Tencent is in discussions to become the largest shareholder in Manus, the agentic AI startup whose sale to Meta was struck down by Chinese regulators, according to two people with knowledge of the talks. The Financial Times reported the discussions first on Friday, July 10.
The Chinese gaming and internet group is working alongside Manus' original backers, a roster that includes ZhenFund and HSG, the investment firm previously known as Sequoia Capital China. The consortium plans to repurchase the company from Meta at no less than $2 billion, matching the valuation Meta paid, according to one of the sources and a third person briefed on the matter.
Tencent, Manus, Meta and the two investment firms did not respond to requests for comment from Reuters.
If it closes, the transaction would reverse what was briefly one of the largest exits in Chinese AI, and it would return a company to almost exactly the ownership position it occupied 19 months ago.
The Shape of the Deal
Tencent is expected to take the biggest single slice while remaining a minority shareholder. That detail carries more weight than the headline. A structure that leaves no party in control reads as reassurance to regulators on both sides of the Pacific, and as a governance problem for whoever runs the company afterward.
Talks remain open. New investors may join. Benchmark, the California venture firm that led Manus' $75 million Series B in 2025, is unlikely to participate, according to the FT.
Manus management is party to the discussions.
From Browser Extension to Billion-Dollar Exit
Xiao Hong, who goes by Red, founded Butterfly Effect in 2022, two months before ChatGPT launched publicly. The company's first product was Monica, a browser extension that stacked several commercial language models behind one interface. By 2024 Monica had passed ten million users and turned a profit. ByteDance reportedly offered roughly $30 million for the team that year. Xiao declined.
Ji Yichao joined as chief scientist, a school dropout who built the Mammoth Browser at 17 and later the Magi search engine. Zhang Tao rounded out the founding group as product partner.
Manus itself launched in March 2025 and detonated. Chinese state media christened it the country's next DeepSeek. The pitch was simple: describe a goal in plain language and the agent plans the work, executes it inside a sandboxed virtual computer, and hands back a finished artifact. It could browse, scrape, run code and build slide decks.
Benchmark led a $75 million round in the spring of 2025 at a valuation near $500 million. That investment triggered a US Treasury review into whether it violated outbound investment rules, and drew a public objection from Senator John Cornyn over American capital flowing into a Chinese-linked firm.
The company answered by leaving. Executives began relocating to Singapore in May 2025. Headquarters followed in June. In July the Beijing team, roughly eighty people, was laid off with severance packages generous enough to keep the exit quiet. The company scrubbed its WeChat and Weibo presence, shelved its mainland service, and abandoned a partnership with Alibaba to build a Qwen-based agent for Chinese users.
By December 2025, Manus reported annual recurring revenue above $100 million. Meta announced its acquisition on December 30, at a price reported between $2 billion and $2.5 billion, ranking it among the largest deals in Meta's history. Xiao took a vice president title and reported to Chief Operating Officer Javier Olivan rather than to Alexandr Wang's Meta Superintelligence Labs, an org-chart decision that told anyone paying attention Meta viewed Manus as a product rather than a research asset.
"Joining Meta allows us to build on a stronger, more sustainable foundation," Xiao said at the time.
Beijing Reaches for a Rule It Had Never Used
China's Ministry of Commerce announced an evaluative investigation in January, examining whether the sale complied with export control rules and technology transfer restrictions, along with the country's overseas investment regime.
The verdict landed on April 27. The National Development and Reform Commission issued a one-sentence notice prohibiting foreign investment in the Manus project and requiring the parties to withdraw the transaction. No explanation accompanied it.
The legal instrument was the surprise. Rather than reaching for antitrust law or export controls, the NDRC invoked the Measures for Security Review of Foreign Investments, a mechanism that had never been publicly used before, according to analysis from Trivium China. The regulation requires national security review of foreign acquisitions in sensitive sectors ahead of completion. Where parties refuse, the state can order them to dispose of equity or assets and take further steps to restore conditions as they stood before the investment.
Reporting indicates the decision was elevated above economic regulators to China's National Security Commission, the Communist Party body chaired by Xi Jinping.
Chinese officials reviewing the transaction reportedly characterized it as an attempt to hollow out the country's technology base.
Meta's response was terse. "The transaction complied fully with applicable law," a spokesperson said, adding that the company anticipated an appropriate resolution.
