Shein targets up to $90bn valuation in US IPO, sources say

Shein is touting its hopes for a valuation of as much as $90 billion as it lays the groundwork for an eventual US initial public offering, a level that far exceeds how the fast-fashion giant is valued in private trades, according to people familiar with the matter.

The company has told prospective investors that it’s aiming to fetch a valuation of $80 billion to $90 billion in a listing, the people said. The timing of the share sale remains uncertain given the market volatility, according to the people.

In private trades, Shein’s valuation has dropped below the $66 billion it got in a funding round in May, the people said. Stakes that have recently changed hands in the secondary market valued the company at around $50 billion to $60 billion, the people said.

While valuation in private trades doesn’t necessarily reflect the company’s actual valuation, the gap underlines investor concerns over Shein’s challenges ranging from intensifying competition to allegations of copyright thefts and potential use of forced labour. It may also complicate Shein’s ambitions for a blockbuster listing.

Shein was the world’s third most valuable startup in 2022, when a funding round valued the company at $100 billion. Its valuation has since dropped along with other startups and technology companies as investors grew wary toward risk assets amid uncertain economic outlook and higher interest rates. Valuation of ByteDance, the parent of short-video hit TikTok, fell to below $300 billion in secondary market in July, down at least 25% from last year, Bloomberg News has reported.

Deliberations are ongoing and no final decision has been made regrading Shein’s IPO including its valuation and timing, the people said. A representative for Shein declined to comment.

Challenges ahead

Shein pioneered ultra-fast fashion, selling new and stylish items such as shirts and swimsuits for as little as $2 each. Its direct-to-consumer e-commerce sales took off in the US during Covid, and the company quickly became one of the most downloaded shopping apps in the country, targeting teens and young women.

Marcelo Claure

Founded in China more than a decade ago, Shein recently moved its headquarters to Singapore and has worked to distance itself from its country of origin. Shein still gets most of its clothing for the US from suppliers in southern China, though it has announced plans to source from other countries. The retailer hired former SoftBank Group Corp executive Marcelo Claure earlier this year to help run its Latin American business.

Shein’s success has prompted scrutiny into its supply chain practices. A member of Congress called for an investigation into Shein’s use of cotton from China’s Xinjiang region. If a probe is launched and Shein is found to have broken US laws against forced labor, its products could be banned from entering into the country. The company acknowledges that 2% of its cotton comes from Xinjiang but says it doesn’t use forced labor. Shein has also been criticized alongside its fast-fashion peers for issues with the industry’s environmental impact.

The online retailer is also facing intense competition from Temu, owned by Chinese e-commerce giant PDD Holdings Inc. In September, sales on Temu were more than double Shein’s in the US after topping Shein for the first time in May, according to Bloomberg Second Measure, which analyzes consumers’ credit and debit card transactions. The duo have sued each other, with Shein accusing Temu of trademark and copyright infringement, while Temu said Shein violated antitrust laws by using bullying tactics to block clothing manufacturers from working with the platform. Shein has said the suit is without merit and the firm will vigorously defend itself.

The online retailer expects its net income to reach $2.5 billion this year despite the intensifying competition, said the people, who asked not to be identified as the information is private. Its net income in 2019 was around 1 billion yuan ($137 million), an investor presentation at the time showed.

Shein has been trying to diversify its products beyond clothes and accessories under its own name. In August, the company bought about one-third of Sparc Group, which owns rival retailer Forever 21 through a joint venture. As part of the deal, Forever 21 products will be made available to Shein’s online customers. In October, Shein acquired British online brand Missguided from Frasers Group Plc, further expanding its third-party offerings.

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