Did Shein Pass Its IPO Test?

Shein shares fell as much as 10 percent in their first day of trading on the Hong Kong stock exchange before recouping the losses, capping a rocky, multiyear journey to market.

The shares, which sold in the initial public offering at 48.56 Hong Kong dollars ($6.19), closed flat at 48.50 Hong Kong dollars on Tuesday after having dropped as low as 43.72 Hong Kong dollars.

Despite multiple declines in Shein’s valuation before the initial share sale, investors pushed the shares lower as they continued to question the company’s business model amid a series of challenges that have emerged over the past several years. Following the first day of trading, Shein’s market value held steady at around $26 billion.

The debut is an important test for a company whose valuation soared during the pandemic before falling sharply as growth slowed and regulators, politicians and investors turned increasingly sceptical of its China-centric, ultra-low-cost business model. Shein’s public-market value is now a quarter of the almost $100 billion valuation it commanded in 2022, when the boom in online shopping helped propel it to the ranks of the world’s most highly valued private companies.

In private funding rounds, Shein’s valuation surged from about $5 billion in 2019 to almost $100 billion three years later. The company first pursued a US listing, then turned to London amid regulatory and political opposition in the US, before ultimately settling on Hong Kong. At its peak, private investors valued Shein at more than the stock market valuation of H&M and about as much as Zara owner Inditex.

The company faces a more challenging environment. Revenue growth slowed from a rate of 41 percent in 2023 to 21 percent in 2024 and 7.9 percent last year, Shein’s IPO prospectus shows. Net income fell 39 percent last year, and the company posted a $99 million net loss in the first quarter of this year, after booking costs linked to the drop in the value of its shares.

Shein built its model manufacturing ultra-cheap clothing in China and shipping it directly to mostly US and European shoppers, using social media to generate demand, and a vast network of suppliers to quickly produce new styles in small batches. The strategy helped the company grow at extraordinary speed, but has also left it exposed as governments tighten rules around low-value imports, labour practices and the environmental impact of fast fashion.

US tariffs have forced Shein to raise prices, eroding some of its low-price advantage. At the same time, the ending of duty-free treatment for small packages — the so-called de minimis exception — is taking a toll. Shein’s dependence on sales from its biggest market makes the company particularly vulnerable to changes in trade policy and consumer sentiment there.

“Since May 2025, the removal of the US de minimis exemption has had an adverse impact on our sales in the US and the overall growth of our net revenues, and has contributed to an increase in our fulfilment expenses as a percentage of net revenues,” the company said in the IPO prospectus.

Shein has also faced roadblocks in Europe, with France in particular drafting measures to curb ultra-fast fashion.

Once a scrappy newcomer that disrupted established fashion retailers, Shein has had to invest more in defending its position. The emergence of Temu and other low-cost e-commerce players with a similarly aggressive, low-price, social media-driven approach, has intensified competition, while established retailers have adapted their offers to meet demand for more affordable fashion.

Shein plans to use most of the money raised in the IPO to improve the technology underpinning its supply chain and inventory management as well as for marketing and other corporate purposes.

Shein has moved more inventory closer to customers in the US and Europe and expanded local warehousing and shipping operations. It has also developed its marketplace to include more local sellers. But the moves have come with a tradeoff. While higher retail prices and a more localised supply chain can protect margins, they also chip away at the low-price advantage that made Shein a global phenomenon.

Although Shein moved its headquarters to Singapore in 2022, it continues to draw scrutiny from Washington for its links to China amid heightened trade tensions between the two countries. At the same time, Shein’s ultra-fast fashion model faces questions about textile waste, emissions and overproduction, with tougher rules in Europe potentially adding costs. The company has also had to fend off questions over labour practices in its supply chain.