Although Shein's stock price fell below its issue price immediately after listing, its symbolic significance is very clear and positive.

Shein's share price fell below its offering price immediately after its listing, with no sign of recovery on the second trading day. Its current valuation is only about 30% of its peak level in 2022. The capital market is extremely harsh on internet companies that have lost growth momentum. Strictly speaking, even internet companies that still maintain growth have fallen out of favor with investors. The companies that investors are favoring now are "hard technology" enterprises, covering large AI models, chips, smart hardware and embodied intelligence.

However, Shein's post-listing price slump may make people overlook a key symbolic significance of its listing: this marks the first successful share offering by a large domestic internet platform company in more than five years, since July 2021. During this period, a number of internet unicorns including ByteDance, Xiaohongshu and Dewu have been rumored to go public on multiple occasions, but none of the rumors ever came to fruition. Didi and Ant Group were also repeatedly rumored to return to the capital market, with no follow-up progress either.

To be precise, there were not zero internet companies going public during this period, but they were either small in scale, such as Dida Chuxing; or had strong supply chain attributes and weak consumer platform attributes, such as JD Industrial (Cainiao would have fallen into this category if its share offering had succeeded back then). The listing wave of well-known large consumer internet companies has been silent for more than five years. The large companies already listed in the US have successively launched secondary listings or dual primary listings in Hong Kong, calling them "Hong Kong IPOs", but these are of course different from IPOs (Initial Public Offerings) in the strict sense.

Before landing on the Hong Kong stock market, Shein had sought to go public at least twice: once in New York and once in London, and both attempts were stranded due to complex reasons. Back in 2023, many people believed its listing was a sure thing, but it still failed at the last moment. Because the situation is no longer the same as many years ago: no matter what corporate structure is adopted, a large internet company seeking listing needs to file with and obtain approval from the competent domestic authorities. Taking Hong Kong listing as an example, any mainland company must obtain approval from the China Securities Regulatory Commission, the Securities and Futures Commission of Hong Kong, and the Hong Kong Stock Exchange at the same time, before it can officially launch the share offering process.

Over the past five years or more, due to complex reasons, none of the large internet companies have completed all the above procedures. Although unlisted large companies generally do not lack funds, the purpose of listing has never been limited to raising capital — cashing out for investors and implementing employee equity incentives both require the support of the public capital market. The claim that they "do not want to go public on their own" is not worth taking seriously. In fact, unlisted large companies have basically discussed and formulated plans on how to achieve listing in compliance with regulations, which will not be elaborated here.

The path to listing in the US is basically blocked, while markets like London and Singapore are too small, making Hong Kong the only reasonable choice. I believe Shein's successful listing in Hong Kong is not only a positive signal, but also a model: the remaining few internet unicorns may step up their efforts to get listed on the Hong Kong Stock Exchange as soon as possible.

However, the above only refers to the compliance aspect. At the market level, investor feedback on Shein's listing this time is obviously not very positive. Its IPO price corresponds to a static P/E ratio of about 13 times, which is not high even considering its noticeably slowed growth (especially obvious in the first quarter of this year). The subscription multiple of its international offering (note: mainly targeted at institutional investors) is only 2.59 times, which is just passable and can hardly be called a "hot IPO". Compared with the two leading AI startups Zhipu and MiniMax at the beginning of this year, as well as the domestic chip startups that are vying to get listed on the Hong Kong Stock Exchange, the difference is as stark as that between heaven and earth, almost the difference between ice and fire.

This is not only related to Shein's own issues, but probably also a matter of market style. "Market style shift" is one of the most common and most notorious buzzwords in the capital market, which translates to: sometimes the market simply favors one type of company and snubs another, and the market will find every possible reason to prove it is right; even if you claim you are a relatively outstanding company in the "snubbed category", the market will still give you a valuation discount.

If you refuse to accept this, you can of course force your way to go public under such circumstances. If you do recognize this logic, you may choose to wait for the right time. As long as the compliance issues are resolved, waiting is not a big problem. Shein basically resolved all compliance issues for listing as early as last June, then spent a period of time solving the valuation inversion problem (essentially coordinating the interests of new and old shareholders), and finally launched its share offering in July this year. I believe other internet unicorns may follow this rhythm — once they obtain recognition from the competent authorities, they will have full peace of mind, and there is no need to rush to go public at this exact time node.

In a few months or a few quarters, when the "market style shift" arrives again, we may see a number of internet unicorns that were once thought to "never go public" land on the Hong Kong stock market. Shein's listing is not an isolated case, and it is very likely to become the first company in this new sequence of listings.

Of course, there is still another possibility: the current "market style" will continue for a very long time, and consumer internet platforms will remain out of favor with investors, forcing other internet unicorns to bite the bullet and go public with a "downside listing at a discounted price". This possibility is very low, but cannot be completely ruled out. Therefore, in the coming period, the management teams of these unicorns will probably face a difficult choice: should they continue to wait? How long exactly do they need to wait before the market environment becomes truly favorable?

No one knows the answer, because the market is essentially unpredictable.

This article has not received any funding or endorsement from Shein or any of its competitors.

The author of this article does not hold any shares of Shein at present.

This article is from the WeChat Official Account "Internet Phantom Gang" (ID: TMTphantom), written by Pei Pei, Head of the Phantom Gang, and published by 36Kr with authorization.