Meta has begun the formal dismantling of its $2 billion acquisition of Manus, the Chinese AI agent startup, after Beijing issued a divestiture order on national security grounds roughly two months ago. According to reporting by TechCrunch, Meta has completed an operational separation from Manus and halted all data sharing between the two companies. Meta employees can no longer use Manus tools for internal projects, and the startup has been cut off from Meta’s internal systems.
The development marks the most concrete step yet in the drawn-out, politically charged unwinding of one of the largest acquisitions of a Chinese AI company by a US technology giant. Meta announced the $2 billion deal in December 2025, shortly after Manus drew global attention with a viral demonstration of its autonomous AI agent capabilities.
The Buyback Option
With Meta stepping back, the Manus co-founders have entered preliminary discussions to raise approximately $1 billion from outside investors to reclaim the startup. One structure under consideration would involve establishing a Chinese joint venture, with the possibility of an eventual listing on the Hong Kong Stock Exchange. The co-founders’ travel restrictions, imposed by Chinese authorities amid scrutiny of the original deal, remain in place, complicating negotiations.
Manus’s investor base reflects the complexity of the situation. California-based Benchmark, which had backed the company at an early stage, has already received proceeds from the Meta acquisition. Asian backers including Tencent, HSG, and ZhenFund have indicated they will cooperate with the unwinding process. Manus’s parent company, Butterfly Effect, is at the center of the restructuring discussions.
Broader Regulatory Signals
The Manus case has sparked a broader recalibration of how Chinese AI companies manage their relationships with foreign capital. Chinese authorities have expanded travel restrictions to researchers and executives at private AI firms, requiring government approval before heading abroad. Top AI companies — including Moonshot AI, StepFun, and ByteDance — will now need government sign-off before accepting US investment.
Senator John Cornyn has separately questioned whether American capital should flow to a Chinese-linked firm, adding a US legislative dimension to what began as a Chinese regulatory action. The case has effectively created a new category of deal risk for cross-border AI transactions, one that neither side’s legal frameworks were designed to handle.
EastFrontier has tracked the Manus saga in detail, from Beijing’s original divestiture order to the co-founders’ buyback plans and the broader implications for AI M&A. The operational separation reported this week represents the first tangible execution of those orders, moving the situation from regulatory decree to commercial reality.
The Legal Mechanics of the Unwind
Unwinding a completed acquisition is substantially more complex than blocking one. Meta paid $2 billion for Manus; the money has been distributed to shareholders, and the company’s technology and personnel have been integrated into Meta’s systems to varying degrees. Reversing that integration requires not just a regulatory order but a negotiated commercial agreement about what is transferred back, at what valuation, and under what terms.
The structure currently under discussion, a Chinese joint venture with a potential Hong Kong listing — reflects the difficulty of a clean separation. A joint venture would allow Meta to retain some economic exposure to Manus’s future value while satisfying Beijing’s demand that the company operate under Chinese governance. The Hong Kong listing option would provide a mechanism for price discovery and eventual exit for all parties. But it also requires Manus to demonstrate the kind of standalone commercial viability that was not fully tested during the period it operated under Meta’s umbrella.
EastFrontier has previously analyzed what the Meta-Manus unwind actually requires and why it rewrites the rules for AI M&A. The operational separation now underway is the first concrete step in that process, but the harder work, agreeing on valuation, governance, and the disposition of intellectual property developed during the Meta period, lies ahead.
Manus Keeps Shipping
Despite the turmoil, Manus has continued to release new features. The company recently announced integrations with Similarweb and Shopify, signaling that its product team remains active even as its corporate structure is being unwound. Neither Meta nor Manus responded to requests for comment on the latest developments.
The situation underscores a tension that will define the next phase of China’s AI industry: the country’s most capable AI startups were built with global ambitions and international capital, but the state now views their independence and their data as a matter of national security. The Manus case has not resolved that tension. It has made it structural.