The rapid fashion powerhouse Shein, which is currently awaiting regulatory consent from Beijing to proceed with its monumental New York or London listing, has more than doubled its profits. The company achieved a record 2023 profit exceeding $2 billion (€1.85 billion) and reported an approximate gross merchandise value of $45 billion for all goods sold on its platform, according to four insiders. Shein, initially established in China before moving its base to Singapore, saw last year’s profits rise beyond the net incomes of $700 million in 2022 and $1.1 billion in 2021 as revealed by a financial document obtained by the Financial Times.
Shein, whose apparel enjoys great appeal among Gen Z consumers, is in line for approvals from Beijing and Washington for its listing, touted to be the year’s largest initial public offering. The corporation, valued over $60 billion in a recent funding round, refrained from commenting on its financial statistics.
Shein’s IPO is perceived as an indicator of Beijing’s stance towards businesses that originated in China but relocated abroad to elude geopolitical issues. Furthermore, it is a litmus test for Beijing’s readiness to allow Chinese firms to accumulate billions in Wall Street funding following its recent tech industry clampdown.
Two individuals familiar with the status of Shein’s application anticipate the China Securities Regulatory Commission and the Cyberspace Administration of China to greenlight the share sale in the imminent weeks. Even as Shein has its headquarters in Singapore and conducts all sales outside of China, the business roots trace back to the Chinese city of Nanjing, where it still controls the majority of its operations. This warrants the necessity to seek approvals from local authorities.
By the conclusion of 2022, Shein employed 10,382 personnel in mainland China spread across numerous subsidiaries responsible for a range of tasks from logistics to code development, states data analyst Tianyancha. Conversely, LinkedIn data suggests that the company has approximately 200 employees based in Singapore.
The company’s 40-year-old founder Xu Yangtian, also known as Sky Xu, who was born in China but has relocated to Singapore following his business, owns 37 per cent of Shein. Other significant stakeholders include Sequoia China, which is now HongShan, General Atlantic, and the Abu Dhabi sovereign wealth fund Mubadala, as per lobbying disclosures filed in the US.
Throughout the process of preparing for their Initial Public Offering (IPO), Shein has ramped up its lobbying efforts in Washington substantially. This comes amid growing scrutiny over their business model, which involves shipping products from China directly to American customers, thereby evading import taxes. It is revealed from public records in the US that Shein forked out almost $2 million on lobbying in a period of nine months the previous year.
Shein’s significant operations in China have elicited criticism from lawmakers stateside. Earlier this year in February, Senator Marco Rubio publically urged Gary Gensler, the chairman of the US Securities and Exchange Commission (SEC), to insist on full transparency from Shein about its organisational structure and relations to the Chinese government and Chinese Communist Party.
In November, Shein submitted confidential paperwork for a US listing. However, according to a source close to Shein, there has not been much communication from the SEC since then. As a result, a reliable insider has disclosed that Shein is considering London as a fallback plan.
The aftermath of the costly and problematic Initial Public Offering of the Chinese ride-hailing giant, Didi, saw a decrease in interest from other large Chinese corporations for New York listings in 2021. Beijing forced Didi to delist due to concerns over data security.