By Kane Wu and Helen Reid
HONG KONG/LONDON, July 10 (Reuters) – Ultra fast-fashion retailer Shein won approval for its long-awaited Hong Kong IPO on Friday, a notice posted on the China Securities Regulatory Commission (CSRC) website showed, clearing the way for a listing after failed attempts in New York and London.
Shein would be the highest-profile retailer to list in years, at a time when many consumer brands have delayed initial public offerings due to weak sentiment and spending among lower- to middle-income shoppers.
The online retailer, founded by secretive Chinese-born entrepreneur Sky Xu in 2012, has waited a year for the green light from Beijing for its IPO, which had to be cleared by the highest levels of the ruling Chinese Communist Party, according to a source with direct knowledge of the matter.
Beijing views Shein as politically sensitive and has been wary of the company causing it further embarrassment after a sex doll scandal in France and reports of poor labour practices at its supplier factories in China, the source said.
Shein filed confidentially for its Hong Kong IPO, and the filing documents had still not been made public on Friday. But now that it has approval, the online retailer can start organising investor roadshows and prepare for the hearing with the Hong Kong stock exchange which all IPO candidates have to pass before the shares are listed.
Shein’s backers include private equity firms General Atlantic, HongShan Capital previously known as Sequoia Capital China, Mubadala Investment, Brookfield, and Claure Group.
A spokesperson for Shein declined to comment.
VALUATION DROPS SHARPLY SINCE 2022
In 2022, Shein was valued at as much as $100 billion, although investors then adjusted their numbers as a pandemic-era e-commerce boom fizzled out and opposition from politicians, retailers and regulators intensified.
Shein’s last private fundraising round in May 2023 valued it at $66 billion.
The source said Shein could now be aiming for a valuation of $40 billion to $50 billion in its IPO.
That would make it far smaller than its main rival Temu’s parent company PDD Holdings, which has a $117 billion market capitalisation, but double the size of fast-fashion retailer H&M, which is worth around $24 billion and has lost market share to Shein.
NEW YORK AND LONDON ATTEMPTS
Shein’s Hong Kong listing would end an IPO journey that took it around the world.
The e-commerce behemoth, which sells $5 dresses and $10 jeans in around 150 countries, first filed for a U.S. IPO in November 2023, but ran into growing resistance from lawmakers and regulators.
After the U.S. filing stalled, Shein turned to London, where Britain’s Financial Conduct Authority approved a draft prospectus, but China’s CSRC withheld its approval, effectively blocking the listing.
Shein’s protracted struggle to go public illustrates how geopolitics has reshaped the path for Chinese companies seeking international capital and how Beijing has tightened its grip on successful entrepreneurs since it halted the IPO of Jack Ma’s Ant Group at the last minute in 2020.
New rules passed by the CSRC in 2023 allowed it to vet offshore listings and block offerings that could threaten the country’s national interests. Although Shein moved its headquarters to Singapore in 2022, it remained subject to Chinese IPO rules because its products are mostly made by a network of third-party suppliers in China.
A Shein listing would mark a boon for Hong Kong, which has emerged this year as one of the top listing locations globally.
In the last 12 months, the CSRC has cleared more than 180 other IPOs, public disclosures show, fuelling a boom for the city’s equity capital markets.
FORCED LABOUR, UNFAIR COMPETITION
Founded in Nanjing, China, Shein has been caught in the middle as relations between the U.S. and China soured and trade became increasingly politicised, with its business criticised in many countries for selling Chinese goods at rock-bottom prices and undercutting domestic retailers and manufacturers.
Shein was criticised by competitors, regulators and non-governmental organisations for issues including its addictive app, poor working conditions in factories, and high emissions from sending cheap polyester clothes across the world by air cargo.
Its business model — buying clothes in China and sending them direct to the doorsteps of shoppers — has been challenged recently by U.S. and European efforts to close customs loopholes and apply duties to cheap parcels.
Shein has also been fined more than €200 million ($228.46 million) in total by French regulators over its use of consumer data and misleading discounts. The European Commission opened a formal investigation into the platform in February over the sale of illegal products.
($1 = 0.8754 euros)
(Reporting by Helen Reid in London and Kane Wu in Hong KongAdditional reporting by Beijing NewsroomEditing by Emelia Sithole-Matarise, David Goodman and Susan Fenton)
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