Shein Prices Hong Kong IPO at $26.5 Billion Valuation, Raises $1.7 Billion
Shein's Hong Kong IPO: Details, Investor Response, and Market Context
By Selena Li, Kane Wu and Summer Zhen
IPO Pricing and Valuation
HONG KONG, Aug 27 (Reuters) - Online fast-fashion retailer Shein is set to price its Hong Kong initial public offering near the midpoint of its marketed range, raising $1.7 billion and valuing the company at about $26.5 billion, two people with knowledge of the matter said.
The company is set to price the deal at HK$48.56 a share, near the midpoint of its HK$47.60 to HK$49.50 range, the people said, raising about HK$13.6 billion ($1.73 billion).
The sources spoke on condition of anonymity as the information is not publicly available. Shein did not respond to a request for comment.
Comparison to Previous Valuations
The valuation confirms a Reuters report last week that Shein's IPO was set to value the company at about one-quarter of its nearly $100 billion private market peak in 2022, and well below its $66 billion valuation in a 2023 fundraising round.
IPO Launch and Subscription Details
Shein, which is headquartered in Singapore and was founded in China, launched its Hong Kong IPO on Monday. The overall IPO book had been fully covered, Reuters reported on Tuesday.
The subscription rates from institutional and retail investors for Shein's IPO will be published on Monday, a day before the stock begins trading on the Hong Kong Stock Exchange.
Investor Sentiment and Market Conditions
Demand from retail investors for Shein stock had not been overly strong, however, said Alvin Cheung, associate director at Hong Kong securities firm Prudential Brokerage.
He said enthusiasm for new listings had weakened in Hong Kong after an Asian market correction in July, while Shein's growth prospects were being questioned by investors and analysts amid rising costs and increased online competition.
Cheung said investors had thought, "'Shein didn't list in Hong Kong when it was in its prime, why should we take them now (that growth is slipping)?'"
Shein did not respond to a request for comment from Reuters on its subscription levels.
Regulatory and Business Challenges
The IPO follows attempts over the past four years to list in New York and London. Shein, known for selling $5 dresses and $10 jeans in about 160 countries, has faced regulatory challenges and business pressure in its key U.S. and European markets.
Cornerstone Investors and Share Allocation
Cornerstone investors, led by existing shareholders Boyu Capital, Tiger Global and General Atlantic, have subscribed for about $383 million of shares, its prospectus showed. Tencent, Greenwoods, Taikang Life and UBS Asset Management will also buy shares.
Use of Proceeds
Shein said it would use about 80% of the proceeds to improve its technology and expand its brand and global reach.
It has also agreed to pay up to about $3.5 billion in cash to certain investors who bought special shares in earlier private funding rounds.
Financial Performance and Outlook
Shein is facing slower revenue growth, weaker earnings and shrinking margins, adding to concerns over higher trade costs, tougher regulation and competition.
The company expects first-half revenue growth to broadly match the 1.1% reported in the first quarter, while its operating margin is expected to decline slightly.
IPO Sponsors and Bookrunners
Goldman Sachs, Morgan Stanley and JPMorgan are joint sponsors on Shein's IPO.
Its 10-strong bookrunners list includes only one Chinese bank — Guotai Haitong — and other global banks such as UBS, BofA Securities and HSBC, the IPO prospectus shows.
Additional Information
($1=HK$7.8401)
(Reporting by Selena Li, Kane Wu and Summer Zhen in Hong Kong; Writing by Scott Murdoch and Yantoultra Ngui; Editing by Sumeet Chatterjee, Christopher Cushing and Jamie Freed)