Shein shapes up for cut-price IPO as dominance slows
Shein will list in Hong Kong this week in a cut-price initial public offering following two previous failed attempts in London and New York.
The Chinese retailer will begin trading in Hong Kong on Tuesday in a debut set to value the firm at around $27bn (£19.8bn), about a quarter of its highest private-market valuation.
Shein will offer nearly 280m shares at between HK$47.60 and HK$49.50, expecting to raise about HK$13.6bn.
The online retailer has surged in popularity in recent years, putting pressure on household high street names like Zara and H&M with its combination of rock-bottom prices and super-fast delivery.
While this public market debut should be a moment of triumph for the fast-fashion seller, the price and location of this offering marks a significant downfall for the firm.
Shein had first sought a listing in the US in 2023, but ditched the plans following pushback from the Securities and Exchange Commission. Lawmakers had raised concerns over alleged labour malpractices and lawsuits from the retailer’s US competitors.
The Singapore-headquartered firm then turned to London, where it filed for a £50bn float. Shein faced pressure from MPs over a “lack of candid and open answers” to allegations that its supply chain was linked to forced labour and human rights abuses.
Tax crackdown threatens sales
The retailer’s filing for a public float in Hong Kong was initially seen as a power play designed to pressure the UK’s Financial Conduct Authority into approving its London listing.
But Shein has now pressed ahead with its cut-price Hong Kong float as it faces growing balance sheet and regulatory pressures.
“Appropriately enough for a business which made its name selling clothes at discount prices, Shein looks set for a cut-price IPO,” AJ Bell investment director Russ Mould said.
The firm swung to a $99m loss in the first three months of this year, compared to a net income of $395m in the year before.
“[But] Shein still has strengths as a retail business, which include identifying and latching on to emerging trends at pace, significant flexibility in its supply chain and a large global customer base,” Mould added.
One of the drags on Shein’s once-buoyant sales is the emerging crackdown on a tax loophole which had been a huge boon to the e-commerce giant and its rivals, like Chinese-owned Temu.
Shein said last month that the US’s decision to scrap a rule which had exempted small packages from import duty had hit its sales in the key market.
“In response to the increased duties and taxes, we are pursuing a wide range of options, including increasing our prices in the US market to offset a portion of the increased costs,” the group said in its accounts.
This tax loophole, known as the ‘de-minimis’ threshold, was closed in the EU earlier this month and the UK government is set to introduce its crackdown on the rule in October 2028.
Fast fashion declines in popularity
But British high street retailers, including Primark and Accessorize, have urged the government to bring forward this measure, which has already been accelerated by six months, meaning that Shein could see its UK sales put under threat even sooner.
“That could gradually narrow the price gap between Shein and high-street rivals such as Primark and H&M, taking some of the sparkle out of its ultra-cheap offering,” said Wealth Club’s chief investment strategist, Susannah Streeter.
Shein is also coming to terms with a fashion market that is much changed from the insatiable appetite for fast fashion which rocketed the company to dominance a few years ago.
Second-hand platforms like Vinted and Ebay have seen a resurgence in popularity as consumers turn to retro styles and more sustainable shopping practices.
“Fast fashion is far less popular than it was a decade ago, with the rise of resale websites proving tough competition, given that shoppers can get their hands on higher-end brands, at a fraction of the price, to refresh wardrobes,” Streeter said.
Shein was co-founded in 2008 by Chinese entrepreneur Chris Xu, also known as Xu Yangtian. The retailer’s IPO is being led by Wall Street heavyweights JP Morgan, Goldman Sachs and Morgan Stanley.