Two Manus co-founders were summoned to Beijing and subsequently barred from leaving China, according to the Financial Times. Beijing routinely imposes exit bans on individuals subject to investigation.
Meta Builds a Firewall
Compliance proved awkward, because the deal had already happened. Manus staff had moved into Meta's Singapore offices. Tencent, ZhenFund and HSG had all collected their proceeds. Benchmark had been paid.
On June 11, Bloomberg reported that Meta had completed an operational split. Manus employees lost access to Meta's internal data systems at the start of that month. Meta employees were instructed to stop using Manus tools for internal projects and to migrate existing Manus work onto Meta systems. An internal memo described the process as sunsetting Manus.
One analyst captured the limits of a legal remedy in a technical context. Engineers who have been inside another company's stack leave a mark that no order can erase: "you can't make them unsee what they've seen," said Fabian Hendrichs, quoted by CNBC.
Manus, meanwhile, kept shipping. It added Similarweb data and Shopify functionality after the block, then connectors for Zoom and Canva. Its users retained the option to reach Meta's Ads Manager as late as June, which meant a product marketing itself as part of Meta was being systematically detached from Meta in the background.
What a Buyback Restores, and What It Cannot
Ownership returns. Momentum does not.
The founders spent May and June exploring a raise near $1 billion to fund a repurchase, with reporting suggesting a Chinese joint venture structure and an eventual Hong Kong listing, a venue that has absorbed a wave of Chinese AI debuts including MiniMax and Zhipu. Tencent's entry at a valuation floor of $2 billion pushes the number considerably higher than what the founders were initially chasing.
The returning investors inherit a company without a strategic parent, without Meta's distribution, and with a product whose technical foundation has always drawn scrutiny. Security researchers who reverse-engineered Manus' system prompts found no proprietary large language model underneath. The reasoning engine was Anthropic's Claude, licensed through standard API access. An open-source group in China reproduced the core functionality in three hours and published it as OpenManus.
None of that stopped Manus from processing more than 147 trillion tokens and spinning up in excess of 80 million virtual machines. Paying users cared about finished work rather than architecture. The company shipped a desktop application in March 2026 with a feature called My Computer, which lets the agent run terminal commands and read local files on macOS and Windows under a per-command permission gate.
Meta lost an interface it can rebuild. The company unveiled Muse Spark 1.1 on Thursday, presenting it as its strongest model for agentic and coding work to date.
The End of Singapore Washing
Manus relocated to sidestep two sets of rules at once. Singapore incorporation let Butterfly Effect accept American capital despite US restrictions on investment in Chinese AI, and it loosened Chinese constraints on moving intellectual property and capital offshore.
Beijing rejected the premise. The company's engineers, research ecosystem and founders remained tethered to the mainland, and regulators treated the corporate address as cosmetic.
"Founders will know that if you start in China, you stay in China," said Duncan Clark, chairman of the consultancy BDA China.
Chris Pereira, chief executive of the consulting firm iMpact, made the same point about jurisdiction, arguing that incorporating in Singapore does not remove a deal from the reach of Chinese regulators.
Several Chinese technology companies have used the same playbook. TikTok established its international headquarters in Singapore while fighting a US ban. The Manus reversal drew alarm from founders and venture investors across China who had been counting on that route.
The Framework That Took Effect on July 1
Beijing did not stop at one deal. A new outbound investment framework came into force on July 1, providing for the first time a formalized legal basis for China to compel the unwinding of completed overseas transactions. It also bans cross-border talent transfers in sensitive sectors without prior approval.
Han Shen Lin, China managing director at The Asia Group, described the framework as giving the state "a retroactive and forward-looking chokehold" over outbound capital. Where Chinese money touched a deal at any point, he argued, Beijing can now assert jurisdiction over the exit, the restructuring or the reinvestment that follows.
Tilly Zhang, an industrial policy analyst at Gavekal Dragonomics, said the directives target precisely the kind of transaction Manus represented: a leading Chinese AI firm turning its back on the domestic market, setting an example Beijing had no interest in seeing repeated.
Which places the current negotiation in a specific light. A consortium led by Tencent buying Manus back at $2 billion is not simply a financial transaction between willing parties. It is the resolution Beijing signaled it wanted when it issued a one-sentence notice in April.
No party has yet said publicly who controls Manus after the unwind, what happens to the roughly one hundred employees now sitting in Meta's Singapore offices, or whether the exit bans on the co-founders have been lifted.
