China-founded fashion company Shein has confidentially filed for an initial public offering (IPO) in the United States, as disclosed by two sources familiar with the matter to Reuters on Monday.
Goldman Sachs, JPMorgan Chase, and Morgan Stanley have been selected as the principal underwriters for the offering, with sources indicating that Shein may debut on the public market in 2024.
The decision by the fast-fashion giant to go public coincides with a challenging period for the initial public offerings (IPO) market, which is grappling with a series of underwhelming stock market debuts in the United States.
Over the past few months, there have been four significant initial public offerings (IPOs), with three of them failing to meet investor expectations. Shares of Birkenstock, a German sandal-maker, Instacart, a grocery delivery app, and Arm Holdings, a chip designer, all experienced declines below their IPO prices shortly after their respective debuts. However, it’s worth noting that Arm’s shares have since recovered and are currently trading above the initial price.
“It doesn’t strike me as the most opportune time for Shein to come public, but if they need capital the markets are open at least we’ve had a rally off the lows in the last few weeks and investor sentiment has been more positive than it was a few weeks ago,” said Jason Benowitz, senior portfolio manager at CI Roosevelt.
“…when investors can review the financials, I would expect to see pretty strong growth historically… the key question will be if they can kind of maintain the pace or to continue to gain market share going forward,” he said.
According to one of the undisclosed sources, Shein initiated discreet roadshows for its public offering in the U.S., with both sources opting not to be identified due to confidentiality constraints.
The retailer’s most recent action occurs against a backdrop of increased scrutiny from U.S. lawmakers directed at the company.
In August, attorneys general from 16 U.S. states, all Republicans, urged the Securities and Exchange Commission to conduct an audit of Shein, the China-founded fast-fashion retailer, to investigate the potential use of forced labor in its supply chain prior to its possible initial public offering (IPO).
Shein, recognized for its $10 tops and $5 biker shorts, predominantly dispatches its products directly from China to customers via air, with each item packaged individually.
The utilization of direct shipping has enabled the company to sidestep the accumulation of unsold inventory in warehouses and evade import taxes in the United States, a significant market for Shein. This approach allows the e-tailer to leverage the “de minimis” provision, exempting inexpensive products from tariffs.
The tax provision is currently facing increasing scrutiny in Congress, with critics contending that it enables companies to circumvent higher tariffs on Chinese goods.
In July, Reuters disclosed that Shein, having postponed its IPO plans on two occasions in the past, has been collaborating with a minimum of three investment banks regarding a potential initial public offering. The company was also engaged in discussions with both the New York Stock Exchange and the Nasdaq.
Shein, currently headquartered in Singapore, chose not to provide a comment. Goldman Sachs and JPMorgan declined to comment, and Morgan Stanley did not respond immediately to a comment request.
In May, the company achieved a valuation of more than $60 billion and is anticipated to become the most valuable China-founded company to go public in the United States since the 2021 debut of the ride-hailing giant Didi Global, valued at $68 billion.
Fast fashion retailers are gaining traction in the United States, with Shein capturing market share from established brands like Gap, as consumers seek fresher styles and trendier clothing.
In August, Shein collaborated with SPARC Group, a joint venture involving Authentic Brands, the owner of Forever 21, and Simon Property, a mall operator. This partnership aims to broaden their market reach and capitalize on the increasing demand for their products.
Both Shein and Temu.com, however, have struggled to translate site visits into actual sales and lag significantly behind the market leader, Amazon.com, which has effectively converted visitors into buyers.
The Wall Street Journal initially reported Shein’s confidential IPO on Monday.
