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China's Shein files for US IPO in major test for investor appetite -sources

China's Shein files for US IPO in major test for investor appetite -sources
According to two people familiar with the subject, the fashion firm Shein has quietly registered to go public in the US. This makes it likely to be one of the most valuable China-founded companies to list in New York.
The IPO will be led by Goldman Sachs, JPMorgan Chase, and Morgan Stanley, and Shein, a Singaporean company, may begin selling fresh shares for sale as early as 2024, according to the sources.
The sources stated that Shein has not decided on the deal's size or IPO valuation. Bloomberg stated earlier this month that the float was intended to reach up to $90 billion.
Both Shein and the banks opted not to respond.
In a fundraiser in May, the mainland Chinese company that was launched in 2012 saw its valuation drop by a third from the previous year's investment round to around $60 billion.
The ride-hailing behemoth Didi Global made its public debut in the US in 2021, valued at $68 billion, making it the most valuable China-founded company to do so to date.
The fast-fashion conglomerate's decision to go public in the United States coincides with the market's ongoing struggles to recover from a run of underwhelming stock market debuts.
Three of the four large initial public offerings (IPOs) in recent months left investors feeling let down.
In the days that followed their debuts, shares of German sandal manufacturer Birkenstock, supermarket delivery app Instacart, and chip designer Arm Holdings sank below their initial public offerings (IPO) pricing; however, Arm's shares are currently trading above that amount.
"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.
"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.
Approximately $23.64 billion has been raised by US initial public offerings (IPOs) this year, up from $21.3 billion in the same period last year. The IPO market was at its peak in 2021, and $300 billion was the comparable amount.
For the float, Shein had begun low-key roadshows in the United States, according to one of the sources, who wished to remain anonymous owing to privacy concerns.
It's not immediately obvious if the business has submitted an application for the U.S. IPO to the China Securities Regulatory Commission (CSRC). For Chinese enterprises to proceed with their offshore offerings, regulatory permission is a prerequisite.
There were no comments on the issue available from CSRC.
"As it is a significant and highly disruptive player in the retail space, Shein will attract a lot of investor interest," said GlobalData managing director Neil Saunders.
Shein, which scrapped its 2020 U.S. listing attempt, has reportedly been in talks with at least three investment banks over a possible initial public offering (IPO) since July.
Before Shein's possible IPO, Republican attorneys general from sixteen U.S. states requested in August that the Securities and Exchange Commission investigate the company's supply chain for possible forced labour usage.
Shein, well known for its $5 biker shorts and $10 tops, sends most of its merchandise directly to consumers via air in individually addressed packets.
Because the direct shipping approach enables the e-tailer to take advantage of the "de minimis" rule, which exempts inexpensive products from tariffs, it helps the company avoid unsold inventory building up in warehouses and avoid import tax in the United States, one of its main markets.
The clause, according to some critics, enables businesses to avoid paying higher duties on Chinese imports.
In the US, fast fashion companies are becoming more and more well-liked as consumers seek out more contemporary looks. Shein is displacing established brands like Gap in terms of market share.
To broaden their market reach, Shein teamed up with Simon Property (SPG.N), the mall operator, and Authentic Brands, the owner of Forever 21 in August.
Nevertheless, Shein and are well behind market leader in this regard as they have not been able to convert customer visits into sales.
Big companies like Shein are entering capital markets because loan rates are peaking and because they may be ahead of changes in U.S. laws for small retailers, according to Sumeet Singh, an analyst with Aequitas Research and contributor to SmartKarma.
"It's probably as good as it gets for them right now," he said.
China's Shanghai Securities Journal was the first to report on Shein's confidential U.S. IPO filing last week. Citing sources, the Wall Street Journal verified the news earlier on Monday.

Christopher J. Mitchell

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