Shein's Backers Look To Offload Shares At 30% Discount Amid Fading Hopes For IPO

The highly anticipated initial public offering (IPO) of Shein, a global online fashion giant, is facing a significant setback as investors are struggling to sell shares at a 30% discount in private market deals.

What Happened: Investors are finding it challenging to offload Shein shares in private market transactions, with the company’s valuation dropping to as low as $45 billion, reported Bloomberg on Thursday. This is a significant decrease from the $66 billion valuation Shein achieved during a fundraising round in May.

Despite the reduced valuations, finding buyers for the shares has proven to be a challenge, raising concerns about further devaluation. These developments are casting a shadow over Shein’s much-anticipated IPO in the U.S., which was expected to reach a valuation of up to $90 billion.

Shein, which was once a dominant player in the cut-rate apparel market, is now facing stiff competition from Temu, a direct rival launched by Chinese e-commerce giant PDD Holdings Inc about a year ago. Additionally, major clothing brands have accused Shein of copyright infringement.

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These challenges have led to a significant drop in Shein’s valuation, in line with the broader trend of declining valuations for startups and technology companies as investors grow wary of riskier assets amid an uncertain economic outlook.

Why It Matters: Shein’s IPO prospects have been under scrutiny for some time. The company, known for disrupting an industry dominated by Zara and H&M, confidentially planned to go public in the U.S. in 2023. It raised $2 billion at a $66 billion valuation and aimed for a valuation of up to $90 billion.

However, the company’s IPO plans have been under fire, with U.S. lawmakers launching an inquiry into Shein’s data privacy practices and its relationship with the Chinese Communist Party. This inquiry, led by Rep. Cathy McMorris Rodgers (R-WA) and Rep. Gus Bilirakis (R-FL.), comes amid concerns about the rising popularity of these platforms in the West and the risks they pose to e-commerce, consumer safety, and data privacy and security.

Additionally, Shein has been facing legal challenges from Temu, which filed a lawsuit against Shein, alleging intensified anti-competitive practices. This legal action reignited a previous conflict between the two companies, each having withdrawn earlier lawsuits against the other.

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Image Credits – Shein