The Shein IPO is back on but after all the “oh-so-nears” and “will they/ won’t they” speculation, Shein looks to be heading for home as reports this morning suggest it is working towards a listing in Hong Kong.
The online fast-fashion retailer’s proposed initial public offering in London failed to secure the green light from Chinese regulators, according to sources with “knowledge of the matter,” Reuters reported.
Reuters reports that the China-founded company aims to file a draft prospectus with Hong Kong’s stock exchange in the coming weeks. Shein plans to go public on the Asian financial hub within the year.
If true – and neither Shein or Hong Kong’s financial exchange have responded to the reports – then it brings a deeply underwhelming conclusion to a flotation that was supposed to be valued at $65 billion or more when it was slated first for New York and then for London.
But Shein has consistently hit roadblocks. Initially, U.S. politicians and lawmakers flagged concerns over a huge New York flotation for a controversial fast fashion retailer that has taken much of the U.S. and Europe by storm attracting Gen Z and Gen A in droves.
Shein’s ultra-low prices and seemingly endless fashion choices have been a huge hit with young consumers and, having exploded onto the market, the retailer seemed to be able to do no wrong with its passionate fan base.
Frustrated by objections to its New York IPO dragging on, Shein turned to London and started moving ahead with a proposed flotation that would have been a huge boost to the beleaguered U.K. exchange which has missed out on several major flotations to other exchanges in recent years.
High-ups from the then opposition Labour party held talks with Shein in an attempt to woo the company as Labour prepared to oust the incumbent Conservative government at last year’s U.K. General Election.
Shein IPO Stalls In London
But as the London IPO failed to materialize other, unexpected challenges came up. Most notably, Shein and its Chinese counterpart Temu were hit by the repercussions of U.S. President Trump’s proposed tariffs on goods emanating from China and most notably his closure of the previously little known de minimis loophole.
Packages valued at up to $800 can no longer bypass customs duty and instead have been slapped with higher duties and single package flat costs.
While Shein continues to soar, there can be little doubt that without a resolution those duties are going to challenge the cheap chic appeal among shoppers and dampen sales in North America.
Unconfirmed reports earlier this year suggested that Shein’s profits dropped by more than a third last year, with net profit down almost 40% at $1 billion in 2024. Shein’s sales for the full year rose by 19% to $38 billion, well off the $4.8 billion in net profit and $45 billion in sales it had projected for 2024.
As a result, the proposed valuation of the London IPO was anticipated at around $50 billion, nearly a quarter below the original value slated for New York.
Shein IPO Heads For Hong Kong
And while Shein has been on a non-stop charm offensive over its environmental record, citing its production on demand model, it has never shaken off its reputation for encouraging shoppers to buy more than they need because prices are so low.
Speaking at World Retail Congress in London earlier this month Christina Fontana, senior director, brand operations at Shein, doubled down and insisted: “As a 100% online business, what drives us is innovation. We operate on demand production and follow trends globally so that we can produce products we know consumers will buy and this reduces waste.”
And Shein this week received a warning from European Union regulators over alleged consumer protection violations. The European Commission, along with watchdogs from Belgium, France, Ireland, and the Netherlands, outlined multiple breaches of E.U. consumer law in a statement released May 26.
The violations included promoting fake discounts, using digital pressure tactics, providing misleading product details, and hiding customer service contact information and are part of an ongoing investigation that began in February.
Shein has one month to respond or could face fines of at least 4% of its annual revenue in the affected E.U. countries.
Of course, the tariffs may settle at levels that allow Shein and Temu to retain their competitive advantage, while the fashion retailer will be working hard to resolve its issues with the E.U. and to continue pushing its sustainability credentials – while younger consumers still seemingly find the allure of super low prices irresistible.
But a Hong Kong listing would reflect a new reality for not just the long-awaited Shein IPO but China’s rising generation of retail superstars as shifting geopolitics and fickle consumers make for more uncertain times ahead.