@chaozuoye: This is hilarious — Xiaohongshu's IPO failed because of layoffs. To make its financials look good for the IPO, Xiaohongshu saved costs by laying off dozens of employees who had stock options. One of them filed for labor arbitration. Xiaohongshu's legal department essentially said: The options were issued by an overseas company, not related to the domestic company. If you want to sue, sue the overseas company. In other words: You sue Lu Xun, what does that have to do with me, Zhou Shuren?...
Summary
Xiaohongshu laid off employees to cut costs for its IPO, triggering option disputes and labor arbitration, which led to Hong Kong Stock Exchange questioning its VIE structure, ultimately resulting in IPO failure.
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Cached at: 07/06/26, 06:17 PM
That’s hilarious — Xiaohongshu’s IPO failed because of layoffs.
Xiaohongshu, trying to make its financials look good for the IPO, laid off dozens of employees who held vested stock options to save money.
One of those employees filed for labor arbitration. The company’s legal team basically argued:
“The options were issued by an offshore company, unrelated to the domestic company. If you want to sue, go sue the offshore company.”
In other words:
“You’re suing Lu Xun — what does that have to do with Zhou Shuren?”
But now the problem is obvious: If the domestic and offshore companies are truly unrelated,
then how do you explain the VIE structure used for the Hong Kong IPO?
The Hong Kong Stock Exchange caught this case during its review, which directly undermined the VIE framework in the prospectus.
It directly caused the IPO to fail, making the company a laughingstock.
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