Shein's Private Backers Endured 73% Valuation Drop On IPO

But the wait kept getting longer.

The company's eventual decision to raise $1.7 billion in Hong Kong, after years of discussions about potential share sales in London and New York, came long after its valuation reached around $98 billion in early 2022. At its listing, Shein was worth 73% less than that.

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The new valuation means that - at least on paper - some of Shein's backers such as Boyu Capital, Coatue Management LLC, Joshua Kushner-backed Thrive Capital, and General Atlantic are now sitting on losses from the once high-flying retailer.

Other investors also went in early but continued to add shares as Shein's valuation increased. HSG, formerly Sequoia China, swooped in during a Series C funding round at a valuation of $2.4 billion, taking up both new shares and those on the secondary market. HSG followed up with investments throughout the fundraising rounds afterward.

There was some compensation to soften the blow: Investors in the Series D round, when the company's valuation hit $98 billion, were set to earn billions of dollars in compensation and interest payments after the listing, according to documents it filed in Hong Kong. The payments were based on a so-called conversion adjustment Shein had agreed with those investors.

China Risks

Shein's valuation whiplash underscores the risks confronting venture capital and private equity investors that remain committed to China. The country's policy environment has proved difficult to navigate since the government upended the technology sector with a far-reaching crackdown, epitomized by Ant Group Co.'s decision to abort a listing that many expected to be a record breaker.

The online retailer's own march to the public markets has been no less fraught. Despite relocating its headquarters to Singapore, Shein's mainland Chinese origins and corporate structure have been magnets for regulatory scrutiny. The unraveling of Meta Platforms Inc.'s acquisition of China-founded artificial intelligence startup Manus - another firm that found a new home in Singapore - has only deepened concerns. 

Shein's drop in valuation also underscores the setbacks and challenges that have confronted the fast-fashion company, as US tariffs and rising material costs following the war in the Middle East put pressure on a business built around sending ultra-cheap clothes across borders. The retailer disclosed slowing profitability and revenue growth in its preliminary prospectus.

For some early backers, though, the company has still been an extraordinary winner on paper. IDG Capital backed the firm when it was worth just 1.1 billion yuan ($164 million), and put more money in the following round.

Coatue declined to comment. Representatives for Shein, Boyu, General Atlantic, HSG, IDG and Thrive Capital didn't respond to emailed queries.

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The scale of returns from those early investments helps explain why investors are still eager to invest in Chinese firms, despite the risk of years of regulatory uncertainty. Global fundraising by China-focused firms has picked up since last year, with venture capital and private equity shops replenishing their war chests to back the next wave of AI, biotech and consumer firms.

Much of the resurgent interest can be traced to the rise of China's breakout AI stars like DeepSeek, which has galvanized local entrepreneurs and fueled widespread optimism that the world's second-largest economy can compete in the AI race.