Shein Faces Scrutiny as It Plans to Go Public

Shein: From Controversial Titan to Public Listing

by Faruk Imamovic
Shein Faces Scrutiny as It Plans to Go Public
© Getty Images/Kristy Sparow

Fast fashion giant Shein is preparing to go public, with a listing expected this year. Valued at $100 billion at its peak, Shein has leveraged AI and technology to expand its global footprint. However, the path to its IPO could be complicated by regulatory and business concerns.

A Giant's Ambitious IPO Plans

Shein could face a new wave of scrutiny as it gears up to go public. The fast-fashion phenomenon sprawls across continents and controversies. Its peak $100 billion valuation once made it the world's third largest privately-held company, behind TikTok owner ByteDance and Elon Musk's SpaceX. Now, the tech-driven behemoth could become a public company as early as this year.

Shein founder Sky Xu, also known by Yangtian Xu or his English name, Chris, launched the company in China in 2008 as ZZKKO, an e-commerce site selling wedding dresses. By its own estimates, the brand now draws in customers from over 150 countries for clothing, shoes, and jewelry, each designed to respond to fleeting trends.

In 2023, Reuters reported the company notched around $30 billion in revenue. However, the CEO of brand management firm Authentic Brands Group, which partners with Shein, claimed revenue is much higher. The Singapore-headquartered business has raised $3.66 billion in total investment, including from top-tier players like HongShan, previously Sequoia China. Its peak valuation, reported to be $100 billion by The Wall Street Journal, was reduced to $66 billion in its most recent funding round in May 2023.

Despite its consumer popularity, Shein has faced criticism from labor and environmental activists for exploiting workers, plagiarizing designers, selling garments containing hazardous chemicals, and contributing to the climate crisis. Public companies have far more stringent reporting requirements than private companies. Ahead of any initial public offering, the company that has played its cards close to its chest will soon have to show its hand. Still, despite the controversies and a hot competitor, investors are eager to pile into the primed-for-growth company.

Shein Faces Scrutiny as It Plans to Go Public
Shein Faces Scrutiny as It Plans to Go Public© Getty Images/Xavi Torrent

Gearing Up to Go Public

The basic details about Shein's hotly anticipated IPO are still unknown: when, where, and for how much it could float. The company filed confidentially to go public in the US, CNBC reported in November. However, in February, Bloomberg said it could list in London, Hong Kong, or Singapore following worries from US politicians about Shein's transparency around its operations in China.

Shein could move its headquarters to the US to appease lawmakers. Estimates have pegged Shein's IPO valuation at around $90 billion, Bloomberg reported last year. Swartz said investors are ready to pile into the young company with "extremely high growth."

Investors won't know Shein's real numbers until the later stages of the IPO process. However, numbers that have been reported so far — none of which have been confirmed by the company — indicate that its estimated $90 billion valuation would be three times its sales revenue in 2023. "That's aggressive for an apparel company under most circumstances, but we have seen Lululemon trading at six times sales. It shows that it is possible," Swartz said. Lululemon has $10 billion in annual sales — a third of Shein's reported sales.

Environmental and Ethical Controversies

Shein has been dogged by stories questioning the company's environmental impact. According to a report from Zurich Insurance Group, the fashion industry is responsible for more than 10% of greenhouse gas emissions. In the UK, Britons throw away over 70 clothing items a year from the average wardrobe, according to a 2022 survey.

Shein has faced widespread criticism of its environmental footprint, partly due to its average item price of $14, which critics say encourages a throwaway culture. The company creates up to 10,000 new items a day and just 6% of products are stocked for more than 90 days, according to a 2022 Guardian article. The rise of #SheinHauls and the "bracketing" trend have added scrutiny on what happens when customers return items. Many fast fashion returns end up in landfills.

New York startup Queen of Raw works with Shein to source materials from other companies' deadstock — goods that were otherwise destined for landfill or incineration, said co-founder and CEO Stephanie Benedetto. Queen of Raw's software platform matches waste material supply and demand at discount rates. Benedetto said their deadstock material is close to Shein's local production chain in China. "We can add more locations as they grow their supply chain, but we're as closely available as where the production mill is."

Shein doesn't currently sell its own deadstock or returns via Queen of Raw, nor does the company publicly disclose its returns process. In 2022, Shein said it had committed $15 million to improve environmental, sustainable, and governance standards across 300 of its partners over the next four years, including appointing an ESG lead in 2021, per documents obtained by Business Insider as part of Freedom of Information requests.