Valued between HK$47.60 and HK$49.50 apiece, filings show that the company sold approximately 280 million shares, pushing the $5 dress manufacturer’s valuation to nearly $27 billion.
Chinese fast-fashion giant Shein reported a 70% drop in market valuation compared to its private market peak from four years ago. This fall comes around the same time as the company seeks to raise nearly HK$13.86 billion ($1.77 billion) in its Hong Kong IPO launch. Shein’s Hong Kong debut comes after it scrapped plans to go public on the New York and London markets for four years.
Valued between HK$47.60 and HK$49.50 apiece, filings show that the company sold approximately 280 million shares, pushing the $5 dress manufacturer’s valuation to nearly $27 billion. Company analysts had accurately expected the Hong Kong listing to oscillate between $25 billion and $28 billion. This performance, however, is a massive drop compared to Shein’s $100 billion market capitalisation in 2022. In the following two years, the valuation stayed at $63 billion.
The fashion retailer will announce the final price on August 31 and begin trading on September 1. News reports indicate that Shein aimed for a $30 billion to $40 billion valuation on the Hong Kong market. Shein garnered international popularity for its cheap and fashionable clothing, with the company selling a pair of jeans for as low as $10. However, external pressures like tariffs, a US Federal Trade Commission (FTC) investigation and some European regulatory cases have slowed the clothing retailer’s growth.
As costs rise and growth slows, investors remain wary of Shein’s ability to reach its previous growth records of $100 billion. Market researchers have pointed out that public investors no longer bet on hyper-growth, focusing instead on underwriting a mature cross-border platform whose profit margins are thinning against Trump tariffs, higher compliance costs, and regulatory scrutiny in both the US and China.
According to LSEG data, Shein’s $27 billion market valuation is at around 0.7 times its forecast sales. This places it higher than its European rival Zalando, trading at 0.4 times. This also makes it cheaper than US-based retailers like H&M and Zara owner Inditex, which trade at around 1.1 and 4.0 respectively.
According to the prospectus, Shein shares worth about $383 million have been subscribed for by cornerstone investors, including incumbent shareholders Boyu, Tiger Global, and General Atlantic. Additionally, UBS Asset Management, Taikang Life, and Tencent Greenwoods will conduct assessments. About 80% of the IPO’s earnings, according to Shein, will be used to expand its brand, enhance its technology, and connect with a worldwide audience.
According to the prospectus, it has promised to pay up to $3.5 billion in cash to certain investors who purchased special shares during previous rounds of private financing. 10% of the voting rights of the company’s founders’ shares will be transferred to the shares sold at the Hong Kong IPO, and the remaining 90% will be in the hands of co-founders Sky Yangtian Xu, Maggie Gu, Molly Miao and Tony Ren.
This float can be attributed to Shein’s weakening profit margins and weaker core earnings. This has also caused concerns over plans for expansion amid rising trade costs and intensifying competition in the global e-commerce industry.
The company has maintained that its H1 revenue growth will be in tandem with the Q1 growth of 1.1%; however, its operating margin is expected to dip lower than its Q1 level. This has been linked to new European import charges and reduced demand in the Middle East due to the Iran crisis.
Shein was also hit with a $99 million quarterly loss after the Trump administration removed the import duty exemption on small packages known as the de minimis rule. This clause had allowed packages worth less than $800 ordered online from China to enter the American market duty-free. There was yet another blow when a $328 million fair-value charge on convertible redeemable preferred shares was levied following an accounting charge.
