Shein Preps for IPO at Fraction of Peak Valuation. Is It Finally a Bargain?
Down close to 75% from its $100 billion peak valuation, the fast fashion retailer will list in Hong Kong while questions swirl about its prospects.
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Warp-speed fashion retailer Shein is building its books ahead of its scheduled listing in Hong Kong in a week’s time.
It’s a listing that’s been a long time coming. But the e-commerce company’s valuation has plunged some 75% in just a couple of years. Has the company missed its window of opportunity? Or to look at the listing another way, is it now attractively priced?
Let’s take a look at the offer.
Hot Money Finds New Home
There’s no doubt the hot money has moved on to the Artificial Intelligence (AI) trade and the semiconductor sector. That means Shein is listing at more-realistic valuations. But the company also faces serious challenges to its business model. And the company itself is paying the price for the rash overpricing by its venture-capital backers.
Readers may recall my columns about a potential initial public offering (IPO) while the company was doing the investment-banking rounds on Wall Street in 2023 at a potential $100 billion valuation. Then I wrote about it again when it was doing the rounds in London in 2024 at $66 billion.
That tally keeps falling. Now Shein, founded in China but having switched its base to Singapore, will list at a fraction of its peak venture-capital pricing, at around $27 billion. The exact price will be set by Friday, with the stock due to start trade on Tuesday, September 1, under the ticker HK:0625.
Shein is selling 279,992,500 shares, or 6.6% of the outstanding total, at a range of HK$47.60 to HK$49.50. At the high end, that would raise HK$13.9 billion ($1.77 billion), and give the company a market capitalization of HK$210.2 billion (US$26.8 billion). It intends to use 40% of the proceeds to enhance its tech, and another 40% to promote its brand and global presence. The rest goes to corporate purposes.
Still a Giant Unicorn
It’s still a big deal, and Shein is still an interesting company. Even at $27 billion, that would rank it around No. 15 in terms of the list of largest “unicorn” private companies around the world.
Yet are other new names above it since it hit the ranks of the largest private startups: AI plays like Anthropic, OpenAI, DeepSeek. By contrast, Shein is being valued as a mature e-commerce operator rather than the kind of high-growth tech venture that initially prompted such lofty valuations.
Shein’s IPO prospects were underpinned by venture-capital rounds in early 2022 that priced it at $98.2 billion, and two rounds in 2023-24 that established a $64.0 billion foundation. Among those v.c. backers are Tiger Global Management, the Sequoia Capital China successor HSG, as well as Chinese v.c.s Boyu Capital and IDG Capital.
Paying Back the Venture Capital
These pre-IPO investors have “special rights,” as outlined in the prospectus, that are already seeing them claw back their overpriced investment. The “anti-dilution” adjustment will give them shares equivalent to their original investment, leaving pre-IPO investors holding 40.4% of the stock in the listed company.
The company has already paid back $1.1 billion to these Series D holders of preferred shares at a per-share annual return rate of 8%, which escalated to 12% and another $230.4 million in cash payments from March 6 through the IPO. The payments will stop at the IPO. But they’re particularly beneficial to the Series D+ Preferred shareholders, who are on a “full-ratchet” basis that will recompense them for everything they invested.
The venture-capital backers will get to convert their preferred shares into the Class B shares that new investors will be buying. Having invested $1.8 billion at the peak valuation in 2022, and another $1.7 billion in 2023, those investors will essentially be made whole, at the cost to the company — and indirectly, the new shareholders from the IPO.
Model Faces Major Challenge
Shein is also bedeviled by a cluster of other issues. Chief among them are Chinese-U.S. trade tensions, leading to increased competition and regulation.
Shein’s name is pronounced “she-in” due to its prior online identity, She Inside, selling wedding dresses online. The company was founded in 2008 but exploded in popularity during the pandemic, building a massive customer base by offering clothing at improbably low prices.
You’ve heard of fast fashion? Well, Shein out-hustled even those clothing producers. Its revolutionary model allowed it to knock off items made by companies such as Zara parent Inditex (IDEXY) (BME:ITX) and H&M Hennes and Mauritz (HNNMY) (STO:HM-B).
That in turn attracted legions of Gen Z followers on social media. Influencers on TikTok, Instagram and YouTube would unbox, say, a “Summer Shein Haul.” As usage ramped up of those platforms — TikTok is owned by China-based ByteDance, Instagram by Facebook parent Meta Platforms (META), and YouTube by Google parent Alphabet (GOOG) — Shein capitalized with smart recruitment of content creators via discount codes that create commissions. It also gamifies use of its app by offering users points and discount codes for logging in daily, sharing content, and referring friends.
Users exploded from 10 million in 2018 to 100 million in 2021. Active users now count 273 million in 160 markets as of the end of last year.
