I Bought Shares in Shein’s IPO So You Don’t Have To

“A fashion disaster”

That’s the headline on a newsletter in my inbox this morning.

It’s not an item about the initial public offering (IPO) for fashion app operator Shein Global Holdings (HK:0625) today in Hong Kong. But it just as easily could be.

Shein shares listed Tuesday in Hong Kong, raising HK$13.6 billion ($1.7 billion) for the company. It also gave the company a market value of $26.1 billion, down almost 75% from its peak $98.2 billion valuation during a 2022 round of venture-capital financing.

Reclusive Founder Appears

Shein – pronounced “She In” due to its earlier online identity as a website selling bridal gowns – was founded by Xu Yangtian, a reclusive entrepreneur who is virtually a ghost online. But Xu, who now goes by the name Sky in English, came to the Hong Kong Stock Exchange for the market debut.

You can see some of the first online photos of Xu here. True to form, he didn’t speak at the listing event. He left the traditional banging of the listing gong to his chief financial officer. He declined to answer reporter questions. His only prior public appearance came in a livestream at a conference in February, where he affirmed the company’s local roots alongside officials at a conference in Guangzhou.

There would be plenty of questions about the future of his company. Shein is one of a handful of China-founded companies that have hit it big abroad, alongside telecom-hardware maker Huawei Technologies, electric-vehicle maker BYD (BYDDY) (HK:1211), or the app TikTok. Inevitably, political pressure follows.

My Small Position

I put my hand up to get some of the shares in the Shein offer, the largest in Hong Kong so far this year. And unlike other recent IPOs, I actually got some – not a positive, as I noted in my column last week previewing this listing.

The reason I’m getting 200 shares is that demand for the offer has not been strong. It brings to mind the Groucho Marx quip when he resigned from the Beverly Hills Friars’ Club: “I don’t want to belong to any club that will accept me as a member.”

I immediately regretted my rash subscription as soon as I saw the stock in my portfolio. On the plus side, I only got 200 shares out of the 1,000 I requested! Bullet dodged!

But I was panicking when I heard that the shares would immediately lose close to 20% of its value.

A First-Day Plunge? Not Quite …

So how have they performed?

Not nearly as badly as you might imagine. That headline above wasn’t about Shein, it was about the Metropolitan Museum of Art and its cancellation of a showcase for the designer John Galliano at the next Met Gala. Galliano, of course, was convicted of a hate crime in France in 2011, throwing anti-Semitic and anti-Asian slurs at patrons in a Paris bar. He was also fired from his job as the creative director at Dior.

Still, Shein is getting plenty of gloating coverage indicating how badly the offer has gone. The truth is a little more nuanced.

Gray-market trading indicated that the shares would open down some 17% – which would have been a disastrous start. In fact, the stock was down 9.8% within six minutes of the open, but spent the rest of the trading day in recovery mode.

The shares listed at HK$48.56, exactly the middle of their HK$47.60 to HK$49.50 range.  

They actually closed pretty much where they started, down a slim 0.1% to HK$48.50. That means they actually outperformed the broader market. Hong Kong’s benchmark Hang Seng slipped 0.9% on the day.

Questions Force Listing to Hong Kong

Shein was founded in China in 2008 but subsequently shifted its corporate headquarters to Singapore. Still, its attempts to list in New York and London were undone by political tensions between China and the West, with both U.S. and U.K. lawmakers raising questions about “sweat-shop” labor conditions in its supply chain, and use of cotton from the Chinese territory of Xinjiang, where the Muslim-majority population faces concentration-camp conditions, forced labor, and constant surveillance.

It is finding a friendlier regulatory regime in Hong Kong, China’s offshore financial center. International investors can still freely buy and sell Hong Kong stock in real time, and the Hong Kong dollar is instantly convertible into other currencies, with a peg that fixes it at HK$7.8 to the U.S. dollar.

Robot Stock on Fire in Shanghai

Still, Shein’s start to public life is far from the kind of stellar debut that we saw when humanoid-robot maker Unitree Robotics (SH:688836) listed in Shanghai. Its shares soared 460.3% on debut. I had indicated they would likely see a large first-day pop in my preview of the listing.

That kind of performance is eye-popping. But it also makes you wonder how the book builders got the pricing so wrong. The company has left millions on the table that would otherwise have gone into its corporate coffers. The Chinese A shares listed in Shanghai, Shenzhen and Beijing are also off-limits to all but the biggest global institutions, and even then only if they have secured a select quota to trade mainland markets. The Chinese Communist Party tightly restricts trading and transfers of the Chinese yuan.

What’s more, Unitree (officially called Yushu Technology Co.) has been correcting ever since. It is now down 32.4% from its first-day close. Those lucky, few investors who bought into the offer made out like bandits. But anyone buying shares in the open market is now looking at a hefty loss.

Book Builders Did Their Job

We can say that the book builders did a much better job with Shein. An offer that closes down 0.1% on the first day isn’t exciting, but it also means that the company was priced just right. It held up in the face of a down day for its home market, with Nasdaq also down 0.7% soon after the start of Tuesday trade.

My buyer’s regret wasn’t really warranted either. I’m out of pocket to the tune of HK$152 ($19.39). I chalk that up as a research expense. Now I have given myself an excellent reason to track Shein from here on out.

For similar reasons, I’m holding onto 200 shares of the KraneShares Hang Seng Tech Index (KTEC). It’s an exchange-traded fund (ETF) that I recommended as an Asian investment play for 2025, when there was a rotation into Chinese tech companies.

