Friday Funding: Shein Valued at $64 Billion

By: James Flippin · January 20, 2023 · Reading Time: 3 minutes

Shein’s Valuation

Shein is a Chinese fast fashion company that offers good outfits at great prices. Its products are most well-known for being exceedingly cheap and gaining considerable traction on the social media platform TikTok.

The digital retailer recently announced that it’s seeking $3 billion at a valuation of $64 billion. While that might sound like a jaw-dropping sum, it’s actually a steep discount from the $100 billion valuation that Shein commanded last April.

Nevertheless, the company has plans to pursue an IPO in the US as early as 2024.

Ecommerce Goes on Sale

The drawdown in Shein’s valuation has some investors hesitating ahead of its IPO. However, Shein is hardly the only Chinese ecommerce company struggling of late, as many major players in the industry saw their worth crumble in the past two years.

Since 2021, rival Pinduoduo’s (PDD) market cap has plummeted from $240 billion to around $100 billion. Meanwhile, Sea (SE), which owns the Asia-centric ecommerce giant Shopee, lost over 80% of its market cap over the same period.

Come Rain or Shein

Despite the plunge in its valuation, Shein still plans to forge ahead with its IPO. However, valuation concerns aside, there are other outstanding issues that could potentially cause investors to reconsider.

For example, despite recent moves to step up its ESG efforts, fast fashion practices have historically been known to be destructive to the environment, which may not sit well with ESG investors. In addition, some Chinese companies pursuing IPOs have previously been accused of accounting non-compliance, involving questionable invoicing and tax evasion.

In 2020, less than a year after going public, Chinese coffeehouse chain Luckin Coffee (LKNCY) was exposed for fabricating sales of over $300 million. The company was forced to declare bankruptcy and answer to the SEC.

Nevertheless, Shein clothing remains immensely popular, and perhaps enough so to overcome these concerns. Investors must simply come to terms with what TikTokers seem to already know: beauty is pain.

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