Shein Global Holdings Ltd. made its highly anticipated debut on the Hong Kong stock market, with shares initially falling as much as 10% before recovering to close nearly unchanged at HK$48.50, just below its IPO price of HK$48.56. The fast-fashion giant raised approximately $1.7 billion in one of Hong Kong's largest new share sales this year. This debut follows a lengthy process and values the company at around $26.3 billion, a significant drop from its peak valuation of nearly $100 billion in 2022.
Investors and analysts expressed concerns regarding Shein's slower growth, escalating trade costs, and heightened regulatory scrutiny. Charu Chanana, chief investment strategist at Saxo, noted that despite the substantial valuation reset, investors did not perceive Shein as "obviously cheap." She highlighted that Shein was valued at 15 times forward earnings, more than double that of its rival Temu (owned by PDD), suggesting investors were paying a premium despite greater uncertainty surrounding growth and significant regulatory and trade risks.
Shein's financial performance has also been under pressure, with net income sliding 39% last year and the company swinging to a loss in the first quarter. Operating profit margins for the first half of the year are expected to be lower due to increased customs duties, tariffs, fees, and logistics costs in Europe and the Middle East. The termination of "de minimis" tariff exemptions in the U.S. and the EU, which allowed low-value parcels from China to enter without duties, has negatively impacted Shein's direct-shipping model, leading to a 45% fall in daily active users in Europe, a trend also observed by Temu.
The IPO served not only as a fundraising event but also as a capital-structure adjustment, enabling Shein to compensate early investors who had invested at much higher valuations. The company agreed to make cash payments totaling about $3.5 billion and adjust shares for some preferred shareholders. Despite the challenges, notable investors, including Willett Advisors (Michael Bloomberg's family office), Xavier Niel, Microsoft, Reliance, Claure Group, and SoftBank Vision Fund, participated in the IPO, with cornerstone investors locking up about one-fifth of the shares for six months.
