Chinese fast-fashion company Shein, which has gained widespread popularity as a global online fashion retailer, is expected to go public on the Hong Kong Stock Exchange on the 1st of next month to raise 13.8 billion Hong Kong dollars (2.4426 trillion won). According to Shein, the funds raised from this initial public offering (IPO) are expected to be used to advance technologies such as inventory management systems, brand marketing, and strengthen social responsibility.

		0
A gathering of global beauties in Hong Kong celebrating Shein's upcoming listing scheduled for the 1st of next month. / The Beijing News

According to Beijing sources well-versed in Chinese-speaking world economic intelligence on the 24th, Shein stated in documents submitted to the Hong Kong Stock Exchange on the same day that it plans to offer 280 million shares at 47.60 to 49.50 Hong Kong dollars (8,425 to 8,761 won) per share. As scheduled, the company is expected to easily raise up to 13.8 billion Hong Kong dollars. In this case, its market capitalization based on the public offering price is estimated to reach up to 26.8 billion U.S. dollars (36.9 trillion won).

Given that it is a fashion company, this might seem remarkable at first glance. However, compared to the reality when Shein's corporate valuation once approached 100 billion U.S. dollars in 2022, the story changes considerably. It can be said to be less than one-third of its peak valuation.

According to sources, setting aside this disappointment, Shein commenced bookbuilding for institutional investors on the same day. Trading is scheduled to begin on the 1st of next month.

In this initial public offering (IPO), Boyu Capital, Tiger Global, General Atlantic, and leading Chinese big tech firm Tencent are known to be participating as cornerstone investors, committing to hold the offered shares for a certain period and guaranteeing investment. Sources report that the committed amounts are 150 million U.S. dollars, 53 million U.S. dollars, 50 million U.S. dollars, and 50 million U.S. dollars, respectively.

Having grown rapidly through a model of shipping affordable and trend-sensitive clothing directly from suppliers to consumers, Shein was originally founded in mainland China. It subsequently relocated its headquarters to Singapore in 2021. Recently, its earnings are known to have taken a substantial hit due to the fallout from the U.S. abolition of de minimis tax exemptions and rising raw material costs driven by the war with Iran.

According to the prospectus, Shein indeed recorded a net loss of 99 million U.S. dollars in the first quarter of this year, swinging into the red from a net profit of 395 million U.S. dollars in the same period last year. Future prospects are also difficult to view favorably. Regulatory shifts in the European Union (EU), which began imposing a 3-euro fee on low-value e-commerce imports last month, are undeniably regarded as a major headwind for its future business.

In addition, Shein faces regulations and scrutiny surrounding U.S.-China trade conflicts, supplier labor conditions, consumer protection, and environmental issues. Its outlook cannot help but be clouded. There appears to be ample reason why the company's valuation has shrunk to one-third of its prime.

                                                                                                           Hong Soon-do