Investors looking for exposure to more consumer retailers after Birkenstock have another brand prepping to walk down the runway.
Chinese fast fashion retailer Shein is reportedly planning an initial public offering (IPO) in 2024.
The company has filed confidentially for its deal, two people familiar with the matter told CNBC. Shein is likely to be the most valuable China-founded company to go public in the U.S. and could potentially be one of the largest listings of the past decade.
Goldman Sachs, JPMorgan Chase, and Morgan Stanley are tipped to be the lead underwriters on the offering, the people said.
The Singapore-based company was founded in China in 2012. It was last valued at over $60 billion in a May fundraising, although in 2022, it was valued closer to $100 billion.
The brand has supercharged the speed and scale of the fast fashion business model in the ilk of Zara, H&M, and other throwaway retail brands. Like these brands before it, Shein targets younger demographics, attracting budget-conscious consumers with a seemingly endless variety of garments at dirt-cheap prices.
In recent years, the company has witnessed explosive growth in America, which is now Shein’s largest market. It recently ranked as the second-most popular shopping site among American teenagers after Amazon. The U.S. is now Shein’s largest market. It employs over 500 professionals in the U.S. for marketing, 1,400 people in manufacturing and coordinates with about 1,800 designers and artists.
At the helm of this behemoth is Sky Xu, (also known as Chris Xu or Xu Yangtian), a somewhat enigmatic executive who reportedly does not do interviews or make public comments about his company. Last month Shein did not answer an inquiry from CNBC about whether Xu still holds Chinese citizenship.
The IPO market remained quite inactive in the last quarter of this year after several big debuts flopped rather unceremoniously in recent months. Shares of German footwear brand Birkenstock, grocery delivery platform Instacart and British chip designer Arm Holdings all fell below their IPO prices in the days following their initial floating. Despite those setbacks, equities have turned around in recent weeks in broader equity prices. After stocks took a hammering through September and October, the S&P 500 has rebounded almost 10 percent in November.
“It doesn’t strike 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,” said Jason Benowitz, senior portfolio manager at CI Roosevelt, told Reuters.
The market mood is prone to shift, yet bulls may view Shein’s listing as a promising sign the IPO market may recover and bring some mega deals in 2024.
Yet Shein’s IPO does not come without regulatory complications. The company is currently being investigated by the House Select Committee on the Chinese Communist Party and is under scrutiny over the nature of its ties to the regime in Beijing. A large group of lawmakers, including 16 Republican attorneys general, want the SEC to verify no forced labor exists in Shein’s supply chain before allowing it to float in U.S. markets.
Across the Atlantic, European lawmakers are also watching closely. This year, the E.U. parliament supported recommendations to toughen rules on excessive fashion production and consumption. French Economy Minister Bruno Le Maire has also called for an investigation into the ethical and environmental impact of Shein’s business model.
Interested investors will keep an eye out for updates on what will likely be a market-moving deal in the new year.
This article was produced and syndicated by Wealth of Geeks.