Shein has been trying to go public for four years, and on Tuesday morning it finally managed it in Hong Kong. New York never happened. London stalled when Beijing withheld approval over what the company would have to disclose about its Chinese supply chain. The shares opened at the offer price and fell as much as 10%.
The offer price was the first tell. Shein sold about 280 million shares at HK$48.56 each, below the maximum it had asked for. That values the company a little over $26 billion. Private investors had it near $100 billion in 2022.
Demand was polite rather than enthusiastic. The Hong Kong retail tranche was subscribed 5.63 times and the international portion 2.59 times, in a market where Hong Kong's retail investors have pushed wanted listings hundreds of times over. Founder Sky Xu attended the gong ceremony, took photographs with staff and said nothing publicly. Chief financial officer Leigh Gui spoke instead.
The rule change that broke the model
Shein's whole model was cheap parcels crossing borders without paying much to do it. The United States ended its duty exemption for e-commerce shipments under $800 last year, and the European Union has since put fees on low-value packages of its own. Net income fell 39% last year and the company swung to a loss in the first quarter.
The company has told the market to expect a thinner operating margin in the first half than in the first quarter, because of customs duties, tariffs, fees and logistics costs in Europe and the Middle East. Revenue growth has nearly stopped: up 1.1% year on year in the first quarter, to $9.05 billion.
The R500 rule that already changed things here
South Africa ran its own version of this two years ago. Shein and Temu had been splitting larger orders into parcels worth less than R500 each, which attracted a flat 20% customs duty and no VAT, while local clothing retailers paid 45% plus VAT on the same goods. SARS added VAT to the flat rate from September 2024 and later moved to withdraw the underlying concession outright. Commissioner Edward Kieswetter put the uncollected tax at over R3.5 billion.
Shein arrived in South Africa in 2020 and, together with Temu, now accounts for about 15.3% of the online retailers South Africans use, second only to Takealot. Goldman Sachs may support the share price for a few more weeks as stabilising manager. That window closes on 26 September.
