Shein launches Hong Kong IPO at sharply lower valuation
HONG KONG, Aug. 24 (Reuters) - Online fast-fashion retailer Shein's valuation has crumpled by about 70% from a private market peak near $100 billion four years ago, as it looks to raise up to HK$13.86 billion ($1.77 billion) in a Hong Kong IPO launched on Monday.
Shein is selling 280 million shares priced between HK$47.60 and HK$49.50, valuing it at close to $27 billion at the top of the range. The valuation has dropped from private fundraising rounds that valued it at $98.2 billion in 2022.
Analysts point to slower growth, tariffs and competition
Here are some comments from analysts.
Nirgunan Tiruchelvam, head of consumer and internet at Aletheia Capital, Singapore:
"It (the valuation drop) shows that the enthusiasm with which investors viewed e-commerce players such as Shein (and) the so-called myriad of baby Amazons that continue to be active, has completely shifted from the heady days of 2020-22 during the pandemic to what it is today."
"The growth rates have completely plateaued from say over 20% in terms of their GMV growth to below 10% in many cases, so there's a normalization of their growth for obvious reasons. There's no more lockdown. Interest rates are much higher today than (they were) in those days, it means that the discount rate with which people value these things is completely different, and valuations are much lower."
Lorraine Tan, director of equity research for Asia, Morningstar, Singapore:
"The drop in Shein’s valuation largely reflects the change in prospects for the company from say 2-3 years ago when its IPO was first mooted. Firstly, the added U.S. tariffs are hurting sales and dent (the) future growth outlook; and secondly, there is increased competition - notably with PDD’s Temu. Margins have slipped as a result and the company made a quarterly loss. We believe interest in Shein by global investors has probably cooled as a result, leading to the reduced listing price."
Gary Tan, portfolio manager, Allspring Global Investments, Singapore:
"The lower valuation suggests investors increasingly view Shein as an internet platform, a sector whose multiples have compressed amid AI disruption concerns. The loss of the de minimis tariff exemption has also weakened one of its key competitive advantages, which the company has been working to rebuild since early last year."
Jason Chan, strategist, Bank of East Asia, Hong Kong:
"It's a bit late for Shein to pursue an IPO. For the past two to three years, China's domestic consumer consumption has been quite weak despite different types of incentives, and for its overseas business the tariff risk is also a big overhang, so this valuation cut is pretty reasonable. The best timing might be three to five years ago and it had already missed that."
Kenny Ng, strategist at China Everbright Securities International, Hong Kong:
"Shein launched ... with a valuation that has fallen significantly compared to earlier years. I believe this primarily reflects that its growth has faced greater challenges recently.
"In my view, these challenges stem from three main areas: trade protectionism (tariffs) across different countries or regions, downward pressure on the global economy affecting consumer sentiment, and fierce competition within the industry.
"I believe the fact that pre-IPO investors entered at a higher valuation than the current IPO offering price will weigh on the overall investment sentiment for Shein's ongoing bookbuilding."
Winston Ma, professor at NYU School of Law and former North America head of China's sovereign wealth fund CIC:
"Shein’s $27 billion valuation targets a new equilibrium.
"Public investors are no longer paying for hyper-growth; they are underwriting a mature cross-border platform that must now defend its profit margins against trade tariffs, higher compliance costs, and regulatory scrutiny in both US and China.
"Also on valuation, Shein is experiencing its 'Zoom moment.' Just like Zoom, Shein's COVID-era business model is now being tested by the new market, where investors have aggressively rotated into AI stack-related investments.
"Robust demand would affirm Hong Kong’s role as the pragmatic listing venue for large consumer and e-commerce names that face hurdles elsewhere."
Kenneth Goh, director of private wealth management, UOB Kay Hian, Singapore:
"Shein is selling equity in Hong Kong while the hyperscalers borrow in global investment grade credit. Direct crowding out is hard to argue.
"Hong Kong and the mainland have seen two listings this month worth comparing.
"Unitree is raising about $900 million at a $9 billion valuation and says its retail tranche was more than 8,000 times covered. Shein is raising $1.77 billion with cornerstones drawn largely from its own existing shareholders.
"Investors who attended the presentations said Shein leaned on operational technology without the growth story now attracting capital to AI-linked businesses.
"The scarce resource is willingness to underwrite something that has to be explained from scratch."
(Reporting by Yantoultra Ngui and Jiaxing Li in Hong Kong and Rae Wee and Ankur Banerjee in Singapore; Editing by Sumeet Chatterjee, Clarence Fernandez and Thomas Derpinghaus)
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