On September 1, 2026, at the Hong Kong Stock Exchange, the bell to mark SHEIN's listing was not rung by its founder.
The bell was rung by two people: Gemma Dunne, the UK brand director, and a warehouse manager named Du Jiabin. Xu Yangtian, who should have been at center stage, wore a T-shirt with "SHEIN" printed on it, stood in a corner during the group photo, made no remarks, and left quickly after the event. The founder, born in 1984 in Zibo, Shandong, has rarely appeared publicly in two decades; his most recent public appearance was at the Guangdong Province High-Quality Development Conference earlier this year.
The low profile was justified. The IPO price was HK$48.56, and the shares broke below the issue price at the open, falling more than 10% at one point during trading. Based on the issue price, SHEIN's market value was about $26.5 billion — compared with the $98.2 billion valuation the market assigned during its Series D round in 2022. In four years, one of the world's most valuable apparel companies shrank by more than 70%.
A company with 273 million active users, operations in 160 markets, and $41.8 billion in annual revenue — why would the capital market only offer a quarter of that valuation? Tariffs and competition are the answers everyone can see, but they are just the cover of the bill.
The real problem is written inside the bill.
Xu Yangtian in the Corner
First, consider how ugly the puzzle itself is.
SHEIN's revenue growth is a textbook diving curve: 41.1% in 2023, 20.7% in 2024, 8% in 2025, and just 1.1% in the first quarter of 2026. Revenue is still growing, but barely. In the US market, first-quarter 2026 revenue fell 14% year over year, and its share of total revenue slipped to 22.5% from 29.4%, making it the second-largest market behind Europe (35.4%).
The profit picture is even more direct: net income was $2.789 billion in 2023, with a net margin of 8.7%; by 2025, net income fell to $2.064 billion, with a net margin of 4.9% — roughly halved. In the first quarter of 2026, the company recorded a book loss of $99 million, which it attributed to accounting adjustments from changes in the fair value of preferred shares; on an operating basis, it still posted $258 million in operating profit. That explanation is technically valid, but the phrase "accounting adjustments" in a listing document has never reassured the secondary market.
User data is also nuanced. Active users rose from 186 million to 273 million, which looks good, but spending per user per year fell from $173 to $153; annual order frequency stayed at four times, unchanged for three years. Translation: new customers are still coming, but each one is buying less and no more frequently.
When capital markets assign a valuation, they are buying not today's profits but tomorrow's slope. When the slope goes to zero, $98.2 billion becomes $26.5 billion.
Shein itself, and most analysts, attribute the problem to two bills.
The first is the tax bill.
On May 2, 2025, the U.S. formally ended the duty-free policy for small parcels under $800 from China (de minimis). The system was originally meant for personal overseas luggage declarations, but cross-border e-commerce turned it into a logistics art: Shein and Temu split full containers into millions of small packages, each below the duty-free threshold, bypassing tariffs and shipping directly to American consumers' doorsteps.
This was the hidden financial foundation of the 'small orders, fast turnaround' model — direct mail is cheap, and half of that cheapness came from the duty-free exemption.
Now the foundation is gone. The EU is dismantling it next: from July 1, 2026, the EU will fully cancel tariff exemptions for parcels under €150 and add handling fees per order. For Shein, this is adding insult to injury — Europe is already its largest market. With two doors closing within twelve months, the prospectus line 'fulfillment costs as a percentage of revenue rose from 42.1% to 47.7%' is what got squeezed in the door gap.
The second is the competition bill. In February 2023, Temu spent big on a Super Bowl ad — 'Shop like a Billionaire' — making Americans remember the Pinduoduo-affiliated app for the first time. Since then, Temu has burned about $3 billion a year on advertising, at one point becoming the largest online advertiser in the U.S.
With the same Chinese supply chain, the same low-price mindset, and the same pool of Meta and Google traffic, TikTok Shop and AliExpress have entered the fray together, pushing customer acquisition costs to a level that hurts everyone. Shein's own marketing spending has risen nearly 80% in three years, reaching $6.19 billion in 2025, or 14.8% of revenue.
