When China’s regulators cleared SHEIN for IPO, we checked with a few capital market friends how they would receive the listing. “We are not really looking at it,” the response was frank.
They shared with us the reason for that - and the SHEIN IPO prospectus filed over the weekend confirmed that reason.
The 463 page prospectus is the first set of hard numbers the company has ever put on the table. The headline figures look sobering. Net revenue growth has decelerated from 41% (2023) to 21% (2024) to just 8% (2025), and to roughly 1% in Q1 2026. The company also swung to a US$99 million net loss in Q1 2026, from a US$395 million profit a year earlier.
We read it closely (and fielded a few press calls on it since). Most of the coverage will hang this on tariffs – the end of the US de minimis exemption, and the EU’s €150 threshold gone as of 1 July. Obvious, but far from the correct, full picture. A few observations on the numbers and the competitive picture may help frame the discussion:
Start with the question many have been asking and the filing quietly answers: why is SHEIN in such a hurry to list? It isn’t the cash. The company holds roughly US$15 billion in cash and short-term investments, carries essentially no bank debt, and generates positive operating cash flow. It does not need an IPO to run.
What it needs is a balance-sheet event. Some US$17 billion of convertible redeemable preferred shares sit on the books as a liability, which is why SHEIN reports a US$7 billion shareholder deficit. On listing, that preferred converts to equity — deficit becomes positive equity in a single stroke. If the listing doesn’t happen, redemption rights loom. That urgency has nothing to do with growth.Which brings us to the number that matters. The headline that SHEIN “swung to a loss“ in Q1 2026 is a non-cash artefact — a US$328 million re-mark of that same preferred, and, counterintuitively, it points to the implied valuation potentially being marked up ahead of listing, not down. Strip it out and the quarter was operationally profitable.
The real signal is one line higher – and the timing is the story. SHEIN’s operating margin didn’t fall when the tariffs hit - it fell a year earlier. It was 4.3% in 2023, halved to 2.5% in 2024, then recovered to 4.1% in 2025 – the year de minimis was actually revoked by the U.S. government. If tariffs were the primary wound, the timing runs backwards;
This also settles a number the market initially got confused about. The widely-reported “2024 profit fell ~40% to about US$1 billion” was operating profit (US$966 million). Net profit that year was actually US$3.37 billion – up – flattered by US$2.4 billion of non-cash gains on the preferred. Look at the operating line, and the trough is unmistakably 2024;
So what happened in 2024? Temu. PDD’s international platform was launched in September 2022, and ramped up extensively in 2023 and 2024 (you remember the “Shop like a billionaire” Super Bowl ads?). By external estimates, 2024 was the year where Temu GMV (~US$55–70 billion) overtook SHEIN’s (~US$50 billion);
Temu is not a like-for-like fashion rival – it sells everything, cheaply. The competition was for inputs. Through 2024, Temu bid aggressively for the same things SHEIN’s model depends on: consumer wallet share, digital ad inventory on the same Meta and Google surfaces, 3rd-party air-freight capacity out of South China, as well as warehouse & last mile capacity in the U.S., Europe and other markets;
And it is the one thing SHEIN cannot list its way out of. The two things Temu competes for are the two things SHEIN cannot relocate: the supplier density of Guangdong – a decade-tuned cluster that is the machine, and can’t be rebuilt elsewhere at speed – and logistics capacity abroad;
SHEIN had been trying to localise the supply chain abroad, which is as hard as Apple trying to relocate production out of China. The filing shows how early that race still is: the widely reported supply chain efforts in Turkey, Vietnam and Brazil were not mentioned anywhere materially, or at all in the document. Besides, two-thirds of SHEIN’s warehouse space is still in China, with the US – some 22% of sales – holding just 7% of it;
Temu is now playing the same meta-game – from a different angle. Late in 2025 PDD launched Xinpinmu, a ¥100 billion (US$14.5 billion) push to turn Chinese manufacturers into curated in-house brands, pairing PDD’s domestic supply chain with Temu’s overseas reach. The overlap with SHEIN is real but nuanced: SHEIN’s model is a vast, long-tail selection of trend fashion, produced across a fragmented network of small workshops; Xinpinmu is aiming at a narrower set of more standardised, everyday products, built with fewer, more capable factories. They are mining the same underlying asset – China’s manufacturing clusters, and the move up from cheap production into brands – but from opposite ends. Not a head-on collision today, but a sign that SHEIN’s core advantage, tuning that supply base to suit the global demand, is no longer uncontested;
The marketplace is working – as growth, not as a margin fix. Service revenue has climbed to 14.3% of the total, and while SHEIN doesn’t disclose marketplace GMV, you can back calculate into roughly US$11–23 billion of it. That it is happy to grow the business but not to show the number tells you something in itself. And worth noting that Temu stands exactly in the way of SHEIN’s marketplace push.
We wrote in June about SHEIN’s three bets on growth – a marketplace, supply-chain-as-a-service, and acquisitions. The prospectus confirms part of the picture, while omitting others. On the one bet we called the real escape – acquisitions – a listing makes going shopping far easier, giving it a liquid, market-valued currency to buy with rather than having to burn cash.
The listing will clean up SHEIN’s balance sheet in a single stroke. What it cannot clean up is the competitive reality the numbers now confirm: the pressure that bent SHEIN’s economics started in 2024, came from a competitor rather than a customs office, and is now converging on its own supply base.
That, not the tariff headlines, is the clock worth watching.
Throughout our executive immersions to China, suppliers, manufacturers and other parts of the ecosystem repeatedly told us that they love SHEIN better than Temu. SHEIN always pays on time, never punishes suppliers harshly, and helps factory floors as well as warehouses install air conditioning.
How SHEIN can turn this goodwill into sustained business advantage would be a big, and worthwhile, test.
Disclosure: Momentum Works has read the full post-hearing information pack. We hold no position in SHEIN or its competitors.