Shein Wins Hong Kong IPO Approval At $40B-$50B Valuation, Down From $100B In 2022

Shein has won approval from China's securities regulator for a Hong Kong initial public offering (IPO), clearing the way for a listing that could come as early as September or October after failed attempts in New York and London.A valuation cut in halfThe China Securities Regulatory Commission approved the listing on Friday, Reuters reported, citing a notice on its website. Shein could now be targeting a valuation of $40 billion to $50 billion in its IPO, according to a source familiar with the matter, a dramatic reduction from the $100 billion valuation it commanded in 2022 and the $66 billion it hit in its most recent fundraising round in 2023. The company has indicated it could sell up to 8% of its shares, though the final stake is likely to be lower, raising low single-digit billions of dollars.Given the lower valuation, Shein will compensate investors for the decline by providing funds to buy shares in the offering. At $40 to $50 billion, Shein would be roughly twice the size of fast-fashion rival H&M, valued at around $24 billion, but far smaller than main competitor Temu's parent company PDD Holdings, which has a market capitalization of about $117 billion.Shein filed confidentially for its Hong Kong IPO and had not made filing documents public as of Friday. With CSRC approval, the company can organize investor roadshows and prepare for its hearing with the Hong Kong Stock Exchange's listing committee, a requirement for all IPO candidates. Shein's investors include Brookfield, Claure Group, D1 Capital, General Atlantic, HongShan Capital, formerly Sequoia Capital China, Reliance, SoftBank, Abu Dhabi sovereign wealth fund Mubadala Investment, and Saudi Arabia's sovereign wealth fund PIF.Delayed IPOFounded by Chinese-born entrepreneur Sky Xu in 2012 in Nanjing, Shein first filed for a US IPO in November 2023 but faced opposition from lawmakers and regulators. The company then turned to London, where Britain's Financial Conduct Authority approved a draft prospectus, but the CSRC withheld its approval, effectively blocking that listing too.Shein's lengthy path to market reflects Beijing's tighter oversight of prominent entrepreneurs since it halted the IPO of Jack Ma's Ant Group in November 2020, when regulators derailed a $37 billion offering at the last minute. New CSRC rules introduced in 2023 give the regulator authority to vet overseas listings and block offerings deemed contrary to national interests. Although Shein moved its headquarters to Singapore in 2022, it remains subject to Chinese IPO rules because its products are mostly made by third-party suppliers in China.Shein had to wait a year for Beijing's green light, and the approval had to be reportedly cleared by the highest levels of the ruling Communist Party.The legal and regulatory overhangShein's IPO approval comes alongside a series of ongoing legal and regulatory challenges. A French court on July 9 awarded luxury brand Lacoste damages of $125,741 (€110,000) following a dispute over the sale of items bearing the Lacoste crocodile logo on the Shein platform. Shein said the ruling relates only to interim proceedings and that substantive proceedings remain ongoing with no final determination on the merits. "SHEIN takes the protection of intellectual property rights seriously and has cooperated with Lacoste throughout these proceedings, including by promptly removing the products at issue once notified," a spokesperson said.Beyond the Lacoste case, Shein has been fined more than $228 million (€200 million) by French regulators over its use of consumer data and misleading discounts. The European Commission opened a formal investigation into the company in February over the sale of illegal products. The company has also faced sustained criticism from competitors, regulators, and advocacy groups over working conditions in supplier factories, allegedly addictive features of its shopping app, and the environmental impact of shipping large volumes of low-cost clothing by air.