A public debut is a complex process – just ask Shein. The Chinese fast-fashion retailer has endured a stream of scandals and setbacks since IPO rumours began circulating in 2023. These include concerns over intellectual property rights, corporate governance and sustainability – not to mention allegations of forced labour in the company’s supply chains.
The the latest challenge – involving Donald Trump’s decision to close the de minimis duty exemption in the US – threatens Shein’s very business model. The retailer was angling to float on the London Stock Exchange (LSE) in the first half of this year. But it’s plans are in now jeopardy, as losing the import-tariff exemption means Shein will face higher costs when shipping to America, one of its biggest markets.
Shein’s value has fallen dramatically as a result of this policy change. The firm had already seen its value drop from $100bn (£79bn) in 2022 to $66bn (£52bn) in 2023. And recent reports suggest it is being pushed to cut its valuation further, to $30bn (£23bn).
Donald Tang, Shein’s executive chairman, told investors in a letter on Monday that “growth remains strong”. But the company’s IPO has now been postponed to the second half of this year. What, if anything, can be done to salvage its public offering?
Adapting to trade tensions and addressing investor concerns
Shein has a lot to prove to regain investors’ confidence. Certain obstacles, such as US regulatory changes, are out of its control; but others, such as concerns over supply chain practices, can be addressed directly. For Shein to have a shot at a successful listing, it must show measurable progress on multiple fronts, says Christoph Martin, CFO at PensionBee, a consumer pensions platform.
American tariffs are a major sticking point. Losing the de minimis exemption, which allows firms to import items worth $800 (£635) or less to the US duty-free, will impact Shein’s profits and may force the company to increase prices in the US. If Shein’s profitability is threatened, investors will naturally question whether its business model is sustainable.
Martin says the company has three options: raise prices to maintain margins, accept a hit to the profit and loss (P&L), or find ways to reduce costs. None of these is ideal. “It’s a delicate decision to increase prices when Shein’s whole proposition is affordable apparel,” Martin says.
Meanwhile, any reconfiguration of the business model will be extremely tricky to pull off in time for an IPO in Q2 2025. “The timeline is very, very tight,” Martin explains. “I imagine the finance team will be overwhelmed, juggling existing operations and an IPO process. Having to execute a new strategy on top of that will be really challenging.”
If Shein can’t show a clear path to profitability and growth, the valuation could take even more hits
Most likely, Shein has a contingency plan. Its leadership has long been aware of the threat of US tariffs and will have considered the firm’s exposure in the most recent risk assessment. This should strengthen their position in pricing discussions with investors, Martin says.
The company is also looking to establish production capabilities in Vietnam to avoid President Trump’s additional 10% tariff on Chinese imports. This is a step in the right direction but it is not a quick fix, says Steven Kibbel, chief executive at Kibbel Financial Planning, a financial consultancy.
Scaling up manufacturing in a new country requires time and money, and there is no guarantee that the cost savings will fully offset the impact of new tariffs. “Investors will want to see a clear timeline and real numbers to back up the claims that this will work,” Kibbel says. “If Shein can’t show that, it’s going to be hard to convince the market that they’ve got this under control.”
Meanwhile, activist groups are pressuring regulators to block Shein’s listing owing to the alleged use of forced labour in the company’s supply chain. Shein’s leadership must provide regulators and investors with a clear roadmap for resolving these problems.
According to Kibbel, it’s not just about fixing operational issues, it’s also about rebuilding trust. “It’s not enough to announce safety programmes or recycling investments; investors want third-party audits, clear reporting and evidence that Shein is addressing these issues in a meaningful way. If they don’t step up, the IPO will be shadowed by these ongoing concerns.”
He continues: “Shein has the advantage of being a dominant player in its space, with strong customer loyalty. But that won’t mean much if they can’t clean up their image and adapt to the evolving regulatory and market landscape.”
A lower valuation is the safest route
Delaying their IPO to late 2025 will afford Shein some time to work through these challenges. It could enable the company to adjust its supply chain to mitigate the impact of higher tariffs and import duties. But there’s a downside to waiting too long. “The fast-fashion space is competitive. If Shein doesn’t move quickly, someone else might claim the spotlight with their own IPO. That could make Shein’s potential listing less attractive by comparison,” Kibbel explains.
However, a rushed IPO could further diminish Shein’s valuation, especially if the firm’s many problems are left unresolved. “Investors are already seeing the valuation drop from $66bn to $30bn, according to reports. That’s not a small adjustment,” Kibbel says. “If Shein can’t show a clear path to profitability and growth, the valuation could take even more hits.”
Accepting a lower valuation might be the best way forward, according to Martin. Investors won’t back inflated numbers when there are clear risks on the table. A realistic valuation that factors in long-term sustainability is much more appealing than one propped up by aggressive growth strategies that are vulnerable to the whims of a foreign head of state.
A public debut is a complex process – just ask Shein. The Chinese fast-fashion retailer has endured a stream of scandals and setbacks since IPO rumours began circulating in 2023. These include concerns over intellectual property rights, corporate governance and sustainability – not to mention allegations of forced labour in the company’s supply chains.
The the latest challenge – involving Donald Trump’s decision to close the de minimis duty exemption in the US – threatens Shein’s very business model. The retailer was angling to float on the London Stock Exchange (LSE) in the first half of this year. But it’s plans are in now jeopardy, as losing the import-tariff exemption means Shein will face higher costs when shipping to America, one of its biggest markets.
Shein’s value has fallen dramatically as a result of this policy change. The firm had already seen its value drop from $100bn (£79bn) in 2022 to $66bn (£52bn) in 2023. And recent reports suggest it is being pushed to cut its valuation further, to $30bn (£23bn).
