Shein, the Chinese-founded fast fashion powerhouse, has confidentially filed for a U.S. initial public offering (IPO). The move sets the stage for one of the most hotly anticipated public listings in recent memory, with the company potentially starting to trade on American markets as early as 2024.
The company is working with lead underwriters Goldman Sachs, JPMorgan, and Morgan Stanley to navigate the public offering process. The confidential filing will allow the company to discretely communicate details and make adjustments with the Securities and Exchange Commission (SEC) out of the public eye before it formally releases IPO paperwork.
Shein’s Key Financials Still Undetermined
Shein has not yet settled on the eventual size of its public share offering or the valuation it will target for its stock market debut. The retailer was valued at over $60 billion as recently as May 2022 following a private funding round. However, that represents a significant decrease from a valuation exceeding $100 billion after a 2021 funding event.
Determining the company’s current fair valuation has been a central debate throughout IPO planning discussions with the company’s advisors and prospective underwriters. Revenue growth slowed in 2022 amid both economic turbulence and the gradual ebbing of pandemic-driven ecommerce gains across the industry.
Nonetheless, Shein remains confident its long-running momentum coupled with further international expansion plans will enable an IPO valuation well in excess of recent private funding marks. The offering’s ultimate reception will hinge on Shein convincing investors of its enduring growth story despite an increasingly challenging retail climate.
Rapid Expansion Draws Intrigue
In just over a decade since its founding, Shein has quickly become one of the world’s largest fashion brands primarily by manically catering to the tastes of young and highly online consumers. The company identifies emerging trends on social media to rapidly design clothes and accessories that capture the zeitgeist.
By selling virtually all inventory directly from its factories in small packages shipped by air, Shein also sports a uniquely flexible supply chain that avoids slow boat transport or costly warehouses sitting full of unsold items. These innovations have fueled average annual revenue growth exceeding 100% and enabled Shein’s sales to eclipse fast fashion pioneers Zara and H&M.
Shein now reaches 150 different countries, an astonishing geographic span. Further international reach paired with potential offline expansion leaves ample room for growth even considering economic warning signs. Shein’s meteoric rise and global ambitions will stoke substantial investor interest in its IPO.
Labor Controversies Threaten IPO
However, Shein’s breakneck ascendency has stirred significant controversy around its labor practices and supply chain opacity. The company has faced allegations of underpaying workers along with poor working conditions and lack of oversight in its Chinese factories.
In August, a group of 16 Republican state attorneys general petitioned the SEC to audit Shein’s supply chain for signs of forced labor prior to any IPO approval. The retailer has additionally caught the scrutiny of a Congressional committee probing Shein’s murky ties to the Chinese Communist Party.
While Shein admits to finding evidence of labor violations among some suppliers, it maintains most factories meet standards and that it aims to cut ties with partners who repeatedly violate policies. Mandatory supply chain disclosures tied to a U.S. stock listing could create further troubles for the firm though. Winning the trust of both investors and regulators on labor issues poses a key IPO challenge.
Who’s Really in Charge?
It remains unclear if Xu still primarily resides in China or retains Chinese citizenship. The practice would be a major departure from executive accountability typical of major U.S. public firms, where CEOs regularly interface with investors, analysts, and the business press.
Shein’s absentee chief executive injects uncertainty around what governance changes the opaque company may need to make to sufficiently satisfy SEC guidelines and stock exchange rules regarding insider leadership before listing.
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