Meanwhile, the entire fast-fashion sector is slowing: Inditex, Zara's parent, grew just 0.8% in the first quarter of fiscal 2025 excluding currency effects, and faces a 3% tariff hit to full-year sales. H&M's sales fell 1% year-on-year in March 2025. The tide is going out overall, and Shein is the first to be caught swimming naked—because its business model depends most thoroughly on being cheap.
Both of those bills are real. But if you look only at these two, you can't explain a more fundamental phenomenon: why, when tariffs and competition arrive together, Shein has almost no cushion. Nike hurts when hit by tariffs, and so does Zara, but after the pain they are still Nike and Zara. When Shein hurts, it's a direct fracture.
The difference is bone density. And that bone density was built up by economizing over the past decade or more.
Shein's supply-chain efficiency remains the industry ceiling: new styles start with trial orders of 100 to 200 pieces, bestsellers are replenished in as little as five days, and slow movers are stopped immediately. Inventory turns in 36 days, versus 71 for Zara, 114 for Uniqlo and 164 for Adidas. Underpinning this system are more than 1,700 proprietary software systems connected to over 7,500 manufacturers.
This system has a name: LATR—large-scale automated small-batch, fast-response production. The prospectus frames it as a technology story, and CFO Gui Lei did the same at the listing ceremony.
But the flip side of efficiency is two costs Shein never has to pay.
The first is design costs. Fast fashion is essentially copying and modifying big brands—no secret in the industry, and Zara started the same way. The difference: Zara maintains a full-fledged design team and pays real money for it. Shein outsources design to its supply chain—many styles are developed by suppliers under an ODM model, where the supplier handles design, while Shein uses algorithms to test styles and allocate traffic. Whose style it is, whose images they are—nobody cares, until someone does.
On Aug. 13, 2026, London’s High Court issued a 77-page ruling. The case had initially looked favorable for Shein: it sued Temu for “industrial-scale” copying of its clothing photos — 2,559 in all. The court dismissed all of Shein’s claims because the styles were designed by suppliers and the photos were taken by photographers, so copyright naturally belonged to them. Shein’s reliance on a standard-form clause in its merchant agreement — “the image copyright of products you sell to us belongs to us” — was insufficient to prove a transfer of rights. The sharpest line in the ruling: a standard-form contract cannot replace complete proof of ownership.
The most dramatic exhibit was a “strawberry nightgown”: a supplier couldn’t sell it, put the inventory on Temu with the same photo — and the copyright in that photo belonged to a freelance photographer.
A company that claims to be in the global fashion first tier can’t even prove copyright over its own product images. This isn’t one unlucky case; it’s a confession of the model: Shein’s control over “fashion” stops at the channel layer and never reaches the creative layer. The ruling also leaves a loose end: Temu’s counterclaim that Shein used exclusive agreements to restrict more than 8,000 suppliers, allegedly violating competition law, will continue to be heard in 2027.
The IP ledger has more than this one entry. Uniqlo has sued Shein for copying its “dumpling bag”; about 50 IP lawsuits are pending in the US; in July 2025, French regulators fined it €40 million for “fake discounts” — raising prices before cutting them — and later added €22.5 million for data-compliance violations. The penalties over two years total nearly 500 million yuan.
The second bill Shein doesn’t pay is supply-chain profit. Shein turns every factory’s lead times, quality, defect rate, capacity and quotes into digital scorecards, and the system allocates orders dynamically. This “free management system” is sold as a digital boon, but suppliers experience it differently: raw-material, labor and compliance costs rise every year, and “costs are hard to pass upward.” The saying among Pearl River Delta factory owners is: “We’re not afraid of no orders; we’re afraid of orders that don’t make money.”
Now put Shein next to Nike and Zara, and the difference in cost structure is clear. Inditex’s gross margin has long been 57%-58%, H&M around 53% — high margins built on designers, fabric R&D and brand premium, moats funded with real money every year. Shein’s gross margin exceeds 60%: 67.9% in 2025 and 70.3% in the first quarter of this year.
In other words, the “dividend” many Chinese companies going global enjoy is roughly the sum of three things: not paying design fees, not paying tariffs, and squeezing factory profits.
Of these three, one has been blocked by the courts, one by tariffs, and one is being blocked by ESG compliance audits. All three bills come due at the same time — that is the accounting expression of “involution can no longer be sustained.”
