Shein shares plunge up to 28% in grey market ahead of Hong Kong debut

Shein Global Holdings shares experienced a significant drop in the grey market the day before its Hong Kong debut, causing concern over the company's valuation. The shares fell 28% on Monday, closing at HK$42.2 after peaking at 28% lower. Each 100-share lot resulted in a loss of HK$636, not including transaction fees. The fast-fashion retailer raised HK$13.6 billion (US$1.7 billion) by selling 280 million shares at HK$48.56 each, valuing the company at over US$26 billion.

This valuation represents a substantial decline from its peak of nearly US$100 billion in 2022 and its 2023 Series D+ funding valuation of around US$64 billion. To compensate investors from previous private funding rounds, Shein will pay approximately US$1.33 billion to pre-D, D, and D+ preference shares. Seven cornerstone investors, mostly existing backers, subscribed to about US$383 million worth of shares, which is 22% of the base offering size.

As of Monday's grey market close, they had already incurred a paper loss of HK$410 million. The stock will begin trading in Hong Kong on Tuesday, marking Shein's third attempt at an initial public offering. Despite consistent annual revenue growth above 40% from 2021 to 2023, the company's net income grew at a compound annual rate of 14.2%.

In the first quarter of 2024, Shein's revenue growth nearly stagnated, increasing by just 1.1% year-over-year to US$9.05 billion. Morgan Stanley, JPMorgan Chase, and Goldman Sachs are the joint sponsors, while Haitong International Securities, UBS, HSBC, Merrill Lynch (Asia-Pacific), Banco Santander, and East West Bank serve as joint bookrunners.