China has put Meta Platforms’ shiny AI shopping spree into reverse and told it to abandon its Manus buyout “on security grounds.”
While no one thinks that “security grounds” is a real excuse, it is exactly the sort of thing that the American government has been doing to Chinese companies, so no one should be surprised.
Meta bought Manus, a China-linked, Singapore-based outfit that builds AI agents, in December for $2.5 billion and has since wired the tech straight into its systems.
Undoing it will be messy because Meta moved quickly, meaning the company now has to disentangle products, people and code that were already being stitched together.
It gets worse because Manus investors, including California venture-capital firm Benchmark, have already been paid out.
Meta pulls in chunky revenue from Chinese advertisers targeting shoppers outside China, even though Facebook and other Meta apps are blocked inside the country.
Several former Manus investors in Asia, including Tencent, HSG and ZhenFund, are planning to cooperate if Meta pushes ahead with tearing up the deal, some of the people said.
Beijing has given the two companies a preliminary deadline of several weeks to unwind the transaction and restore Manus’s Chinese assets to their original state, the people said.
That includes stripping any data or technology that was transferred to Meta, and officials have weighed penalties if the rescission cannot be completed, the people added.
The deal annoyed Beijing enough that it began reviewing it shortly after the announcement, and in March it summoned co-founders Xiao Hong and Ji Yichao to discuss the takeover.
Engineers at Beijing Butterfly Effect Technology, founded by Xiao in 2022, built early versions of Manus before a Singapore-based entity, also called Butterfly Effect, took over sales outside China.
Last summer, Manus moved most of its China-based staff to Singapore after taking investment from Benchmark.
Chinese authorities say they can demand an unwind because Beijing Butterfly Effect Technology remains a Chinese company, with Chinese law allowing review of foreign investment deemed a national-security risk.
Before the ban landed, talks explored concessions to soothe Beijing, including the founders leaving Meta, and the company has accepted it will have to let them go as part of the unwind.
Some investors in Chinese AI firms reckon the risks may spook foreign money, even though China’s success stories like ByteDance and Alibaba once leaned on overseas capital to get moving.
