghai or Shenzhen signals its desire to go for deep offshore institutional capital, similar to MiniMax and Z.AI. For an AI developer that needs billions of dollars to bankroll high-end computing hardware, cloud infrastructure and top-tier engineering talent, the vast international funding pool that Hong Kong offers should be an irresistible draw.

In addition to its deep funding pool, Hong Kong’s Chapter 18C listing regime, designed specifically for specialist technology companies, provides a clear regulatory pathway for IPOs by commercial-stage high-tech firms that are still pouring heavy capital into R&D.

Under traditional rules, companies must demonstrate a track record of net profits or substantial revenues before they can list in Hong Kong. Chapter 18C removes these hurdles by creating tailored entry criteria for high-tech sectors like AI. That allows fast-growing AI pioneers like Moonshot to raise public capital to fuel their costly expansion without waiting years to show profits. Listing in Hong Kong can also help Chinese startups raise their international profiles as they look to market their products abroad.

Surging valuation

Moonshot has certainly lived up to its name in terms of its surging valuation. The company was worth $4.3 billion during a funding round late last year, and the figure more than quadrupled to $20 billion by May. Now, it’s aiming to more than double that just months later with a target of $50 billion.

The driver behind its explosive ascent is the monetization of its Kimi series of large language models, with its annualized recurring revenue tripling to $300 million in June from just three months earlier, according to media reports.

A key appeal of Moonshot’s products is that they dramatically cut computing expenses by running an efficient design that activates only the necessary parts of its AI system for any given job. Because the model uses much less computing power and memory, Moonshot can deliver premium-quality products to corporate clients at a fraction of the prices charged by Western competitors. Kimi’s ability to process ultra-long text at low costs has made it an attractive proposition for anything from financial analysis to legal reviews and software code generation.

Despite their impressive growth, Moonshot and its Chinese peers face greater difficulty raising funds than their Western competitors. As a result, while Silicon Valley leaders regularly secure multibillion-dollar funding rounds, top Chinese startups have to operate on leaner balance sheets.

Expanding restrictions on Western institutions investing in Chinese tech firms amid rising U.S.-China tensions are widening this funding gap. Lacking easy access to foreign mega-funding, Chinese AI developers are forced to rely on a much smaller pool of domestic capital from local funds, state-backed guidance vehicles, and tech giants like Alibaba and Tencent.

So Moonshot is following in the footsteps of Z.AI and MiniMax, which made back-to-back debuts in Hong Kong’s equity market at the start of this year to become the first pure LLM makers to go public in the financial hub.

AI hype

Z.AI raised HK$4.35 billion ($559 million) in early January, and MiniMax took in HK$4.80 billion the next day. Both offerings were oversubscribed more than 1,000 times by retail investors, underscoring overwhelming demand for pure AI plays. The duo didn’t stop there. They launched much larger follow-on share placements immediately after their six-month lockup periods expired in July, with Z.AI securing HK$33.6 billion, the largest amount ever for a secondary equity offering in Hong Kong, and MiniMax raising a fresh HK$16 billion.

Moonshot isn’t alone in trying to capitalize on the AI hype. Among others, 01.AI has undertaken a corporate restructuring as it works towards a Hong Kong listing next year. Baichuan Intelligent Technology, founded by Sogou search engine creator Wang Xiaochuan and backed by Alibaba and Tencent, is exploring a path to a dual listing on China’s domestic A-share markets and in Hong Kong, while StepFun, led by former Microsoft executive Jiang Daxin, is targeting a Hong Kong IPO this year or next.

This rush, however, may end up creating a glut of AI stocks, making investors more selective. That means financial and technical realities will become an increasingly important differentiator.

The annualized recurring revenue metric thrown around by AI startups often blurs the line between traditional software-as-a-service (SaaS) subscription revenue and simple annualized run rates derived from monthly usage.

Because LLM consumption can fluctuate significantly based on short-term developer experimentation or promotional credits, an annualized run rate may overstate long-term revenue durability.

Furthermore, cloud infrastructure costs are a significant drag on developers’ profitability. Unlike traditional software vendors that enjoy fat gross margins, LLM makers face enormous, ongoing server and power expenses to run workloads at scale. At the moment, Moonshot isn’t profitable because of these heavy costs, with the low prices it charges for its products further undercutting its margins.  

In scrutinizing Moonshot’s prospects, investors will want clear visibility into metrics like customer retention rates and gross margins after server and bandwidth costs.

Moonshot’s ambitious IPO plan may materialize, but to satisfy public shareholders over the long haul, it will need to prove that it will eventually be able to turn durable bottom-line profits. Both Z.AI and MiniMax are also loss-making, but their shares command sky-high valuations. Z.AI shares trade at a price-to-sales (P/S) ratio of a whopping 577, while the figure for MiniMax is about 175.

Achieving a $50 billion valuation would require a similarly high multiple, and Moonshot may well succeed in that regard. But if it fails to generate significant cash on its own, and keep the figure growing at triple-digit rates over the near-term, its valuation could come back down to earth as dramatically as the moonshot behind its name.

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