China’s Shein files for US IPO – a major test of investor appetite – sources

  • Shein has not yet determined the size of the IPO, which was valued at over $60 billion in May
  • The IPO takes place amid challenging markets and under US scrutiny
  • Fast fashion retailers still lag behind Amazon in sales

Nov 27 (Portal) – Fashion company Shein has confidentially filed to go public in the United States, two sources familiar with the matter said on Monday. It is probably one of the most valuable Chinese-founded companies to go public in the US

Goldman Sachs, JPMorgan Chase and Morgan Stanley have been hired as lead underwriters for the offering, and Singapore-based Shein could go public sometime in 2024, the sources said.

According to the sources, Shein has not specified the size of its offering or its IPO valuation. Bloomberg reported earlier this month that it was targeting a float of up to $90 billion.

Shein, Goldman and JPMorgan declined to comment, while Morgan Stanley did not immediately respond to a request for comment.

The company, founded in mainland China in 2012, was valued at more than $60 billion in a May fundraising round, down a third from a funding round last year.

The most valuable Chinese-founded company to go public in the United States to date is ride-hailing giant Didi Global’s (92Sy.MU) debut in 2021, valued at $68 billion.

The fast fashion giant’s move to go public in the U.S. comes as the IPO market is struggling to recover after a series of lackluster stock market debuts.

There have been four major IPOs in recent months, three of which disappointed investors.

Shares of German sandal maker Birkenstock (BIRK.N), grocery delivery app Instacart (CART.O) and chip designer Arm Holdings fell below their IPO prices in the days after the initial public offerings, although Arm’s shares are now trading above that price become.

“It doesn’t seem to me like the best time for Shein to go public, but when they need capital, the markets are open … and investor sentiment is more positive than it was a few weeks ago,” said Jason Benowitz, senior portfolio manager at CI Roosevelt.

“If investors can review the financials, I expect growth to be quite strong by historical standards… The key question will be whether they can maintain the pace to some extent or continue to gain market share in the future,” he said.

U.S. IPOs have raised about $23.64 billion so far this year, compared to $21.3 billion in the same period last year. In 2021, the comparable figure was $300 billion, when the IPO market was near its peak.

SUPPLY CHAINS

Shein has launched low-profile roadshows for the float in the United States, said one of the sources, who did not want to be named for confidentiality reasons.

It is not immediately clear whether the company has filed with the China Securities Regulatory Commission (CSRC) to go public in the United States. Chinese companies must obtain regulator approval before proceeding with their offshore offerings.

CSRC did not immediately respond to a request for comment.

Portal reported in July that Shein – which attempted to go public in the U.S. in 2020 but put that plan on hold – had been working with at least three investment banks on a possible IPO.

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

“Good time to list”

Known for its $10 tops and $5 biker shorts, Shein ships most of its products by plane directly from China to customers in individually addressed packages.

The drop shipping strategy helped the company avoid the accumulation of unsold inventory in warehouses and avoid import tax in the United States, one of its largest markets, as it allows the online retailer to benefit from the “de minimis” clause, which cheap products exempt from taxes from customs duties.

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

Fast-fashion retailers are becoming increasingly popular in the U.S., with Shein taking market share away from companies like Gap (GPS.N) as shoppers seek fresher styles.

In August, Shein partnered with SPARC Group, a joint venture between Forever 21 owner Authentic Brands (AUTH.N) and mall operator Simon Property (SPG.N), to expand its market reach.

However, Shein and Temu.com have failed to convert customer visits into sales and lag far behind market leader Amazon.com (AMZN.O) in this regard.

Sumeet Singh, an analyst at Aequitas Research who publishes on SmartKarma, said large companies like Shein have been tapping into capital markets for small retailers because of peak interest rates and ahead of possible changes in U.S. regulations.

“Right now it’s probably as good as it gets for them,” he said.

Shein’s confidential U.S. IPO filing was first reported in China’s Shanghai Securities Journal last week. The Wall Street Journal confirmed the report on Monday, citing sources.

Reporting by Pritam Biswas and Ananya Mariam Rajesh in Bengaluru; Kane Wu in Hong Kong and Anirban Sen in New York; Additional reporting by Rishabh Jaiswal in Bengaluru, Scott Murdoch in Sydney and Miyoung Kim in Singapore; Edited by Stephen Coates

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Anirban Sen is managing editor for U.S. M&A at Portal in New York, where he leads coverage of the biggest deals. After starting at Portal in Bangalore in 2009, Anirban left the company in 2013 to work as a technology deals reporter at several leading business news agencies in India, including The Economic Times and Mint. Anirban rejoined Portal in 2019 as senior finance editor to lead a team of reporters covering everything from investment banking to venture capital. Anirban holds a degree in History from Jadavpur University and a Post Graduate Diploma in Journalism from the Indian Institute of Journalism & New Media. Contact:+1 (646) 705 9409


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