China’s fast-fashion company Shein anonymously files to offer an Initial Public Offering (IPO) in the US markets, in a move to expand its reach globally.
This offering is likely to be one of the most valuable Chinese companies to be listed in New York, and will be handled by the big banks like Goldman Sachs, Morgan Staley, and JPMorgan Chase as its lead underwriters. The company is expected to issue its new share sales in 2024.
Shein hasn’t yet determined the size of the offering or the valuation of the IPO. However, Bloomberg had reported earlier this month that it is targeting almost $90 billion. The company was previously valued at $60 billion, nearly a third less than its past valuations, in fundraising that took place in May.
Till now, the most valuable firm to be listed in the United States is the ride-hailing giant Didi Global, initially offered at $68 billion in 2021.
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The US IPOs this year
The move is being discussed rather extensively as Shein files for the US IPO and looks to expand its reach globally, due to the fact that the US markets are struggling to revitalize after a series of failed stock market debuts.
In recent times, there have been four major IPOs out of which three failed miserably, bringing down the motivation level of investors. Shares of Birkenstock, Arm holdings, Instacart Fell below their IPO prices in days following the offering, although Arm has been able to trade above its original price.
Jason Benowitz, a senior portfolio manager at CI Roosevelt said that, “It doesn’t look to me as the most opportune time for Shein to come public, but if they need capital the markets are open … and investor sentiment has been more positive than it was a few weeks ago.”
He further noted that, “when investors would review the financials, I expect to see pretty strong growth historically … but the key question will be if they can maintain the pace or to continue to gain market share going forward.”
The US IPO market has remained almost dry from the past two years, clocking at a mere $23.64 billion of offering this year, nearly $2.3 billion more than the previous year; but it is unable to reach even 10% of what it was in 2021.
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Preparations
According to the sources, Shein has already started pulling off low-profile road shows for the offering in the US. However, it is not clear whether the company has filed with the Chinese Securities Regulatory Commission (CRSC) ahead of its offshore offering in the United States.
GlobalData’s managing director Neil Saunders in an interview said that, “As it is a significant and highly disruptive player in the retail space, Shein will attract a lot of investor interest.”
Earlier in July, Reuters reported that Shein has started its homework for the offshore offering in the United States with three premier banks. Fast fashion retailers are gaining immense popularity in the US recently, with Shein taking the majority market share from the likes of Gap, as customers look for newer styles.
In August, Shein partnered with SPARC group and mall operator Simon Property in an attempt to expand their reach.
An analyst at Aequitas Research, said big companies like Shein were tapping capital markets due to peaking interest rates and ahead of possible changes in U.S. regulations for small retailers, which is probably a good time for them.