Shein is set to be the most prominent retailer to launch a public offering in years, especially as many consumer brands have postponed their IPOs due to a decline in sentiment and spending among lower- to middle-income consumers.
Founded in 2012 by the elusive Sky Xu, a Chinese entrepreneur, Shein has been awaiting Beijing’s approval for its IPO for a year, requiring clearance from the top echelons of the ruling Chinese Communist Party, per a source familiar with the situation.
Beijing considers Shein to be politically sensitive and has expressed caution, especially following a previous scandal involving a sex doll in France and accusations of poor labor practices at its factories in China, the source noted.
Shein filed its Hong Kong IPO application confidentially, and as of Friday, the documents have not yet been made public. With the recent approval, the online retailer can begin organizing investor roadshows and preparing for hearings with the Hong Kong stock exchange, a mandatory step for all IPO candidates before their shares are officially listed.
Notable backers of Shein include private equity firms such as General Atlantic, HongShan Capital (formerly Sequoia Capital China), Mubadala Investment, Brookfield, and Claure Group.
A representative for Shein declined to provide a comment.
Valuation drops sharply since 2022
In 2022, Shein was valued at up to $100 billion, but as the pandemic-driven e-commerce surge faded and resistance from lawmakers and regulators grew, this valuation was adjusted by investors.
Its last private fundraising round in May 2023 set the company’s valuation at $66 billion.
According to sources, Shein is now targeting a valuation between $40 billion and $50 billion for its IPO.
This would place it significantly smaller than its main competitor, Temu’s parent company PDD Holdings, which boasts a market cap of $117 billion, but double the size of fast-fashion retailer H&M, valued at around $24 billion and has seen its market share erode due to Shein’s success.
New York and London attempts
Shein’s upcoming Hong Kong listing concludes a global IPO journey.
The giant e-commerce platform, renowned for its $5 dresses and $10 jeans, initially filed for a US IPO in November 2023, but faced increasing pushback from lawmakers and regulators.
After its US filing faltered, Shein sought a listing in London, where the Financial Conduct Authority approved a draft prospectus, yet the CSRC in China withheld its approval, effectively blocking the move.
This prolonged struggle underscores how geopolitical tensions have altered the landscape for Chinese firms pursuing international funding, and how Beijing has tightened its control over successful entrepreneurs since obstructing Jack Ma’s Ant Group IPO in 2020.
New regulations established by the CSRC in 2023 empowered it to scrutinize offshore listings and impede offerings that might jeopardize national interests. Despite relocating its headquarters to Singapore in 2022, Shein remains under Chinese IPO regulations, as most of its products are sourced from third-party suppliers in China.
A Shein listing would be a significant positive for Hong Kong, which has emerged as a leading global listing hub this year.
In the past year, the CSRC has granted approval for over 180 additional IPOs, according to public records, driving a resurgence in the city’s equity capital markets.
Forced labour, unfair competition
Originating in Nanjing, China, Shein finds itself at a crossroads as US-China relations deteriorate and trade becomes increasingly contentious. Its business model has come under fire in various countries for offering Chinese products at exceptionally low prices, undermining local retailers and manufacturers.
Shein has faced criticism from competitors, regulators, and NGOs over several issues, including its addictive app, substandard working conditions in its factories, and high emissions resulting from air cargo shipments of inexpensive polyester clothing worldwide.
Recently, US and European initiatives aimed at closing customs loopholes and imposing duties on cheap shipments have challenged its business model of sourcing clothes from China and delivering them directly to consumers.
Furthermore, Shein has accrued over €200 million ($228.46 million) in fines from French regulators for consumer data misuse and deceptive discount practices. The European Commission initiated a formal investigation into the platform in February regarding the sale of illegal items.
