Sources: Chinese company Shein files for initial public offering in the US in a major test of investor appetite

Nov 27 (Reuters) – Fashion company Shen has filed a secret application to go public in the United States, two sources familiar with the matter said on Monday, in what is likely to be one of the most important companies founded in China to go public in the United States. we

Goldman Sachs, JPMorgan Chase and Morgan Stanley have been appointed as lead underwriters for the offering, and Singapore-based Shein could go public sometime in 2024, the sources said.

The sources said that Sheen did not specify the size of its offering or its valuation at the time of the IPO. Bloomberg reported earlier this month that it was targeting up to $90 billion in the flotation.

Shen, Goldman and JPMorgan declined to comment, while Morgan Stanley did not immediately respond to a request for comment.

The company was founded in mainland China in 2012 and was valued at more than $60 billion in fundraising in May, down by a third from last year’s funding round.

The most valuable Chinese-founded company to go public in the US so far is ride-hailing giant Didi Global (92Sy.MU) which debuted in 2021 with a valuation of $68 billion.

The fast-fashion giant’s move to go public in the US comes as the market for initial public offerings struggles to rebound after a series of lackluster stock market debuts.

In recent months, there have been four major IPOs, three of which disappointed investors.

Shares of German sandal maker Birkenstock (BIRK.N), grocery delivery app Instacart (CART.O) and chip designer Arm Holdings fell below their IPO prices in the days following their debut, although Arm shares are now trading above this price.

“It doesn’t seem to me like this is a good time to go public with Shen, but if they need capital the markets are open… and investor sentiment has been more positive than it was a few weeks ago,” Jason Benowitz said. Senior Portfolio Manager at CI Roosevelt.

“When investors are able to review the financials, I expect to see historically strong growth… The key question is whether they can maintain the pace or continue to gain market share in the future,” he said.

Initial public offerings in the United States have raised about $23.64 billion so far this year, compared to $21.3 billion during the same period last year. In 2021, the comparable figure was $300 billion when the IPO market was near its peak.

supply chains

One of the sources, who requested anonymity due to confidentiality restrictions, said Shin has begun low-key promotional tours for the US float.

It is not immediately clear whether the company has applied to the China Securities Regulatory Commission (CSRC) for an IPO in the United States. Chinese companies need to obtain clearance from the regulator before moving forward with their overseas bids.

CSRC did not immediately respond to a request for comment.

Reuters reported in July that Shen — which attempted a U.S. listing in 2020 but shelved that plan — was working with at least three investment banks on a potential IPO.

In August, Republican attorneys general from 16 US states asked the Securities and Exchange Commission to review Sheen’s supply chain over alleged use of forced labor ahead of a potential initial public offering.

“Right time to list”

Known for its $10 T-shirts and $5 biker shorts, Shein ships the majority of its products directly from China to shoppers by air in individually addressed packages.

The direct shipping strategy has helped the company avoid accumulating unsold inventory in warehouses and avoid import tax in the United States, one of its largest markets, because it allows the e-retailer to take advantage of a “minimum” requirement that exempts cheap products. Of definitions.

Some critics say this provision allows companies to evade high tariffs on Chinese goods.

Fast fashion retailers are gaining popularity in the United States, with Shein taking market share from companies like GAP, as shoppers search for newer styles.

In August, Shein partnered with SPARC Group, a joint venture between Forever 21 owner Authentic Brands (AUTH.N) and shopping mall operator Simon Property (SPG.N), in a bid to expand their market reach.

However, Shein and Temu.com have been unable to convert shopper visits into sales, and lag far behind market leader Amazon.com (AMZN.O) in this regard.

Sumit Singh, an analyst at Aequitas Research who publishes at SmartKarma, said big companies like Shein were tapping capital markets due to interest rates peaking and ahead of potential changes in US regulations for small retailers.

“It might be good for them now,” he said.

Shein’s secret US IPO filing was first reported by Chinese newspaper Shanghai Securities Journal last week. The Wall Street Journal confirmed this report earlier today, Monday, citing sources.

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