Saturday, February 24

China’s fast-fashion giant Shein said to have filed for US IPO in major test of investor appetite

Fast-fashion giant Shein has confidentially filed to go public in the United States, according to two sources familiar with the matter, in what is likely to be one of the most valuable China-founded companies to list in New York.

Goldman Sachs, JPMorgan Chase and Morgan Stanley have been hired as lead underwriters on the initial public offering, and Singapore-based Shein could launch its new share sale some time in 2024, the sources said.

Shein has not determined the size of the deal or the valuation at IPO, the sources said.

Bloomberg reported earlier in November that it targeted up to US$90 billion (S$120 billion) in the float.

Shein and the banks declined to comment.

The company founded in China in 2012 was valued at more than US$60 billion in a May fund-raising, down by a third from a funding round in 2022.

The most valuable China-founded enterprise to go public in the US so far is ride-hailing giant Didi Global’s debut in 2021 at a US$68 billion valuation.

Shein’s move to go public in the US comes as the IPO market is struggling to rebound after a string of lacklustre stock-market debuts.

In recent months there were four major IPOs, and three of them disappointed investors.

Shares of German sandal-maker Birkenstock, grocery-delivery app Instacart and chip designer Arm Holdings dropped below their IPO prices in the days that followed their debuts, though Arm’s shares are now trading above its IPO price.

“It doesn’t strike me as the most opportune time for Shein to go public, but if (the company needs) capital the markets are open… and investor sentiment has been more positive than it was a few weeks ago,” said CI Roosevelt senior portfolio manager Jason Benowitz.

“When investors can review the financials, I would expect to see pretty strong growth historically… The key question will be if Shein can kind of maintain the pace or to continue to gain market share going forward,” he said.

US IPOs have raised about US$23.64 billion so far in 2023, compared with US$21.3 billion during the same period in 2022. In 2021, the comparable number was US$300 billion when the IPO market was close to its peak.

Supply chains

It is not immediately clear if Shein has filed with the China Securities Regulatory Commission (CSRC) for the US IPO.

Chinese companies need to receive clearance from the regulator before going ahead with their offshore offerings.

CSRC did not immediately respond to a request for comment.

In August, Republican attorneys-general from 16 US states asked the Securities and Exchange Commission to audit Shein’s supply chain for alleged use of forced labour ahead of its potential IPO.

Shein ships the majority of its products directly from China to shoppers by air in individually addressed packages.

The direct-shipping strategy helped the company avoid unsold inventory piling up in warehouses and avoid import tax in the US, one of its biggest markets, as it allows the e-tailer to take advantage of the “de minimis” provision that exempts cheap products from tariffs.

Some critics say the provision allows companies to evade higher tariffs on Chinese goods.

Fast-fashion retailers have been gaining popularity in the US, with Shein taking away market share from the likes of Gap as shoppers look for fresher styles.

In August, Shein partnered Sparc Group, a joint venture between Forever 21 owner Authentic Brands and mall operator Simon Property, in an attempt to expand its market reach.

However, Shein, along with Temu.com, has not been able to turn shopper visits into sales and is far behind market leader Amazon.com on that score.

Mr Sumeet Singh, an analyst at Aequitas Research who publishes on SmartKarma, said big companies like Shein were tapping capital markets due to peaking interest rates and ahead of possible changes in US regulations for small retailers.

“It’s probably as good as it gets for them right now,” he said. – Reuters

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