Chinese online fashion group Shein is reportedly looking at a US IPO later in the year and is looking to raise $2 billion in a funding round this month.
Reuters reported that in the funding round, Sequoia Capital China, General Atlantic, and UAE’s sovereign wealth fund Mubadala would participate.
Mubadala would be the major investor in this round while Tiger Global would join as a new investor.
Notably, sovereign wealth funds of UAE and Saudi Arabia are major investors in some of the new-age tech companies.
Saudi Arabia’s PIF (public investment fund) is the biggest investor in US EV (electric vehicle) company Lucid Motors and is rumored to acquire the company and take it private.
In the latest funding round, Shein, which is headquartered in Singapore has cut the valuation to $64 billion which is only about two-thirds of its valuation in the previous funding round.
The valuation cut is not surprising and most of the startup companies like Klarna have taken a major hit to their valuation.
There are exceptions though – while Elon Musk’s SpaceX reportedly raised funds at a higher valuation, ChatGPT’s parent company OpenAI is also getting good interest from investors.
Artificial intelligence (AI) as a theme has been quite popular among investors, while many tech giants are accelerating their AI plans.
Several companies like Baidu, Microsoft, Nvidia, and Alphabet see AI as a key growth driver – we have provided a list of companies that are a play on AI.
Shein Looks at US IPO after Funding Round
According to Reuters, Shein held initial talks with investment bankers to select the bookrunners for the US IPO – the company, meanwhile, denied that it has any plans for an IPO yet.
Notably, the US IPO market has been dead for the last few quarters.
In 2021, there were over 1,000 IPOs in the US and many of these were of SPACs (special purpose acquisition) companies, marking a record year for the US IPO market which broke the previous record that was set in 2020 only.
In 2022, however, the total IPOs fell below 200 as the market soured – the number of SPAC IPOs also plummeted and many of the existing SPACs including those from credible sponsors like Chamath Palihapitiya wound up.
Venture capital fundraising also fell in 2022 and Q4 2022 fundraising was the slowest in almost a decade.
As markets turned their back on newly listed companies, as is reflected in the 57% drawdown last year in Renaissance IPO ETF, many companies delayed their IPO plans.
These include Vietnam-based EV company Vinfast, South Korea’s online grocery company Kurly, as well as more well-known names like Instacart.
The IPO Market is Yet to Revive
If Shein indeed goes ahead with the IPO in 2023, it could be among the biggest listings of this year.
While the proposed listing would test the appetite for new tech stocks, it would also gauge the demand for Chinese IPOs in the US.
After the Didi debacle where China forced the ride-hailing company shortly after the IPO, many US investors became apprehensive of Chinese IPOs.
Meanwhile, last month, China announced new IPO rules for companies looking to list overseas.
The China Securities Regulatory Commission (CSRC) would have the power to scrutinize any overseas IPO of Chinese companies – the rules mandate that overseas listing of Chinese companies should not be a threat to the country’s national security.
Furthermore, the US-China rivalry has escalated and the world’s two largest economies have often been at loggerheads over issues ranging from trade to geopolitics.
All said, even if Shein decides to IPO, markets might like to see a lower valuation. Notably, Amazon’s valuation is just over half of its all-time highs and the US e-commerce giant’s market cap is still below $1 trillion.
Given the slump in listed companies and the still rising interest rates, privately-held companies that are looking to go public might also need to be circumspect about their expectations.
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