Fast-fashion giant Shein made its highly anticipated stock market debut in Hong Kong, with shares falling by almost 10% on Tuesday. The listing valued the company at $26.3 billion, a stark contrast to its peak valuation of nearly $100 billion in 2022. This debut follows failed attempts to list in the US and UK, where concerns about Shein's labor practices and environmental impact were raised. The company raised HK$13.6 billion ($1.7 billion) from the listing, with shares initially priced at HK$48.56 each, but trading at HK$43.9 in early hours.
The significant drop in valuation reflects a "complex moment" for the company, as investors grow skeptical of fast-fashion performance, according to Louise Deglise-Favre from research firm GlobalData. Shein faces heated competition, particularly from rivals like Temu, and increased scrutiny over its business model. Its net income plunged 39% in the prior year, and it reported a $99 million quarterly loss in the first quarter, partially due to the removal of the de minimis exemption in the US, which previously allowed tariff-free imports of small packages. The EU has also imposed a €3 tax on low-value imports, further impacting its finances.
Analysts like Dickie Wong from uSMART Securities expressed skepticism about the IPO, noting that a significant portion of the money raised will go back to earlier investors. The IPO also includes approximately $3.5 billion in cash payments and share adjustments for some preferred shareholders to address legacy valuation mismatches. The shares offered in the IPO represent about 6.6% of Shein's enlarged share capital, with cornerstone investors holding about one-fifth and committed to a six-month lock-up, leaving only about 5% freely tradable at launch. Despite a formidable supply chain and global reach, Shein's business model is now challenged by tighter regulation, tariffs, and rising customer acquisition costs, according to Deglise-Favre.
