As per a Bloomberg report, Shein investors are trying to divest shares in private market transactions, with valuations for the online fashion giant dropping as low as $45 billion. This decline mirrors a diminished interest in the company, which is currently contending with intensified competition and regulatory scrutiny as it prepares for its much-anticipated debut in the United States.
Shareholders were offered stock at valuations ranging from $45 billion to $55 billion in late 2023, as disclosed by individuals familiar with the matter. This represented a notable decrease from the $66 billion valuation Shein had secured in a May fundraising round. However, even at these diminished levels, finding buyers posed a challenge for the shareholders, prompting concerns about the potential for additional loss in value. The sources requested anonymity while discussing these private transactions.
The latest offers, which haven’t previously been reported, highlight the widening gap between market appetite and Shein’s target of up to $90 billion in an initial public offering. While private transactions aren’t always indicative of the levels a company can reach on public markets, they provide a useful barometer of investor sentiment.
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The diminished interest underscores the challenges faced by the formerly dominant retailer of budget-friendly apparel in warding off Temu, a direct competitor launched approximately a year ago by the Chinese e-commerce giant PDD Holdings Inc. Concurrently, prominent clothing brands, from Fast Retailing Co.’s Uniqlo to Hennes & Mauritz AB, have accused Shein of copyright infringement. Requests for comment from Shein representatives went unanswered.
During the second quarter of last year, Shein’s shares were traded at approximately $50 billion to $60 billion, with an initial target of achieving a valuation between $80 billion and $90 billion in a public listing. However, liquidity has continued to diminish, and in a peculiar transaction towards the end of 2023, Shein was exchanged at a valuation of around $30 billion. In this particular instance, a financially burdened seller was compelled to quickly divest, according to one source.
The diminishing valuation raises concerns about Shein’s highly anticipated public listing, currently under review by China’s cyberspace administration. This regulatory body is examining the company’s data management and sharing practices, a thorough process that may extend over several months. Concurrently, officials in the United States have called on the Securities and Exchange Commission to suspend the IPO until they can confirm that Shein does not employ forced labor in its supply chain.
Established in Nanjing and presently based in Singapore, Shein achieved the status of the world’s third most valuable startup in 2022 following a funding round that assessed the company’s worth at $100 billion.
In the wake of a general decline in the valuation of startups and technology companies, Shein’s worth has also diminished. Investors, adopting a cautious approach amid an uncertain economic outlook, have contributed to the downward trend in valuations. Notably, ByteDance Ltd., the parent company of the short-video service TikTok, saw its valuation dip below $300 billion in secondary markets around July, marking a decrease of at least 25% from the previous year.