Outburst! 450 billion unicorns rare big move: rare in 10 years

Pencil Road

2024-06-05 11:12Posted on the official account of Shanghai Pencil Road

Outburst! 450 billion unicorns rare big move: rare in 10 years

Pencil Road Author丨Naohachi

Very shocking. According to foreign media reports, Shein, China's fourth largest unicorn, is going to be listed in the UK.

Since December last year, there has been a lot of news about Shein's listing on the London Stock Exchange.

The earliest source came from Sky News, and the article said that Shein Chairman Tang Wei met with executives of the London Stock Exchange (December 2023), and the focus of the exchange was "the possibility of Shein listing in the UK".

That's weird.

With a valuation of 450 billion yuan (Hurun), known as China's fourth largest unicorn, how can Shein, who is not going to go to mainstream listing locations such as China and the United States, but has a soft spot for the unpopular location of the United Kingdom, what is the unspeakable behind it?

Generally speaking, when a company considers where to go public, the underlying logic includes several types: 1. Financing ability; 2. Market valuation level; 3. The recognition of the enterprise by the local customers; 4. The degree of difficulty of listing; 5. Legal and policy environment, etc.

From the point of view of 1 and 2, the London Stock Exchange is not the most attractive.

In terms of the total market capitalization of the company, the total market capitalization of the New York Stock Exchange is about 24.87 trillion US dollars (2024.2), the Shanghai Stock Exchange can reach 7.2 trillion US dollars, and the London Stock Exchange can reach 2.5 trillion US dollars (2024.1).

In terms of the average market capitalization of companies, the New York Stock Exchange is about $19.8 billion, the Shanghai Stock Exchange is about $3.18 billion, and the London Stock Exchange is about $1.36 billion.

Although the above is a phased data, it also shows to a certain extent that from the perspective of overall strength, the London Stock Exchange is not the best choice.

Throughout the past 10 years, there are only a handful of Chinese companies listed on the London Stock Exchange.

In 2011, there were more than 2,000 listed companies on the London Stock Exchange, of which only 62 were Chinese companies, accounting for about 3.1%, of which less than 25 were on the main board.

From 2011 to 2024, there will be less than 20 new well-known Chinese enterprises, such as China Pacific Insurance, SDIC Power, Huatai Securities, Asia Fruit, etc.

Shein's move directly broke the record of the London Stock Exchange: the market value exceeded 460 billion yuan, becoming the second largest IPO in the history of the London Stock Exchange, second only to the mining giant Glencore in 2011.

Shein's approach to this is actually justified in a number of ways.

First of all, Europe is one of Shein's main markets, and customer recognition is high.

According to Euromonitor, as of 2021, 33% of Shein's sales came from the United States, 30% from Europe, 17% from the Middle East and 8% from Southeast Asia.

In terms of market share, Shein's listing in the United States is the most ideal. After 2021, Shein has a large share of fast fashion in the United States, more than 30%, but due to force majeure factors such as policies, the United Kingdom has become the best choice for second place.

Shein's exploration of the European market can be traced back to 2010: the Spanish site was launched; In 2012, it went live in France; In 2013-2014, the German site was launched. In 2017, Shein was present in 224 countries, including many in Europe.

From the perspective of commercialization, in 2020, Shein's trading volume in the U.S. market exceeded $10 billion.

And in 2022, according to a document filed with the UK Companies Registrar, in the 16 months to the end of 2022, Shein's sales were about $1.27 billion.

For the whole of 2023, Shein's sales are about $45 billion.

Then some people will ask: OK, if you don't go public in the United States, then why not list in China?

Judging from the current reality, the domestic issuance resources (listing quotas) are very limited, and priority will be given to hard technology companies to "give the green light", while e-commerce companies like Shein will not get much dividends.

In addition, Shein's main source of income comes from overseas. Judging from the old data in 2021, the market share in Europe and the United States accounts for more than 63%, and Southeast Asia accounts for only 8%. Judging from the strategy of the past three years, Shein's key markets are the United States, Europe, the Middle East, Latin America, etc.

Based on a combination of factors, Shein's decision to go public in the UK was both unexpected and reasonable.

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