Shein is targeting a valuation of about 25 billion dollars for its listing on the Hong Kong exchange, well below the almost 100 billion it commanded four years ago. According to Reuters, the Singapore based fast fashion group intends to launch the initial public offering by the end of the week, adjusting its expectations downwards to fit current market conditions. The figure is also a cut against the 30 to 40 billion that was being discussed at the start of August.
The descent has been steady. At the peak of a private funding round in 2022 Shein was worth 98,2 billion dollars. The following year the valuation had already fallen to 64 billion, and at the beginning of this month analyst estimates still ran between 30 and 40 billion. Two things have driven that down: sales growth slowing after the boom of the pandemic period, and an increasingly strict international regulatory environment for cross border e commerce. Pricing at 25 billion is a deliberately cautious move, meant to get past the financial community's wariness and complete the deal.
At that level Shein lands close to the Swedish group H and M, worth around 26 billion. It stays a long way from the top of the sector. Fast Retailing, the Japanese group behind Uniqlo, is capitalised above 160 billion dollars, and Spain's Inditex, which owns Zara, is worth more than 200 billion.
Reuters reports that several investors who attended the presentations or examined the accounts doubt Shein can return to the growth rates of 2022. A lower valuation also has a direct effect on the capital structure: under the arrangements set for the listing, if the value falls below certain thresholds the company has to compensate its earliest investors by issuing new shares.
Behind it is Sky Xu, co founder and chief executive of a platform built on selling ultra cheap clothing to customers in more than 150 countries, backed by investors including HongShan, formerly Sequoia China, and grown on low prices and digital channels. In 2023 Xu tried to widen the model with an agreement with Sparc Group, which manages the Forever 21 brand, to put Shein products into physical stores in the United States. The route to a listing has been obstructed more than once: regulatory problems blocked plans for Wall Street and then London before the group turned to Hong Kong. Forbes estimates Xu's personal fortune at around 6 billion dollars.