Investors are expected to scrutinize whether Shen can justify a valuation of $40 billion to $50 billion in a Hong Kong initial public offering after a prospectus filed on Sunday showed slow growth and a sharp drop in profitability.

Revenue grew 8% to $41.8 billion in 2025, but net income fell 39% to $2.06 billion. In the first quarter of this year, the fast fashion retailer lost $99 million, filings show.

While the quarterly loss reflected a $328 million fair value charge on convertible redeemable preferred shares following the accounting change, slower revenue growth and weaker core earnings underscore the company’s growing challenges.

“Institutional investors on the HKEX (Hong Kong Stock Exchange) … will zero in on a 2.9% operating margin,” said Winston Ma, executive director of the Global Public Investment Funds Forum and former managing director of China Investment Corporation.

“Investors will shift Sheen away from a pure hyper-growth tech platform to a physical retail and logistics player that will navigate high-friction global trade.”

Narrowing margins add to concerns that the shilling’s rapid rise is facing headwinds from higher trading costs, increased regulatory scrutiny and intense competition in global e-commerce. The company said the removal of the US de minimis exemption had hurt sales growth, increased costs and that it was “pursuing a wide range of options, including raising prices in the US” to offset part of the increased costs. Europe’s new fees on low-value imports pose another challenge — Schein said it’s possible that trends in the EU could “match or exceed the impact generally seen” in the United States. Shane’s challenges in Europe could lead to lower levels of competitive intensity at the value end of the market, which could be positive for fashion retailers Primark and H&M, Citi said in a note.

Evaluation pressure

“I argue that Shen is unlikely to achieve a significant valuation appreciation compared to its Hong Kong IPO or its last private fundraising round in the secondary market,” said Shen Meng, a director at Beijing-based boutique investment bank Chanson & Co. It has become much more difficult for them now, said Juozas Kaziukenas, an e-commerce industry analyst.

“There is no proposed solution to declining growth,” Kaziukenas said. With US sales contracted from 2025 and growth slowing in Europe due to tariff changes, Kaziukenas said revenues in the two markets – which together account for more than 50% of Shane’s global total – are likely to remain flat in the near term.

“Sheen’s short-term future is going to be in the ‘rest of the world’ countries, not Europe or the US,” he said.

Even before the filing, some investors questioned whether the target valuation left enough room for risks.