Online fast-fashion giant Shein is reportedly lowering its valuation to approximately $50 billion for its potential London listing. This represents a significant decrease from its $66 billion valuation in 2023 and signals growing headwinds for the company.
Impact of “De Minimis” Exemption Removal
One major factor contributing to the reduced valuation is the recent decision by the Trump administration to eliminate the “de minimis” duty exemption in the United States. This exemption previously allowed Shein to import goods valued under $800 without paying duties, contributing to its low prices and profitability.
Analysts predict that the removal of this exemption could negatively impact Shein’s profitability and lead to increased product prices in the U.S., its largest market. The extent of the impact will likely influence the final IPO valuation.
Regulatory Hurdles and Scrutiny
Shein’s path to an IPO has encountered challenges. The company confidentially filed with the UK’s Financial Conduct Authority (FCA) in early June, but the approval process has been lengthier than usual. Market experts indicate that decisions on IPOs can take several months.
Furthermore, Shein will require approvals from Chinese regulators, including the China Securities Regulatory Commission (CSRC). The company shifted its IPO plans to London after facing scrutiny in the U.S. regarding alleged labor practices and lawsuits from competitors.
UK Government’s Push for Pro-Growth Policies
Shein’s proposed IPO aligns with the UK government’s efforts to promote growth and attract companies to list in London. The government has been encouraging regulators to adopt a more pro-growth approach and has implemented reforms to listing rules to enhance the attractiveness of the London market.
Down Round and Uncertainties
The reduced valuation for the London IPO marks the second consecutive down round for Shein. This indicates that investors are less optimistic about the company’s future prospects compared to previous funding rounds.
The reasons for this decline are not fully clear, but factors such as increased competition, potential regulatory changes in other markets, and concerns about sustainability and ethical practices in the fast-fashion industry could be contributing to the uncertainty surrounding Shein’s future.
