Shein IPO in Hong Kong: Valuation cut by 75% from peak

Fast fashion retailer Shein is aiming for a valuation of $27 billion in its Hong Kong IPO next week — nearly three-quarters below its peak valuation, after previous attempts to take the company public faced resistance from regulators.

The company, founded in China, plans to raise up to 14 billion Hong Kong dollars ($1.8 billion) in the offering, which will launch on September 1. Shein is offering 280 million shares at a price of 47.60 to 49.50 Hong Kong dollars per share, giving it a market capitalization of 202–210 billion Hong Kong dollars ($26–27 billion), according to the offering announcement published on Monday on the Hong Kong Stock Exchange. About 90% of the shares will be available to international investors: Chinese regulators approved Shein's request to list in Hong Kong last month, giving the green light to an initial public offering (IPO) that has been in preparation for more than four years.

Shein's previous attempts to list its shares in New York and London failed, partly due to opposition from politicians and regulators amid scrutiny of the company's Chinese supply chain. The valuation of less than $30 billion, which was previously reported by the Financial Times, is significantly lower than the approximately $100 billion valuation Shein reached after a private funding round in 2022.

The company has the option to sell an additional 42 million shares, depending on demand, which could increase the total amount raised to $2 billion. The banks leading the IPO: Goldman Sachs, Morgan Stanley, and J.P. Morgan — will together receive an underwriting fee of 1.5% of the money raised, in addition to a discretionary incentive fee of 0.75%. This means a fee pool of nearly $40 million, even before the sale of additional shares.

Anchor investors, who commit to purchasing the shares and holding them for six months, have purchased about 20% of the offering volume. These are mainly investors who already hold stakes in Shein, including the American private equity firm General Atlantic and the Chinese tech giant Tencent. According to PitchBook data, both General Atlantic and the investment group Tiger Global participated in a $1 billion funding round in 2022, in which Shein was valued at $100 billion. The Chinese private equity fund Boyu Capital received the largest allocation, amounting to $150 million. It is followed by General Atlantic, Tiger Global, and Tencent, each of which received an allocation of about $50 million.

According to the IPO terms document, Shein plans to use about 40% of the IPO proceeds for investments in technology, another 40% for marketing, 10% for initiatives designed to "promote corporate responsibility," and the remaining 10% for general corporate purposes.