Meta has reportedly begun dismantling its $2 billion acquisition of AI startup Manus, taking significant steps to separate the two companies after Chinese authorities ordered a divestiture on national security grounds earlier this year.
According to Bloomberg, Meta has cut Manus off from its internal systems and halted data-sharing arrangements, preventing employees from using Manus products for internal projects as the companies move toward a complete operational separation.
The move follows reports from May indicating that Manus co-founders have explored raising approximately $1 billion from external investors to regain control of the company. Such a transaction could pave the way for a Chinese joint-venture structure and potentially position the startup for a future listing in Hong Kong, which has recently seen growing activity from Chinese AI companies including MiniMax and Zhipu.
What was initially viewed as one of the most significant exits in China’s AI sector is now rapidly being reversed. The situation highlights Beijing’s determination to maintain oversight of strategically important technologies, even when companies are incorporated or operate overseas.
Beyond the divestiture order, Chinese regulators have expanded restrictions on AI-related talent and investment. Reports indicate that researchers and executives at private technology firms now require government approval before travelling abroad. Authorities are also increasing oversight of foreign investment, with major AI companies such as Moonshot AI, StepFun, and ByteDance reportedly required to obtain approval before accepting U.S. capital.
Despite the uncertainty, Manus has continued to release new products and integrations, including partnerships with Similarweb and Shopify.
The startup gained international attention after a viral demonstration of its AI agent technology. Manus relocated employees to Singapore in mid-2025 before announcing its acquisition by Meta in December. Chinese regulators later launched a review of the transaction, citing concerns related to technology export controls and foreign investment regulations.
According to The Wall Street Journal, investors, including Benchmark, have already received proceeds from the acquisition. In contrast, Asian investors such as Tencent, HSG, and ZhenFund have indicated they will cooperate with the unwinding process.
Manus’ connection to its Chinese parent company, Butterfly Effect, also attracted scrutiny in the United States, where Senator John Cornyn previously questioned whether American investment should flow to companies with ties to China.
