Moonshot AI executives are in talks to settle a $700 million shareholder dispute before Hong Kong IPO

Moonshot AI's top executives are in settlement talks with a shareholder that has accused them of wrongdoing, ahead of the Chinese AI startup's planned Hong Kong listing, according to Reuters.

Recurrent.ai, an AI software company, and certain of its investors have claimed that Moonshot CEO Yang Zhilin and Chief Technology Officer Zhang Yutao misled Recurrent investors and used their positions for personal financial gain, according to Reuters, which obtained a March 11 letter that Recurrent's legal counsel addressed to Moonshot's investors. The two men launched Recurrent.ai together in 2016 and later started Moonshot in 2023, and corporate records show they hold directorships at Recurrent's holding company, according to Reuters.

The dispute has been in Hong Kong arbitration since 2024. The March letter alleged that servers containing large-language-model data were transferred without authorization from Recurrent to a Moonshot subsidiary in April 2023, and that other key data was deleted in September 2024 at Zhang Yutao's direction, according to Reuters. The letter provided no supporting evidence for those allegations.

The compensation Recurrent and its investors are demanding amounts to 10.5% of Moonshot's original shares — a stake that could exceed $700 million in value, given the startup's $30 billion valuation established in a June fundraising round, according to Reuters. Recurrent had previously received 9.5% of Moonshot's original shares when the startup was established.

The dispute extends beyond Yang and Zhang Yutao. Beyond the arbitration, Recurrent and its investors are weighing a separate lawsuit in the Cayman Islands targeting Moonshot President Zhang Yutong, according to Reuters; she stepped down from her role as a Recurrent director in 2022. The letter alleged she received a Moonshot shareholding that was concealed from Recurrent's shareholders — a claim Reuters said it could not confirm.

Yang and Zhang Yutao did not respond to requests for comment, according to Reuters. Yang has previously denied the allegations. David Morrison, a senior partner at MinterEllison, which represents Yang, Zhang Yutao, and Moonshot, told Chinese media in November 2024 that the case "lacked both legal and factual basis." Moonshot declined to comment, and Recurrent did not respond to a request for comment.

People familiar with the dispute told Reuters they did not know whether a settlement was imminent. Although the dispute is unlikely to derail Moonshot's IPO, leaving the conflict with Recurrent unresolved could create governance, ownership, and disclosure questions that give pause to potential investors and add friction to the listing, one of those people said.