Drifting Through Nationalities
Another layer of uncertainty is written on Shein's passport.
In 2024, Shein Executive Chairman Donald Tang offered a widely quoted formulation at the Milken Institute Global Conference: "By birthplace and supply chain, Shein is a Chinese company; by headquarters and key personnel, it is a Singapore company; by market and values, it is an American company."
That remark was clever in its context—it winked at all three sides. But viewed against today's geopolitical backdrop, it precisely exposes Shein's deadlock: none of the three sides fully claims it. The US Congress has never stopped scrutinizing Chinese-linked e-commerce, stalling its New York listing; a move to London drew repeated regulatory and public questions over supply-chain labor; after all the detours, it has ended up in Hong Kong—four years, three cities, the longest IPO detour in Chinese internet-company history.
But the real determinant of the listing timing may be an unassuming number in the prospectus: $17.294 billion in convertible redeemable preferred shares on the books, due at the end of 2026. The IPO's net proceeds are about HK$13.2 billion, with 40% earmarked for cloud computing, AI demand forecasting, and warehouse and distribution automation. In other words, this celebration is itself half a debt-repayment arrangement. Cornerstone investors include Boyu, Tencent, and Tiger Global, subscribing for more than HK$3 billion—what the old shareholders need is a liquidity exit.
Xu Yangtian held about 33% of Shein before the listing, with ten times the voting power through a dual-class share structure. His posture—standing in a corner in a T-shirt—is a metaphor for the company's predicament: low-key to the point of invisibility, yet forced to step into the spotlight.
05. The Era of Debt Repayment
That brings us to the answer to the opening question: why has the $100 billion empire been devalued?
Because a large part of that $100 billion was borrowed in the first place. It borrowed from tax loopholes, copyright gray areas, and factory concessions. In a bull market, no one calls in the debt; valuation is collateral. When the wind shifts, creditors line up, and valuation is recalculated based on debt-repayment capacity. The capital market's answer this time is cold and honest: it will no longer pay a brand premium for "efficiency squeezed out of cutthroat competition"; it will only pay for what remains after the debts are settled.
What's left after the debts are settled? Shein's own answer lies in its revenue structure: platform service revenue—fees charged to third-party merchants for access to its supply chain, logistics, and traffic—rose from $868 million in 2023 to $4.74 billion in 2025, with its share climbing from 2.7% to 11.3%, and its profit margin roughly double the group's overall margin. The margin on selling goods is 4.9%; the margin on selling "water"—selling its supply-chain capabilities to others—is double that. This is an arithmetic problem Amazon demonstrated once with AWS, Alibaba is demonstrating a second time with cloud, and Shein wants to tell a third time.
Charlie Munger, reviewing the tens of millions he lost on Alibaba late in life, called it a "damned retailer" — a business of endless competition and razor-thin margins. The same applies to Shein, but its position is more awkward: it wants to graduate from being a "damned retailer," yet first must pay the tuition of a student — design tuition, compliance tuition, brand tuition.
The real upgrade lies in Panyu. Among Shein's more than 7,500 factories, domestic operations are retreating into sampling and small-batch orders, while bulk orders are accelerating their shift to Vietnam, Turkey and Brazil. For the garment factories that grew up with Shein over the past two decades, the platform's IPO is not the finish line — the phrase "orders don't equal profits" on their books is. The sharper operators are already exploring fabric R&D and process upgrades, trying to climb out of the cycle of taking orders, processing and earning processing fees.
Over the past two decades, the sharpest knife Chinese manufacturing forged for going global was efficiency. Shein proved that knife could cut through ZARA's price tags, and also that it cuts both ways: the outward edge is competitiveness, the inward edge is a one-time overdraft of profits across the entire chain. Overdrafts don't disappear; they are merely deferred.
From $100 billion to $25 billion, what was erased is not just a company's market value but the market's repricing of a model: fast doesn't equal strong; cheap doesn't equal a moat; efficiency gained by pushing others to the limit will eventually be repaid with interest.
Fortunately, the first step in paying off the debt is acknowledging that every item on the ledger counts.
On September 1, Xu Yangtian stood in a corner wearing a plain T-shirt — no bell-ringing, no speech. That T-shirt made one thing clear: this time, the brand on the clothes was 100% his own.