(Adds dropped word 'billion' in headline)
By Summer Zhen, Helen Reid and Selena Li
LONDON/HONG KONG, Aug 4 (Reuters) - Shein is aiming for a $30 billion to $40 billion valuation in a Hong Kong initial public offering (IPO) that the online fast-fashion retailer plans to launch as early as mid-August, three sources familiar with the matter said.
The target, which has not been previously reported, and the timeline are not final and are subject to change after feedback from investor meetings, which began
last week, said the sources, who declined to be named as the plans are confidential.
The valuation marks a dramatic reset for Shein, which private fundraising rounds valued at $98.2 billion in 2022, before falling to $64 billion in 2023 and April 2024 as growth slowed and external pressures mounted.
Shein, known for selling $5 dresses and $10 jeans to shoppers in about 160 countries, is prioritising a price that can support the shares after the listing rather than maximise valuation, said one source.
Some potential cornerstone IPO investors are pushing for a valuation closer to $30 billion or $32 billion, the source said, adding Shein has held investor meetings in New York, Boston and San Francisco over the past week.
Singapore-headquartered Shein did not immediately respond to a Reuters request for comment. Shein, which was founded in China in 2012, has not publicly disclosed the size, offer price or timetable for its planned stock market debut.
Shein's draft IPO prospectus last month showed it swung to a $99 million quarterly loss due to slowing sales after the U.S. removed an import duty exemption on small packages and a $328 million fair-value charge on convertible redeemable preferred shares following an accounting change.
"The valuation cut mainly reflects two concerns: first, Shein's profits declined last year; second, its e-commerce model is closely tied to small-parcel tariffs," said Kenny Ng, a securities strategist at Everbright Securities International.
Ng's comment referred to changes in the U.S. and European rules for low-value shipments that have clouded visibility on Shein's future profitability. He, however, said there was limited room for a further cut in Shein's valuation.
Slowing revenue growth and weaker core earnings highlight growing strains on Shein's business, while shrinking margins have also raised concerns its breakneck expansion is running into headwinds from higher trade costs, tighter regulatory scrutiny and intensifying competition across global e-commerce.
LOWER IPO VALUATION
A $30 billion to $40 billion valuation, if achieved, would place Shein broadly alongside H&M, worth about $26 billion, but it will be well below Fast Retailing at $161 billion and Zara parent Inditex at $208 billion.
Shein would trade at 0.7-1 times its 2025 sales, Reuters calculations showed, versus H&M at about 1.1 times sales, Inditex at 4.6 times and Fast Retailing at 7.6 times.
The planned "conservative" price-to-sales multiples for Shein compared with other listed peers was due to Shein's lower profit margins and weaker earnings visibility, said Jianggan Li, founder and chief executive of consultancy Momentum Works.
"The range looks realistic, with the lower end likely easier for investors to support than the upper end."
Shein is also exploring measures to lower the cost of investment for some late-stage investors, according to the draft prospectus, as the IPO valuation was expected to be below the value at which it previously raised private capital.
It may offer payouts to early investors as well as more shares with a lower conversion price for their holdings.
Shein won approval from the China Securities Regulatory Commission (CSRC) for its Hong Kong IPO on July 10, clearing the way after failed listing attempts in New York and London.
It said in its draft prospectus that it intends to use proceeds from the IPO to fund technology investments, global brand-building, corporate responsibility initiatives and general corporate purposes.
(Reporting by Summer Zhen and Selena Li in Hong Kong, Helen Reid in London, and Yantoultra Ngui in Singapore; Editing by Sumeet Chatterjee, Shri Navaratnam and Alexander Smith)
