'Chinese Uniqlo' Shein, Set to Be This Year's Biggest IPO... Earnings Triple Up

This year, the Chinese version of Uniqlo, Shein, which is preparing for an IPO on the New York Stock Exchange, reported that its revenue last year tripled compared to the previous year. If it succeeds in going public despite regulatory hurdles in the US and China, it is expected to be the largest IPO of the year.

According to major foreign media citing multiple sources on the 31st of last month (local time), Shein sold products worth $45 billion (approximately 60.4845 trillion KRW) last year and earned a profit of $2 billion (approximately 2.6882 trillion KRW).

[Image source=AFP Yonhap News]

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Shein posted net profits of $700 million (approximately 940.9 billion KRW) in 2022 and $1.1 billion (approximately 1.4785 trillion KRW) in 2021, representing about a threefold increase year-over-year.

Inditex, a leading fast fashion company that owns H&M and Zara, recorded a net profit of 5.4 billion euros (approximately 7.8382 trillion KRW) last year.

Currently awaiting IPO approval from Chinese and US regulatory authorities, Shein is considered the biggest player this year. In a recent funding round, the company was valued at over $60 billion (approximately 81 trillion KRW). Reddit, which recently went public on the New York Stock Exchange and caused a sensation, debuted with a valuation of $6.4 billion (approximately 8.6048 trillion KRW).

Foreign media reported, citing two sources, that the China Securities Regulatory Commission and the Cyberspace Administration of China are expected to approve the IPO within the next few weeks.

Shein's IPO is regarded as a barometer of the Chinese government's stance on overseas listings by Chinese companies. Previously, in 2021, Didi Chuxing, known as the "Chinese Uber," pushed ahead with its New York Stock Exchange listing despite opposition from the Chinese government, becoming a target of Chinese regulatory crackdowns. Ultimately, unable to withstand various investigations and regulations by Chinese authorities, it began delisting procedures about a year later. Since then, Chinese companies' attempts to list on the New York Stock Exchange have sharply declined.

Shein relocated its headquarters to Singapore and sells products outside China, but it was originally founded in Nanjing, China. According to data provider Tianyancha, as of the end of 2022, Shein had 10,382 employees in mainland China. These employees work across more than 12 subsidiaries, handling everything from logistics to coding. In contrast, LinkedIn reports that about 200 employees work in Singapore.

Even if Shein passes the Chinese government approval stage, it is uncertain whether it can successfully settle on the New York Stock Exchange. Shein submitted documents for a US IPO in November last year but reportedly has heard little from the US Securities and Exchange Commission (SEC) since then. Shein spent about $2 million (approximately 270 million KRW) on lobbying activities in the US over nine months last year amid increasing investigations into its business model of directly air-shipping Chinese goods to US customers to avoid import taxes. In February, US Senator Marco Rubio urged SEC Chairman Gary Gensler in a public letter to demand special disclosures regarding Shein's structure and interactions with the Chinese government and the Chinese Communist Party. There is strong opposition in the US Congress due to the use of Xinjiang cotton and forced labor concerns.

If Shein fails to list on the New York Stock Exchange, it is reportedly planning to target the London Stock Exchange as a backup plan, due to difficulties in raising funds amid the Hong Kong stock market slump. If Shein proceeds with a London Stock Exchange listing, it is expected to be one of the largest IPOs ever.

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