China’s Sheen has filed documents for a US IPO in a key test of investor appetite

Nov 27 (Reuters) – Fashion company Sheen has secretly filed to go public in the United States, according to two sources who said it could be one of the most valuable Chinese-founded companies to list in New York.

Goldman Sachs, JPMorgan Chase and Morgan Stanley have been hired as lead underwriters for the initial public offering (IPO), and Singapore-based Sheen could launch its new share sale in 2024, the sources said.

Sheen has not determined the size of the deal or the valuation at the IPO, the sources said. Bloomberg earlier this month targeted the float at $90 billion.

Sheen and Banks declined to comment.

The company, which was founded in mainland China in 2012, was valued at more than $60 billion in a May fundraising, down by a third from last year’s funding round.

The 2021 debut of ride-hailing company TT Global ( 92Sy.MU ), valued at $68 billion, is the most valuable Chinese-founded company ever to go public in the United States.

The move by fast-fashion companies to go public in the U.S. comes as the market for initial public offerings struggles to rebound after lackluster stock market debuts.

There have been four major IPOs in recent months, three of which disappointed investors.

Shares of German shoemaker Birkenstock ( BIRK.N ), grocery delivery app Instacart ( CART.O ) and chip designer Arm Holdings all fell below their IPO prices in the days following their debut, although Arm’s shares are now trading above that price.

“I don’t think it’s the right time for Sheen to go public, but the markets are open if they need capital…and investor sentiment is more positive than it was a few weeks ago,” Jason Benowitz said. Senior Portfolio Manager at CI Roosevelt.

“As investors review the funds, I expect historically strong growth … the key question is whether they can sustain the momentum or continue to gain market share going forward,” he said.

U.S. IPOs have raised about $23.64 billion so far this year, compared to $21.3 billion in the same period last year. A comparable figure was $300 billion in 2021, when the IPO market was nearing its peak.

Supply chain

Sheen has begun limited roadshows for the float in the U.S., said one of the sources, who declined to be identified due to confidentiality restrictions.

It was not immediately clear whether the company had filed with the China Securities Regulatory Commission (CSRC) for a US IPO. Chinese companies must obtain approval from the regulator before offering their overseas offerings.

The CSRC did not immediately respond to a request for comment.

“Sheen will attract more investor interest as it is a significant and highly disruptive player in the retail industry,” said Neil Saunders, managing director of Global Data.

Reuters reported in July that Sheen, which had tried to list in the U.S. in 2020 but put that plan on hold — was working with at least three investment banks about a possible IPO.

In August, the Republican attorneys general of 16 US states asked the Securities and Exchange Commission to audit Sheen’s supply chain for alleged use of forced labor ahead of its potential IPO.

‘Good Time to List’

Known for its $10 tops and $5 biker shorts, Sheen ships most of its products directly from China to shoppers in individually addressed packages.

The direct shipping strategy has helped the company avoid piling up unsold inventory in warehouses and avoid import duties in the US, one of its biggest markets, as it allows the e-tailer to take advantage of the “de minimis” rule that exempts cheaper products. from fees.

Some critics say the rule allows companies to avoid higher tariffs on Chinese goods.

Fast fashion retailers are gaining popularity in the United States, taking market share from the likes of Sheen Cap ( GPS.N ) as shoppers look for new styles.

In August, Sheen partnered with SPARC Group, a joint venture between Forever 21 owner Authentic Brands ( AUTH.N ) and mall operator Simon Property ( SPG.N ).

However, Sheen with Temu.com has not been able to convert shopping visits into sales and is lagging far behind market leader Amazon.com ( AMZN.O ) in that estimation.

Sumeet Singh, an analyst at Aequitas Research who publishes in SmartKarma, said large companies like Sheen are tapping the capital markets ahead of peak interest rates and possible changes in US regulations for smaller retailers.

“This is as good as it gets for them right now,” he said.

Sheen’s secret U.S. IPO filing was first reported last week by China’s Shanghai Securities Journal. The Wall Street Journal confirmed the report on Monday, citing sources.

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