Shein's Hong Kong IPO faces investor skepticism amid stalled growth and valuation cuts

Shein won Beijing's approval for a Hong Kong listing after it publicly embraced the Chinese roots it spent years playing down. Now investors are questioning whether that blessing can carry a $40-billion-plus valuation for a company whose growth engine has stalled.

The China Securities Regulatory Commission approved the listing early this month, after Shein's attempts at going public in New York and London failed. The company's filing on Sunday gave investors a closer look at the pressure facing the online fast-fashion retailer — higher costs, slowing growth, and mounting regulatory scrutiny in its biggest markets.

Shein's revenue grew 8% to $41.8 billion in 2025, decelerating from 20.7% growth a year earlier. In the first quarter of 2026, the company swung to a $99 million loss after the U.S. removed an import-duty exemption on small packages and the company booked a hefty one-time accounting charge.

"The company has missed the golden time to list," said William Ma, chief investment officer at GROW Investment Group.

Investors and consumers were no longer excited by the ultra-fast fashion retailer as they once did, said Shaun Rein, managing director at China Market Research Group: "By waiting, they missed the golden windows of opportunity."

Shein, known for selling $5 dresses and $10 jeans with a presence in about 160 countries, is under pressure to flatten its valuation to $30 billion, according to Bloomberg, a far cry from the nearly $100 billion it commanded in a 2022 fundraising round, and below the $64 billion of 2024.

Even after the markdown, "that valuation is still demanding," Ma said. It represents roughly 19 to 25 times fiscal 2025 earnings, he said, while peers such as PDD trade at 9 times and established consumer names in Hong Kong at around 11.

Analysts are increasingly valuing the one-time tech-focused supply-chain disruptor as a pure clothing retailer, grappling with slowing growth and sharp declines in profitability.

The company is "transitioning from a high-growth, technology-enabled fast-fashion platform to a mature global apparel retailer facing structurally slower growth and sustained margin pressure," said Lenny Zephirin, principal and analyst at The Zephirin Group.

He expects its post-listing market capitalization to settle in the high-$20 billion to low-$30 billion range.

Shein did not respond to CNBC's request for comments.

The Hong Kong stock market Shein is entering has also moved on. "The Shein appetite has gone. It no longer exists," Zephirin said of an IPO pipeline dominated by AI and chip listings. "The appetite right now is AI, semiconductors, memory chips, storage, cloud infrastructure—and Shein does not offer it."

Founded in Nanjing, Shein moved its headquarters to Singapore in 2022, built a global brand identity and pursued Western exchanges only to see Beijing block its London prospectus over risk disclosures tied to its China supply chain.

In February, Shein's founder Sky Xu, in his first public appearance, pledged to "continue to take root in Guangdong," committing more than 10 billion yuan ($1.4 billion) to a "smart supply chain system" in the province.

"China clearly wants Chinese brands to IPO in mainland China and Hong Kong ... the future for Chinese companies is to forgo western markets and seek listings close to home, or at home," Rein added.

Investors also face a set of reputational and ethical risks due to alleged poor working conditions at Shein suppliers, addictive features of its shopping app, and the environmental toll of shipping enormous volumes by air.

Shein disclosed Tuesday that its U.S. business is under investigation by the U.S. Federal Trade Commission for unspecified reasons, and that it could face significant fines as a result.

Stalling growth, heated rivalry

Sales data also point to a slowdown that runs deeper than tariffs.

Shein's share of U.S. apparel, accessories, and footwear spending peaked at about 5% in the first quarter of 2025, turned negative year over year by the fourth quarter, and has continued ceding ground in 2026, even after lapping the duty change, according to Michael Gunther, an analyst at Consumer Edge.

In the U.K., where Shein commands a record high 7.5% share of the apparel, accessories, and footwear segment, year-over-year share gain slowed to essentially zero from roughly 1.8 percentage points in the first half of 2025, according to Gunther. "That suggests that Shein may be entering the mature retailer phase, since momentum slowed in the one market with no specific price pressure," Gunther said.

The customer base is aging with it. In the U.S., share losses are steepest among 18-to-34-year-olds while shoppers over 55 are still adding share, Gunther said. The under-25s who drove Shein's rise in the country two years ago have turned slightly negative, with every gain now coming from shoppers over 55.

"A fast fashion brand losing momentum with under-35s while growing with over-55s is a signal worth monitoring across geographies," he said.

Rivals have adapted in ways Shein may struggle to match. Temu has shifted toward local sellers holding bulk-imported inventory that clears customs at standard tariffs.

"Shein, however, can't localize inventory as easily, because the whole idea of ultra-fast fashion is that they launch thousands of new designs every day and only ship them on demand from China," said Juozas Kaziukenas, an e-commerce industry analyst.

Since the European Union imposed a fee of 3 euros on low-value imports this month, both companies have paused most advertising spending in Europe, Kaziukenas said, switching off the customer-acquisition engine in a region that supplied about a third of Shein's revenue last year.