The initial public offering (IPO) world is buzzing on news Singapore-based fast-fashion retailer Shein has filed confidential paperwork to go public in the U.S. While details are sparse, reports suggest that the company could see its stock start trading as soon as 2024.
Shein was founded in China in 2012 and has quickly become a hot-spot for cheap fashion. The e-commerce company moved its headquarters to Singapore in late 2021, with media reports speculating this was done to bypass China's stringent rules on overseas listings.
According to its website, Shein uses "on-demand manufacturing technology to connect suppliers to our agile supply chain, reducing inventory waste and enabling us to deliver a variety of affordable products to customers around the world." The retailer has a global workforce of roughly 10,000 people and sells its products in more than 150 countries.
"Fashion companies are heating up in the IPO market, and others rumored to file soon include Vuori, Skims and Golden Goose," says Josh Giordano, director of investment research at Linqto, a private equity platform. "Most recently valued at $66 billion, if Shein's IPO is a success, it will encourage others in the sector to seriously consider the IPO route in 2024. This is a promising outlook for retail investors looking to buy stock and an exciting shift in the private market as we head into the new year."
Schein's financial numbers are impressive. Per The Wall Street Journal, the company had $23 billion in revenue and $800 million in net profit in fiscal 2022. Not too bad when considering Old Navy parent Gap (GPS) had revenue of just $15.6 billion in fiscal 2022, while Chinese e-commerce retailer and Temu owner PDD Holdings (PDD) reported sales of $18.9 billion in its most recent fiscal year.
Schein IPO faces several hurdles
However, the retailer's IPO isn't a done deal. Fast fashion has plenty of critics. Shein, specifically, is accused of sourcing its cotton from Xinjiang, where China is believed to have committed human rights abuses against the Uyghur population, though the company has denied the allegations.
Additionally, "Shein has come under significant criticism for the huge volumes of cheap clothes it produces, the lack of transparency in its supply chain and its appropriation of other designers' work," says Susannah Streeter, head of money and markets at Hargreaves Lansdown.
IPO market is thawing, but challenges remain
Among Wall Street's upcoming IPOs, Shein will likely be one of the most highly anticipated. But just because investors are looking forward to a company going public doesn't mean the excitement will last.
Take Arm Holdings (ARM), for instance, which went public in September 2023 in what was easily the most talked about IPO of the year. And while the Arm offering turned out to be one of the biggest IPOs in U.S. history, the semiconductor stock struggled in the weeks immediately following.
ARM stock has stabilized heading into the final stretch of 2023, though, and is back above its IPO price. The same can't be said for two of this year's other anticipated IPOs, Instacart (CART) and Klaviyo (KVYO), which are both trading below their IPO prices.
Still, the recent pickup in IPO activity "offers some hope for a rebound in 2024 capital markets activity," writes Nathan Stovall, director of the financial institutions research team for S&P Global Market Intelligence. However, higher interest rates "could limit risk appetite," Stovall adds.
IPOs face additional hurdles, with market volatility, a potential recession and unknown "macro consequences of various wars" making most institutional money managers "skittish and unwilling to dive headlong into the IPO pool," says Joe Endoso, president of Linqto.
