Fast-fashion giant Shein shrinks value to $27 billion, at best, in Hong Kong IPO

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By Yantoultra Ngui and Kane Wu

HONG KONG, Aug 24 (Reuters) - Online fast-fashion retailer Shein's valuation has dropped by around 70% from its private market peak four years ago, as it aims to raise up to HK$13.86 billion ($1.77 billion) in its Hong Kong IPO launched on Monday.

The long-awaited Hong Kong IPO comes after Shein, known for selling $5 dresses and $10 jeans to shoppers in about 160 countries, scrapped plans to list in New York and London over the past four years.

It is selling 280 million shares between HK$47.60 and HK$49.50 per share, the filings showed, valuing it at close to $27 billion at the top of that range.

Reuters last week exclusively reported the Shein IPO was set to value the company at around a quarter of the $100 billion it was worth in 2022. 

Shein was valued at $64 billion in 2023 and April 2024.

The China-founded, Singapore-headquartered company will announce the final price on August 31 and start trading on September 1.

Shein had first sought an IPO valuation of $30 billion to $40 billion when investor meetings ahead of the IPO kicked off.

The marked decline in valuation comes after the company faced questions over slowing growth, rising costs and changing market conditions. Investors had said they were not convinced Shein could return to the growth rates that valued it at nearly $100 billion four years ago.

The weaker valuation reflects a new equilibrium, said Winston Ma, an adjunct professor at New York University School of Law and former head of North America for China's sovereign wealth fund CIC.

"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 the U.S. and China," Ma said. 

The $27 billion market capitalisation values Shein at around 0.7 times its forecast sales, more expensive than European rival Zalando, which is trading at 0.4 times, but cheaper than H&M and Zara owner Inditex, which trade at multiples of around 1.1 and 4.0 respectively, according to LSEG data. 

Cornerstone investors led by existing shareholders Boyu, Tiger Global and General Atlantic have subscribed for about $383 million worth of Shein shares, the prospectus showed. Tencent, Greenwoods, Taikang Life and UBS Asset Management will also take stock.

Shein said it would use about 80% of the cash raised in the IPO to improve its technology and increase its brand and global presence.

It has agreed to pay up to about $3.5 billion in cash to certain investors who bought special shares in earlier private funding rounds, according to the prospectus.

The shares sold in the Hong Kong IPO will have one-tenth the voting rights of the shares held by the company's founders.

Co-founders Sky Yangtian Xu, Maggie ⁠Gu, Molly Miao and Tony Ren will control 90% of Shein's voting rights, the prospectus showed.

GROWTH SLOWS SHARPLY

The float comes as slowing revenue growth and weaker core earnings weigh on Shein's business, while shrinking margins have also raised concerns its expansion is running into headwinds from higher trade costs, tighter regulatory scrutiny and intensifying competition across global e-commerce.

Shein said in the prospectus its first-half 2026 revenue growth is expected to be broadly in line with the 1.1% growth posted in the first quarter, while its operating margin is expected to be slightly lower than the first-quarter level.

The company said this is due to new European import charges, pricing pressure and weaker demand in the Middle East linked to the Iran war.

It swung to a $99 million quarterly loss after the U.S. removed an import duty exemption on small packages, and a $328 million fair-value charge on convertible redeemable preferred shares following an accounting change. 

The de minimis rule had allowed packages worth less than $800 ordered online from China to enter the U.S. duty free. Shein ​previously said Chinese-origin products sold by it or through its marketplace and shipped to the U.S. are now subject to tax rates ranging from 10% to 87.5%.

In its prospectus, Shein said it faces a "significantly higher level of duties and taxes" in the U.S. which directly triggered a 14.3% drop in U.S. revenues during the first quarter this year.

The company said it has set aside about $80 million at end-March for ongoing legal and regulatory cases. These include a U.S. Federal Trade Commission investigation that could result in significant payments, an EU Digital Services Act investigation and data privacy cases in France and Ireland.

Shein's purchase of U.S. clothing brand Everlane in May for $80 million is now facing a national security review by the Committee on Foreign Investment in the United States (CFIUS), Bloomberg News reported on Monday. Shein did not immediately respond to a request for comment from Reuters.

Shein's IPO is the largest new share sale in Hong Kong in 2026, surpassing autonomous driving firm Momenta Global's $751 million offering in July. It is the third-largest IPO in Asia, behind CXMT and China Resources New Energy, which raised $9.8 billion and $3.6 billion respectively, in Chinese onshore IPOs.

Hong Kong new listings have raised about $41 billion so far this year, a record for the period and more than double the $17 billion ‌raised a ⁠year earlier, LSEG data showed.

($1 = 7.8400 Hong Kong dollars)

(Reporting by Yantoultra Ngui and Kane Wu in Hong Kong and Sameer Manekar in Bengaluru; Writing by Scott Murdoch; Editing by Chris Reese and Sonali Paul)