Shein proposes cash payouts, more shares for late-stage investors ahead of IPO

[HONG KONG] Shein is considering lowering the cost of investment for some late-stage investors as the fast-fashion retailer pursues an initial public offering at a lower valuation, according to filings with the Hong Kong Stock Exchange.

The company may offer payouts to early investors as well as more shares with lower conversion price for their holdings, the public filings showed.

The plans laid out in the public disclosure confirmed a Reuters report in July, in which a source with direct knowledge of the matter said the company will compensate investors for the decline in valuation, including cash payment.

Shein’s valuation fell from US$98.2 billion in a 2022 fundraising round to US$64 billion in a 2023 round. The source told Reuters the firm is seeking up to US$50 billion in valuation in the upcoming IPO.

The firm has agreed to give investors in its Pre-D, D and D+ funding rounds a guaranteed cash payout equal to an 8 per cent annual return, or around US$1.1 billion in total, on their original investment, according to the filings.

Calculated from the day they first bought in up until Mar 4, this payment will be made in three equal cash payments due by the end of this March, June, and September.

Meanwhile, if the company goes public at a price lower than what the investors paid, those investors are protected from losing money.

Investors with preferred shares will automatically convert into regular Class B shares upon listing, and their conversion price gets adjusted downwards so they get more shares to compensate.

Shein did not immediately respond to a Reuters request for comment on the cash and share offer plans.

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Investors are expected to scrutinise whether Shein can justify the US$40 billion to US$50 billion valuation it is seeking in the IPO, after filings with the exchange showed slowing growth, a sharp decline in profitability, as well as rising regulatory and legal uncertainties. REUTERS