Shein to List in Hong Kong on Tuesday with $26 Billion Valuation as Investors Worry About Growth Outlook

Fast fashion giant Shein has completed its initial public offering (IPO) in Hong Kong, raising $1.7 billion. However, its listing valuation has dropped to $26 billion, a sharp decline from its peak of $100 billion in 2022, with some investors even questioning whether this valuation remains too high amid uncertain prospects.

According to estimates, Shein's IPO implies a price-to-earnings (P/E) ratio of over 15 times, exceeding the Hang Seng Index's 10.7 times and more than double that of Pinduoduo (7.4 times), the parent company of rival Temu. Amid U.S. and European tariff barriers and fierce competition from Temu, Shein's growth has clearly slowed, with next year's sales growth projected at just 3.4%.

Regarding the high valuation, Gary Tan, portfolio manager at Allspring Global Investments, pointed out that a 15x P/E ratio already prices in an expected recovery in growth. Investors will remain cautious until management proves that a restructured business model can reignite growth.

The shift in investor focus also poses a challenge. Jason Hsu, Chief Investment Officer at Rayliant Global Advisors, said that Shein, once the hottest topic in the U.S. two to three years ago, has now been overtaken by artificial intelligence (AI) as the most popular investment theme.

Sam Wyatt, International Equity Portfolio Manager at U Ethical Investors, also believes Shein has "clearly missed its optimal timing," noting that e-commerce now holds far less appeal for investors compared to AI.

Moreover, Edmund Harriss, Chief Investment Officer at Guinness Global Investors, questioned Shein's unique advantages, stating he prefers holding shares in Alibaba, which, despite facing competition, offers more stability.

Sheng Lu, a professor at the University of Delaware, analyzed that market trends are shifting unfavorably for Shein. The widespread adoption of AI is helping competitors close the gap by enabling faster responses to consumer demands. Shein's past strategy of leveraging "de minimis" exemptions to avoid import tariffs in the U.S. and Europe has been severely undermined by the Trump administration's elimination of tariff waivers and the EU's imposition of fixed tariffs. Previous attempts to list in New York and London were also blocked due to scrutiny over alleged forced labor practices.

With the company's valuation significantly revised downward, Chris Xu, the 43-year-old founder and CEO, has seen his net worth shrink from a peak of $23 billion to approximately $8 billion.