Fashion giant Shein, the brainchild of mainland China, has confidentially filed for an initial public offering (IPO) in the US, setting the stage for what is anticipated to be one of the most substantial listings of a China-founded company on the New York Stock Exchange. Two reliable sources familiar with the matter revealed the groundbreaking development regarding Shein’s US IPO.
Leading financial institutions Goldman Sachs, JPMorgan Chase, and Morgan Stanley have been enlisted as the lead underwriters for Shein’s US IPO, scheduled tentatively for 2024, according to the sources. However, the size of the IPO and the valuation are yet to be determined, and both Shein and the involved banks have declined to comment on the matter.
Shein, founded in 2012 in mainland China, witnessed a valuation of over $60 billion in a May fundraising round, marking a 33% decrease from the previous year. The company’s valuation is expected to be a focal point of market attention, with Bloomberg reporting a targeted valuation of up to $90 billion in the upcoming IPO.
Notably, the most valuable China-founded company to go public in the US to date is e-commerce titan Alibaba Group, which made its debut in 2014 with a valuation of $231 billion.
The decision by Shein to go public in the US comes at a time when the market for initial public offerings is grappling with challenges following several lackluster stock market debuts. Recent major IPOs, including German sandal-maker Birkenstock, grocery delivery app Instacart, and chip designer Arm Holdings, witnessed shares dropping below their IPO prices in the days following their debuts.
Jason Benowitz, Senior Portfolio Manager at CI Roosevelt, commented on the timing, saying, “It doesn’t strike me as the most opportune time for Shein to come public, but if they need capital, the markets are open, and investor sentiment has been more positive than it was a few weeks ago.”
US IPOs this year have raised approximately $23.64 billion, compared to $21.3 billion during the same period last year. In 2021, the total reached a staggering $300 billion when the IPO market was nearing its peak.
Shein had initiated low-profile roadshows for its US IPO, according to one of the sources, who chose to remain anonymous due to confidentiality constraints. It remains unclear if the company has filed with the China Securities Regulatory Commission (CSRC) for the US IPO, as Chinese companies require clearance from the regulator before proceeding with offshore offerings. The CSRC has not responded to requests for comments regarding Shein’s US IPO at the time of reporting.
GlobalData Managing Director Neil Saunders expressed that Shein, being a significant player in the retail space, is expected to attract considerable investor interest.
The company, recognized for its affordable fashion items such as $10 tops and $5 biker shorts, employs a direct shipping strategy, shipping the majority of its products directly from China to customers by air. This approach aids Shein in avoiding unsold inventory build-up in warehouses and sidestepping import taxes in the US, its primary market.
In August, Shein joined forces with SPARC Group, a joint venture between Authentic Brands and Simon Property, aiming to expand their market reach. However, despite its popularity, Shein, along with Temu.com, still lags behind market leader Amazon.com in converting shopper visits into sales.
Sumeet Singh, an analyst at Aequitas Research, noted that larger companies like Shein are tapping into capital markets amidst rising interest rates and in anticipation of potential changes in US regulations for small retailers. “It’s probably as good as it gets for them right now,” Singh added.
The news of Shein’s confidential US IPO filing initially surfaced in China’s Shanghai Securities Journal last week, with The Wall Street Journal confirming the report on Monday, citing inside sources.
Source: Reuters
