NextFin News — Kling has begun formal preparations for an independent listing. Reports on October 6 cited people familiar with the matter saying the AI video unit of Kuaishou has selected China International Capital Corp., Goldman Sachs and UBS to work on a Hong Kong initial public offering that could raise at least $1 billion, with a target as early as 2027. Timing and size remain subject to change.

The numbers explain the urgency. In the second quarter of 2026 Kling recorded revenue of more than 850 million yuan, up over 200 percent year on year. Kuaishou’s group revenue for the same period rose only 1.4 percent to 35.535 billion yuan. Advertising still supplied the bulk of the parent’s income, live-streaming declined, and the “other services” line that includes both e-commerce and Kling grew mainly because of the AI unit. Investors who want pure exposure to generative video can already see a path to buying Kling shares directly. Those who remain in Kuaishou must accept the slower platform businesses and the capital-allocation decisions that accompany them.

Kling has already moved beyond the parent’s ecosystem. Adobe integrated Kling 3.0 and its Omni variant into Firefly; Runway lists the model among its options. Professional creators can compare outputs and switch suppliers inside the same interface. That distribution widens Kling’s addressable market while intensifying the need to keep winning usage budgets against rivals.

The ownership structure adds another layer of complexity. After the July 2026 capital increase, Kuaishou entities retained roughly 68 percent of the equity and a majority of the voting power in the restructured Kling entity. External investors and equity-incentive pools took the rest. Cheng Yixiao, who serves as both Kuaishou chairman and Kling chairman, received a personal restricted interest equivalent to 1 percent of the enlarged Kling equity, subject to transfer restrictions and claw-back if he leaves within six years. Su Hua, who retains substantial voting power at the parent, was not listed among the personal grantees in the disclosed incentive arrangements. The difference means Cheng’s economic exposure to Kling’s standalone valuation is more direct than Su’s.

Historical precedents show that control does not automatically protect the parent’s share price. When Kingsoft Office listed on the STAR Market in 2019, the subsidiary surged while the Hong Kong-listed parent fell. LG Chem’s plan to list its battery unit produced similar shareholder dissatisfaction even though the parent kept a large stake. In both cases investors who wanted the high-growth asset preferred the pure-play vehicle. Kuaishou faces the same arithmetic: retaining majority ownership of Kling does not guarantee that the market will assign the parent a matching valuation.

E-commerce remains the clearest reason for ordinary Kuaishou shareholders to stay. Merchants pay the platform both transaction-related fees and advertising fees; the two revenue streams are economically linked. Cheng has repeatedly framed the strategy as a return to “content e-commerce,” with heavier support for brand and industrial-belt merchants, better tools to improve return-on-investment, and deeper fusion of product and traffic. More than 850,000 merchants used free AI operating tools in the first half of 2026. If those efforts raise merchant profitability and sustain advertising spend, the parent generates cash that is independent of Kling’s capital needs.

Yet the funding dynamic cuts both ways. The private round already carries repurchase rights that can be triggered if an IPO is not completed within agreed timelines. Independent capital can reduce the cash Kuaishou must inject into model training and compute. At the same time, any residual funding gap or inter-company cost allocation will be scrutinized by two sets of shareholders with different priorities. Cheng’s dual role and personal Kling interest heighten the need for transparent pricing of shared resources.

A successful Kling listing would give pure AI-video capital a clean vehicle and give Kuaishou a high-profile validation of its technology. It would also force a clearer test of the parent’s remaining businesses. Advertising growth is modest, live-streaming is contracting, and e-commerce must prove it can convert content traffic into durable merchant and buyer value. Investors who continue to hold Kuaishou will be betting that the platform’s cash generation and capital returns justify the conglomerate discount that often accompanies a high-growth subsidiary.

Cheng now manages both the growth story that attracts new capital and the legacy platform that must keep earning its keep. The market will ultimately decide how much of Kling’s value accrues to Kuaishou shareholders and how much travels with the independent listing.