Shein is offering a combination of cash payouts and additional stock to investors who bought in at elevated valuations, as the fast-fashion company prepares for a Hong Kong initial public offering at a sharply lower price.
The fast-fashion retailer's planned listing is targeting a valuation of $40 billion to $50 billion, well below the $64 billion investors paid in 2023
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Shein is offering a combination of cash payouts and additional stock to investors who bought in at elevated valuations, as the fast-fashion company prepares for a Hong Kong initial public offering at a sharply lower price.
The company agreed in filings with the Hong Kong Stock Exchange to give investors in its Pre-D, D, and D+ funding rounds a guaranteed cash payout equal to an 8% annual return on their original investment, calculated from the day they first invested through March 4, 2026. The total comes to approximately $1.1 billion, to be paid in three equal installments due by the end of March, June, and September 2026, according to the filings.
If Shein lists at a price below what those investors originally paid, their preferred shares will automatically convert into Class B shares at a lower conversion price, giving them more shares to offset the difference, the filings showed.
Shein's valuation has fallen from $98.2 billion in a 2022 fundraising round to $64 billion in a 2023 round. The company is now targeting a valuation of $40 billion to $50 billion in the upcoming IPO. According to Bloomberg, the cash payouts and additional shares are intended to lower late investors' effective cost base to roughly $40 billion, closer to the expected listing price. Coatue Management, HSG, and General Atlantic are among the investors in those rounds. Bloomberg reported that the process remains in flux and no terms have been finalized, as the size of any cash distributions and share grants will be tied to the valuation Shein receives at listing.
Shein did not respond to a request for comment from Reuters.
The compensation offer comes as investors are weighing whether Shein can support even its reduced valuation target. The company posted a $99 million net loss in the first quarter of 2026, swinging from a $395 million profit in the same period a year earlier, as the elimination of a U.S. duty exemption hit its largest market. Revenue rose just 1.1% to $9.05 billion in the quarter. Operating margin compressed to 2.9% from 3.9% a year earlier.
Shein also disclosed that its U.S. business is under investigation by the Federal Trade Commission, a probe first made public in documents filed in connection with the Hong Kong listing. The company said it is cooperating with the FTC but cannot predict the outcome or timing, and warned that any resolution could require significant monetary payments. Goldman Sachs $GS, Morgan Stanley $MS, and JPMorgan $JPM Chase are joint sponsors of the listing, which has received approval from China's securities regulator. A trading date has not been set.
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