Shein fashions bizarre upside-down IPO

Industria de Diseno Textil SA

24/08/2026 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Katrina Hamlin
HONG KONG, Aug 24 (Reuters Breakingviews) - Shein’s IPO turns the concept of capital raising upside-down. The online retailer is now hoping to raise $1.8 billion in its looming stock market debut. But at the same time it will be paying around double that to investors in its private funding rounds since 2022 to make up for its shrunken valuation. In essence, that means these professional risk-takers are being compensated for their own mistakes. That's not how public listings are supposed to work.
The problem stems from the near-75% decline in the value of Shein's equity, which stood at $98 billion in early 2022. Investors in a later round, where the company's worth had fallen to $64 billion, negotiated payouts in case it plummeted further. This March, the company extended the privilege to all who had sewn money into Shein at $60 billion or higher.
That means the company now has to stump up $3.5 billion in cash and another $120 million in stock to these irrationally exuberant venture capitalists. Sure, Shein has long insisted during its several attempts over the years to go public that it's not doing so because it needs the money. But it's bizarre indeed, to say the least, to push ahead with an IPO that costs the company twice what it's raising.
Adding to the topsy-turvy nature of Shein's capital-raising saga, some of its current shareholders are coming back for more: Boyu Capital, General Atlantic and Tiger Global are among those to sign up as cornerstone investors for the offering, which will be Hong Kong’s largest this year. Given that Shein may yet deserve a deeper discount, they may be in for more pain.
That's because even a $27 billion valuation looks punchy. Assume revenue hits $36 billion this year, based on annualising the adjusted first-quarter sales number. Assume 4.5% growth in 2027 and a net margin of around 3.5%, and Shein's net profit could hit $1.4 billion. Pop that on 20 times multiple, a tad below the 24.5 times Zara-owner Inditex ITX.MC sports, per Visible Alpha, and the equity would be worth what Shein wants IPO investors to pay for it.
But the company is grappling with the end of import duty exemptions for low-value parcels in the U.S., new fees on such shipments in Europe, and investigations in both regions – which are its two largest markets. Sales grew only 1% in the first quarter, with a 2.5% net margin, after adjusting for one-off charges. And the 20 times multiple is overly generous: Inditex and other listed fashion peers have margins closer to 10%, as well as stronger sales growth.
Sure, Shein could don a nattier performance than that, but it would take time to prove that any rapid recovery were sustainable. Its messy IPO is setting the scene for a financial fashion faux pas.
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CONTEXT NEWS
Online fashion retailer Shein Global will price its shares at up to HK$49.50 each according to a filing on August 24. At the upper end of the range, the company could raise HK$13.9 billion ($1.8 billion), implying a valuation of $26.8 billion.
Shein will pay out as much as $2.2 billion in compensation to early investors, assuming the final offer price is at the low end of the range, and issue an additional 19.6 billion in stock, worth about $120 million. It is also paying out $1.3 billion in cash to holders of Series pre-D, D and D plus preferred shares, who bought in when the company was valued at $60 billion or more.
Cornerstone investors led by existing shareholders Boyu, Tiger Global and General Atlantic have subscribed for about $383 million worth of Shein shares, the prospectus showed. Tencent, Greenwoods, Taikang Life and UBS Asset Management will also take stock.

(Editing by Antony Currie; Production by Ujjaini Dutta)
((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))