KTEC did well last year, ending 2025 with an advance of 18.9% on the share price, or around 20% when you factor in the dividend. But it has since given it all back, and is now 4.5% below its price at the start of last year. KTEC continues to slide since its October peak, with the broad market for Chinese shares down this year, the benchmark CSI 300 down 2.3% year to date.

I did sell much of my position this February and March, when as I explained at the time China gave its weakest forecast for its economic growth since 1991. But I retain 200 shares of KTEC, just as I’ll sit on my 200 shares of Shein.

Not that I’m expecting significant gains. My biggest current position is in the Roundhill Memory ETF (DRAM), which gives me plenty of excitement. Its Korean core components, Samsung Electronics and SK Hynix, can move up or down 20% in a day.

A ‘Regular’ E-Commerce Play?

Shein will likely muddle along as a prosaic e-commerce play. It first made waves during the pandemic, when Instagram and TikTok influencers posted “haul” short videos of themselves unboxing bolts of clothing at unreasonably cheap prices, many items costing less than $10.

The prospects for Shein are decidedly mixed. It faces a major challenge to its business model from the removal of the de minimis or “trifling matters” exemption on U.S. shipments that were worth less than $800. The European Union, which wasn’t charging duties on shipments below €150 ($174), has also implemented a €3 ($3.50) per parcel charge.

There’s also the sticking point that Shein is essentially paying back its venture-capital investors. When it was shopping itself around Wall Street in 2023, that was based off the 2022 v.c. round at just under $100 billion, as I covered at the time. When it took its listing to London instead in 2024, that was based off rounds in 2023 and 2024 that established a $64.0 billion valuation.

Venture Capitalists Get Their Money Back

But the venture capitalists who bought in at those rash prices are not paying the price. As Shein explains in its prospectus, it has already paid back $1.33 billion to its Series D investors, the ones that bought in at $98.2 billion. The whole Series D round raised $1.8 billion, and the company agreed to make those private-market investors whole.

So the $98.2 billion and $64.0 billion valuations were essentially meaningless. The pre-IPO investors have an anti-dilution agreement in place that converts their preferred shares into the Series B stock included in the global IPO offer at a price that gives them back what they paid, minus costs, on a weighted-average basis. That includes the IPO pricing and capital raised in the total.

The Series D Preferred shareholders have the best deal, on a “full-ratchet basis” that means they are fully insulated and will be completely be made whole. All their shares reprice at the lower valuation, regardless of the money raised in subsequent financing rounds.

The anti-dilution measures come at the cost of the company. Now that Shein is public, those repayments will stop. But the dilution means that Series B minority public shareholders like me indirectly paid the price.

Has the Fashion Business Moved On?

Shein will now look to build a foundation as a public company. Xu, the founder, is keeping a 30.3% stake of the Class B shares that’s worth $7.9 billion. He also retains 49.9% of the voting rights. Xu is chairman, CEO and founder though he credits three other “co-founders,” now chief operating officer Molly Miao, chief product officer Maggie Gu, and head of public affairs Tony Ren. They all met while working in search-engine optimization, helping Chinese companies export their goods.

Fashion is a fickle business. Shein’s biggest flaw may be that the industry has moved on.

My Gen Z daughter does her shopping on Vinted, the Lithuania-based platform for second-hand clothing that was valued at €8 billion ($9.3 billion) in a secondary-share deal in April. Thrifting, trading and reusing clothes is all the rage, making a Shein haul of disposable clothes look wasteful.

Vinted generated sales of €1.1 billion last year, up 38% over 2024. It is at the size where it could continue a rapid increase.

Shein is an order of magnitude larger, and mature to the point where its explosive growth is likely over. Its revenue for 2025 hit $41.8 billion, up 8.0% compared with the year before.

Of greatest concern is that profits slipped to a $99 million loss in Q1 this year. The company says it took fair-value charges of $2.1 billion in 2025 due to convertible preferred shares, and a $328 million charge in Q1.

Shein still has a huge customer base of 281 million active users as of Q1. But analysts question where its future growth will come.

The company says it will use 40% of the IPO proceeds to enhance technology and another 40% to grow and improve brand awareness. As part of that process, it plans to hire 1,500 to 2,000 new tech staff in the next 36 months.

Is LATR the Future?

It credits its in-house proprietary operating model called LATR (for Large-scale Automated Test and Reorder) as helping it design and order clothes and manage inventories. Its tech prowess and low cost basis makes it nimbler than rivals like Zara, owned by the Spanish company Inditex (IDEXY) (BME:ITX), and the Swedish brand H&M, under H&M Hennes and Mauritz (HNNMY) (STO:HM-B).

LATR allows Shein to order small batches of 100 to 200 items from its network of 7,500 independent factories, the vast majority of them in China. The system then reorders items as soon as they prove popular.

Faced with slowing growth, Shein is looking to market LATR to other companies, is buying brands such as Missguided, and is incubating others. The company is also expanding beyond fashion, with other goods such as cosmetics, furniture, electronics and pet products now making up around one-third of sales.

It also, though, faces competition such as rival app Temu, run by the Chinese company PDD Holdings (PDD). Both companies will have to work out how to maintain margins while dealing with tariffs and higher shipment costs.

Those questions aren’t answered, hence Tuesday’s initial fall in the share price. I’ll be tracking my new position to see where Shein heads next.

At the time of publication, McMillan was long Shein, KTEC and DRAM.