HONG KONG/LONDON, Aug 12 (Reuters) - Even after cutting its expected IPO valuation to $30 billion to $40 billion from a near $100 billion private market peak, Shein faces questions over whether slowing growth, rising costs and changing market conditions justify that price tag.
Five investors who attended presentations or reviewed recent financial statements ahead of a Hong Kong offering expected to launch as early as August 19 said they were not convinced fast-fashion retailer Shein could return to the growth
rates that valued it at nearly $100 billion in a 2022 fundraising round.
"The future is quite challenging ... Shein at its core is still a supply chain company," one investor said, citing slowing sales growth due to fierce competition, and pressure on its core business model.
Shein's management highlighted opportunities to expand its portfolio of in-house brands, said the investor, who questioned whether that represented a meaningful new growth avenue.
Another investor said Shein was an increasingly mature e-commerce business whose IPO valuation would need to reflect a more modest growth outlook.
A third investor said in their view Shein should be valued at a single-digit price-to-earnings (P/E) ratio, closer to that of PDD Holdings, which owns shopping platform Temu.
A lower price would have consequences for Shein's ownership as under terms in its IPO filing, the company's founders would be required to provide extra shares to certain pre-IPO investors if the valuation falls below agreed thresholds.
Representatives for Shein declined to comment.
Morgan Stanley analysts estimated a "fair value range" of $39 billion to $52 billion in a report provided to potential Shein investors, which was seen by Reuters.
They said the price range was based on 18 to 24 times Shein's projected 2027 earnings, taking into consideration the price at which competitors such as Inditex and H&M trade.
Morgan Stanley, which is a sponsor on Shein's IPO alongside Goldman Sachs and JPMorgan, did not immediately respond to a Reuters request for comment.
GROWTH SLOWS SHARPLY
Shein's biggest challenge is convincing investors that a sharp slowdown in growth is temporary rather than structural.
Its revenue rose by 41.1% in 2023 and 20.7% in 2024 and research firm Coresight expects growth to slow to around 2% this year as changes to customs regimes in key markets raise costs and weigh on demand.
The European Union imposed hefty fees on e-commerce packages in July, after the U.S. last year ended duty-free access for cheap parcels, removing a key advantage of Shein's direct-shipping business model and forcing it to invest in local warehousing capacity.
"We think Shein will make a big push in the rest of the world, as we saw when the U.S. introduced de minimis changes, and try to limit pass-through of costs to EU consumers in view of its IPO," said Coresight head of global research John Mercer.
CUSTOMER ENGAGEMENT
Investors and analysts are also scrutinising customer metrics disclosed in Shein's IPO filing.
While annual active customers rose to 273 million in 2025 from 230 million a year earlier, purchase frequency remained unchanged at roughly four orders per year.
The figures suggest Shein continues to attract new shoppers but has yet to demonstrate significantly deeper engagement.
"The reason Shein got on everyone's radar is that they decided to turn on this fire hose of advertising and make a play for market share," said Mike Ryan, head of e-commerce insights at Smarter Ecommerce.
"They got app installs, they got users, but it wasn't sustainable," he added.
Shein has ramped up marketing spending, to $1.43 billion in the first quarter from $1.09 billion a year earlier, and will have to show investors that is helping boost demand.
MORE SELECTIVE
Several investors said Shein's presentations highlighted operational technology and data capabilities but lacked the growth story now attracting capital to AI-linked businesses.
The term "artificial intelligence" appears only a handful of times in Shein's Hong Kong filing.
A source close to Shein said it was not attempting to market itself as an AI company or to achieve an AI valuation, and instead viewed the technology as a tool making its supply chain more efficient.
(Reporting by Summer Zhen and Kane Wu in Hong Kong and Helen Reid in London; Editing by Matt Scuffham and Alexander Smith)
