SHEIN to raise $1.7B in Hong Kong IPO
What's the story
SHEIN, the popular online fast-fashion retailer, is gearing up for its Hong Kong initial public offering (IPO). The company plans to price the shares at around HK$48.56 each, slightly above the midpoint of its marketed range. This will help SHEIN raise some HK$13.6 billion ($1.7 billion) from the IPO and value it at a little over $26 billion, according to Reuters.
Valuation drop
Steep discount from previous valuations
The upcoming IPO will value SHEIN at a steep discount from its previous private-market valuations.
The company was expected to be valued at about one-quarter of its nearly $100 billion peak valuation in 2022 and well below the $66 billion it was valued at during a 2023 fundraising round.
Despite strong investor demand, SHEIN has been facing slower growth, shrinking margins, higher trade costs, and intensifying competition globally.
Regulatory hurdles
SHEIN's long road to IPO
Founded in China and now based in Singapore, SHEIN has been trying to go public for four years.
The company has faced regulatory scrutiny as well as business pressures in the US and Europe, its two most important markets.
Despite these challenges, the overall order book for its Hong Kong IPO was fully covered, indicating strong initial investor demand.
Investor commitments
Final IPO price on August 31
SHEIN will announce the final IPO price on August 31, with trading set to start on September 1.
Cornerstone investors have committed to buying about $383 million worth of shares.
Existing shareholders Boyu Capital, Tiger Global and General Atlantic are leading the cornerstone participation, while Tencent, Greenwoods, Taikang Life and UBS Asset Management are also set to invest.
Financial strategy
Use of proceeds from the offering
SHEIN plans to use about 80% of the IPO proceeds to strengthen its technology infrastructure and expand its brand and international presence.
The company has also agreed to pay up to $3.5 billion in cash to certain investors who bought special shares in previous private funding rounds.
These financial considerations come amid a more challenging operating environment for SHEIN, which is facing slower revenue growth, weaker earnings, shrinking margins, higher trade costs, tighter regulation, and intensifying competition.