Xiaohongshu employees' value increases again

```

Author | Wang Xiaojuan

Editor | Huang Yu

Although the internet’s wealth-creation myths have become rare, some unicorns still offer such opportunities.

Recently, Xiaohongshu announced another increase in employee option grant prices, adjusting the grant price to $25 per share, while the exercise price remains at $2 per share, resulting in a per-share gain of $23.

This option adjustment by Xiaohongshu is not an isolated event, but the latest move in a series of value reappraisals this year.

Looking back at 2025, in March Xiaohongshu first raised the option grant price from its initial level to $13.5 per share. In just three months, it was raised again in June to $18 per share, with the exercise price still at $2 per share, resulting in a per-share gain of $16.

The latest adjustment in October further increased the grant price to $25 per share. From a growth perspective, the value of options doubled within the year—a rare margin in the primary market.

More notably, Xiaohongshu also raised the option buyback price for both current and former employees. The buyback price for departing employees rose from $10 to $17.5 per share, an increase of 75%.

This move led to an increase in value for all employees, benefitting both current and departed staff. Additionally, in April this year, Xiaohongshu introduced a mechanism allowing annual bonuses to be exchanged for options. Employees who have worked for one year and have a performance score of 3.5 or above can convert their annual bonus into options at an “internal preferential price.”

Behind Xiaohongshu’s generous employee incentives is a significant rise in its valuation.

As one of the few unlisted unicorns among internet companies, Xiaohongshu’s capitalization process has always attracted close attention.

In September, market sources said that a recent transaction document from a GGV Capital investment fund showed Xiaohongshu’s valuation rose 19% in three months, reaching $31 billion (about RMB 220.87 billion).

Three months prior, Xiaohongshu’s relevant transaction valuation was recorded at $26 billion; furthermore, in January this year, when old shares were transferred, the valuation was $20 billion; in July last year, the valuation at the time of old share sales was only $17 billion.

Judging from these valuation changes, Xiaohongshu shows a steep curve. In just a year, its valuation jumped from $17 billion to $31 billion, an increase of over 82%.

Behind this soaring valuation is the “sudden fortune” that Xiaohongshu received at the start of 2025.

In January this year, a large number of self-proclaimed “TikTok refugees” from the US flooded into Xiaohongshu. This unexpected windfall briefly took Xiaohongshu to the top of the Apple App Store rankings in the US, and to number one in the free app list in the App Store of 43 countries, including Canada and Australia.

Data from market intelligence company SensorTower shows that in March 2025, Xiaohongshu’s average daily active users in the US were 800,000, a sharp drop from the January peak of 1.3 million, but still up 114% over December 2024. This indicates Xiaohongshu still maintains user growth momentum internationally.

As of mid- 2025, Xiaohongshu’s monthly active users surpassed 350 million, a record high. The rapid increase in user scale provides greater potential for monetization and is a key reason capital markets are optimistic on its future.

In addition to user growth, Xiaohongshu’s profitability improvement is also notable.

In 2023, Xiaohongshu achieved profitability with net profit reaching $500 million. Of greater interest, a Bloomberg report in September indicated that Xiaohongshu could triple profits in 2025 to $3 billion.

If this forecast comes true, it will mean a qualitative leap in Xiaohongshu’s profitability.

Xiaohongshu’s revenue mainly comes from advertising and e-commerce. A GF Securities report in February 2024 revealed that 80% of its 2022 revenue came from advertising, and most of the rest from e-commerce. The proportion of advertising income fell slightly in 2023, but still accounted for nearly 80% of total revenue.

Xiaohongshu’s monetization capacity keeps increasing, driving up its valuation. Facing the long-term challenge of commercialization, Xiaohongshu is seeking breakthroughs in e-commerce.

In July 2024, Xiaohongshu proposed the “lifestyle e-commerce” concept, further clarifying its strategic direction in e-commerce. This year, Xiaohongshu has sped up its e-commerce expansion, with a series of moves showing active exploration in monetization.

In August, Xiaohongshu announced the establishment of a “big business unit”, integrating commercialization and e-commerce teams. Shortly after, it added a marketplace to its channel, boosting its e-commerce efforts further.

With valuation rising and performance improving, Xiaohongshu’s IPO journey has become a market focus again.

The IPO journey of Xiaohongshu has always been closely watched. As early as 2018, founder Qu Fang publicly stated the possibility of completing an IPO within 2 to 3 years. However, there was no substantial progress in subsequent years.

In 2023, IPO rumors resurfaced. In April, reports claimed Xiaohongshu had secretly filed for IPO with the US SEC. However, in July that year, Xiaohongshu was reported to have suspended its US listing plan.

In the past two years, market rumors say Xiaohongshu shifted its IPO focus to Hong Kong. Still, there has been no substantial progress.

This June, InvestHK announced Xiaohongshu officially opened its Hong Kong office. Industry interpreted this as a precursor to a Hong Kong IPO, but Xiaohongshu explained it mainly as a business-driven decision.

“To us, Hong Kong is not only an important market, but also a key bridge,” said Qianyue, Xiaohongshu’s General Manager of Commercial Cross-Border, at the opening ceremony, “It’s to help overseas brands reach mainland Chinese consumers as well as to support mainland Chinese brands in expanding to Hong Kong and overseas markets.”

With option prices doubling within the year and valuation surpassing $31 billion, all this points to high expectations from capital markets for Xiaohongshu.

Standing at the door of IPO, how Xiaohongshu writes a long-term story from “planting grass” to “harvesting”, and how it can keep users on the platform in the long run, are questions the company must consider.

Risk Warning and DisclaimerThe market involves risk; investment needs to be cautious. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial circumstances, or needs of any individual user. Users should consider whether any opinions, views or conclusions in this article are suitable for their particular circumstances. Investing accordingly is at your own risk. ```