Shein will struggle to justify $40-50 billion Hong Kong IPO valuation

By Yantoultra Ngui and Selena Li

SINGAPORE/HONG KONG, July 27 (Reuters) - Investors are expected to scrutinise whether Shein tin warrant the $40 cardinal to $50 cardinal valuation it is seeking successful a Hong Kong archetypal nationalist offering aft a prospectus filed ‌on Sunday showed slowing maturation and a crisp diminution successful profitability.

Revenue roseate 8% to $41.8 cardinal successful 2025, but nett ‌income fell 39% to $2.06 billion. In the archetypal 4th of this year, the accelerated manner retailer swung to a $99 cardinal loss, the filing showed.

While the quarterly nonaccomplishment ​partly reflected a $328 cardinal fair-value complaint connected convertible redeemable preferred shares pursuing an accounting change, slowing gross maturation and weaker halfway net underscore the company's mounting challenges.

"Institutional investors connected the HKEX (Hong Kong Stock Exchange) volition ... zero successful connected the 2.9% operating margin," said Winston Ma, enforcement manager of the Global Public Investment Funds Forum and a erstwhile managing manager astatine the China Investment Corporation.

"Investors volition re-price Shein distant from ‌a axenic hyper-growth tech level toward a carnal ⁠retail and logistics subordinate navigating high-friction planetary trade."

The narrowing borderline adds to concerns that Shein's accelerated emergence is encountering headwinds from higher commercialized costs, accrued regulatory scrutiny and intensifying contention successful planetary e-commerce.

The institution ⁠said that the removal of the U.S. de minimis exemption had wounded income growth, accrued expenses, and it was "pursuing a wide scope of options including expanding prices successful the U.S." to offset a information of the accrued costs.

Europe's caller interest connected low-value imports poses different situation — Shein ​said it ​was imaginable that trends successful the EU could beryllium "generally successful enactment with ​or transcend the interaction observed" successful the United States.

Shein's ‌challenges successful Europe could pb to a little level of competitory strength astatine the worth extremity of the market, which could beryllium affirmative for manner retailers Primark and H&M, Citi said successful a note.

VALUATION PRESSURE

The prospectus showed Shein's valuation fell from $98.2 cardinal pursuing a fundraising circular successful 2022 to $64 cardinal aft different backing circular successful 2024.

"I reason that Shein volition improbable execute a important uplift successful valuation either astatine its Hong Kong IPO oregon successful the secondary marketplace compared to its past backstage fundraising round," said Shen Meng, ‌director astatine Beijing-based boutique concern slope Chanson & Co.

"It would person been truthful ​much much optimistic if they went with their London oregon New York IPO ​a mates of years ago. The marketplace by present has ​got a batch much hard for them," said Juozas Kaziukenas, an e-commerce manufacture analyst.