Matein Khalid
Chinese fast-fashion giant Shein is set to list in Hong Kong on September 1 at a valuation of up to $27 billion. That is less than half the $64 billion valuation at which Abu Dhabi sovereign wealth fund Mubadala invested in 2023.
It is a brutal comedown for a retailer once expected to be worth $100 billion.
My knowledge of sartorial retailing is admittedly less than encyclopaedic. Yet I know a viral growth-curve startup when I see one, and Shein was definitely an exponential-growth retail empire in 2020. As the Covid virus raged across the planet, its revenues soared from $16 billion in 2021 to $32 billion in 2023.
Thus, Shein was hailed as the next Zara multiple-bagger fashion retailer for the digital age in China and on Wall Street.
But I did not invest in the Shein pre-IPO deal, originally targeted for a New York listing in November 2023, because I did not believe a $100 billion valuation was credible. Dubai’s brokers and middlemen were demanding a 15 percent upfront premium from private investors for access to Shein’s cap table, via the usual daisy chain of offshore special purpose vehicles.
Alas, the New York IPO never happened. The Biden White House imposed punitive tariffs on China, and a bipartisan Congressional caucus wrote to the SEC to ban the Shein IPO. The charges? Alleged use of Uyghur forced labour in Xinjiang, environmental pollution and sweatshop working conditions across a network of 7,500 contract manufacturers in the Dragon empire.
The toxic trade relations and geopolitical Cold War between Washington and Beijing, and the end of parabolic global sales growth after Covid, eviscerated the speculative froth in Shein’s valuation.
Shein raised $2 billion in May 2023, with Abu Dhabi’s Mubadala among the investors. Japan’s SoftBank and US private equity giant General Atlantic also joined the round.
Long negotiations over a London IPO followed, but China’s securities regulator ultimately scuttled the plan over disclosure concerns and sensitive national security issues.
As the doomed New York IPO had already demonstrated, Shein’s ambitions to list overseas ultimately depended on Beijing’s blessing. So Shein, which had moved its head office from Nanjing to Singapore, eventually turned to Hong Kong.
The Mubadala investment in Shein was a milestone deal, executed by a team of dealmakers recruited at its newly opened Beijing office, the first for a UAE sovereign wealth fund. The UAE was fast emerging as the GCC pivot for China Inc. Shein was a trophy hypergrowth prize for the Abu Dhabi Fund in 2023.
Over the past three years, Shein’s valuation has been bruised by Trump’s trade war, the removal of the $800 de minimis parcel exemption – goods under that value could enter the US duty-free – the 2026 war against Iran and ensuing energy shock, as well as higher inflation and turbulence in Western government bond markets.
Shein’s Hong Kong IPO is expected to be priced on August 31. The company earned $2 billion in net profit on global revenues of $40 billion in 2025, putting its IPO valuation at around 13.5 times trailing earnings – a steep discount to rival Zara-owner Inditex’s current multiple of 20 times earnings.
Falling Chinese retail sales, cutthroat competition from PDD’s Temu brand and a sharp slowdown in US sales in a K-shaped consumer economy pushed Shein into an operating loss in the first six months of 2026.
Full-year profits in 2026 could fall as low as $1.65 billion. It will take time for earnings per share growth to normalise to 20 percent, but Bloomberg Intelligence believes this will happen in 2027 and 2028.
So, while the Hong Kong IPO finally gives Mubadala a route to exit, the fund could still be at least two years away from breaking even.
Existing investors have subscribed for 50 percent of the $2 billion Shein hopes to raise. Shein has also attracted UBS, BOYU and several PRC venture capital funds to its shareholder roster for the Hong Kong IPO.
There are positive geopolitical and business model omens that make me a nervous bull on Shein’s medium-term prospects:
- Shein has re-entered the Indian market in partnership with Mukesh Ambani’s Reliance Retail. India has the world’s largest and fastest-growing demographic of young people aged 18 to 35, giving Shein access to 350-380 million young Indian consumers.
- Shein sales growth is accelerating in the Gen Z cohort in Southeast Asia, Africa and Latin America. This is a classic global emerging market brand with trendy localised styles and a unique network of 7,500 contract factories in the PRC that can respond in real time to changing fashion trends worldwide.
- Shein has amassed 200 million monthly active users on its global platform. I see no reason why AI deployment cannot raise its global user base to 500 million consumers by 2029. If this happens, Shein can easily reach Morgan Stanley’s target valuation of $54 billion.
If this happens, Mubadala will eventually achieve breakeven and even gain a handsome profit on its investment.
The Shein saga proves that GCC investors must not assume hypergrowth businesses are immune to valuation hits, earnings slumps and exogenous shocks such as wars, tariffs or oil panics.
Also published on Medium.
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