Part of Shein’s cost-cutting measures come from relying on a network of suppliers in China that are out-of-house, and off its books. It keeps corporate headcount as low as possible, and carved out an impressive direct-to-consumer model.
It credits its success to its in-house algorithm, which it calls its Large-scale Automated Test and Reorder (LATR) model. The system allows it to place orders for small micro-batches of just 100 to 200 items, then quickly scale.
Double Tax Exemption
But another part of the model is a quirk of regulation. When the first Trump administration started raising U.S. tariffs on Chinese goods in 2018, China sought to ease the burden by waiving its Value Added Tax (VAT) and consumption tax on e-commerce shipments.
The United States had in 2016 raised its “de minimis” or “trifling matters” duty-free exemption from $200 to $800 per person per day. This saved companies on the cost of sending sample items, but mainly sought to cut government admin costs, where labor and paperwork cost more than any tax raised.
Shein could therefore get a double tax exemption, one on both sides of the Pacific. Chinese rival app Temu, owned by the group-buying e-commerce operator PDD Holdings (PDD), saw a similar opportunity and entered the U.S. market in 2022, backed by a splashy Super Bowl ad in early 2023.
Their model has been undermined though when the Trump administration removed the de minimis exemption for items from China in May 2025, and then for all goods in August last year. The European Union has also changed its exemption from no tax for shipments under €150 to impose a €3 charge per parcel for e-commerce.
A series of wildly oscillating U.S. tariffs were slapped on Chinese goods, too, rising as high as 145% before being slashed to a 30% U.S. import duty. After many of the Trump team’s duties were ruled illegal, the import tax was slashed to 10%. It was then raised slightly to the current 12.5% under the current “Section 301” penalty tariffs based on claims countries do not do enough to eliminate forced labor.
Questions About Forced Labor
Shein has faced criticism that its clothes include cotton from Xinjiang, where Muslim minority groups such as the Uighurs face oppressive policies and surveillance monitoring, including claims of forced labor. The BBC, meanwhile, found that in the “Shein village” of Panyu in southern Guangdong Province, workers say they face 75-hour work weeks with one day off per month. They toil for independent suppliers but their sewing machines hum away to produce goods for Shein.
“Slave labour, sweatshops, and trade tricks are the dirty secrets behind Shein’s success,” then-senator Marco Rubio, now U.S. secretary of state, wrote to the British chancellor to warn against a U.K. listing of the company.
Shein puts the onus on its 7,500 contract manufacturers to follow labor law. “The behavior of our supply-chain partners may adversely affect our business and reputation,” it states in its prospectus.
Pressure on such issues pushed Shein away from U.S. and U.K. listings. Despite establishing a corporate presence in Singapore in 2019, and moving its legal headquarters there in 2021, it is now re-embracing its Chinese roots with a listing in Hong Kong. Reclusive founder Xu Yangtian in February appeared with local officials at a conference in Guangzhou. “Guangdong is where Shein’s roots are, and where our striving began,” he said in a livestream speech.
Model Must Change?
The U.S.-China tariff war creates chaos for exporters such as Shein. But it is the elimination of the de minimis exemptions that hurt the most, threatening its prior profitability. What’s more, unlike the Trump tariffs — ruled rightly to be illegally imposed taxes — the de minimis change is sticking.
It is forcing Shein to raise its prices, and ultimately pass on the costs to the consumer. Shein can adapt shipping practices so very small orders are all passed through customs in a bigger batch, but it forces increased paperwork, higher costs, and the potential need for expensive warehousing of goods. In many ways, it would force Shein back to a traditional e-commerce model.
The company has expanded into other areas such as cosmetics, furniture, electronics and pet products, which made up 38.6% of sales in Q1. It is also seeking to market its back-end technology to aspiring brands and designers, establishing the Shein Xcelerator incubation program, and has bought brands such as Missguided, which it acquired in 2023.
While sales continue to increase from $32.1 billion in 2023 to $38.7 billion in 2024 and $41.8 billion in 2025, profits and margins are declining. Net profit peaked at $3.4 billion in 2024 before falling 38.7% last year. For the quarter ended in March, the company slumped to a $99 million net loss.
The company says U.S. sales fell 14.3% in Q1, while the U.S. share of sales has declined steadily from 29.4% in 2023 to 22.5% at last count. But it is also paying the price of having to recompense its venture-capital backers, the holders of its preferred shares.
I’ve put up my hand to take a small number of shares largely for interest’s sake. And unlike other recent popular offerings in Hong Kong, I might actually get them — which is not necessarily a good thing, indicating a lack of investor demand. Call my investment a research expense.
The company will ultimately need to navigate the changing tariff environment. It may ultimately become a prosaic e-commerce retailer of cheap clothes, supplemented by other cheap goods. Even after repaying its venture-capital backers, it’s clear investors are not convinced it can recapture the pandemic-era magic that catapulted the company to social-media stardom.
