Chinese fast-fashion giant Shein Global Holdings Ltd. was once valued at more than the parent companies of H&M and Zara combined, giving its reclusive founder and CEO, Sky Xu, a net worth exceeding $23 billion.

Four years later, Xu's fortunes have sharply reversed as Shein contends with tariffs, political scrutiny, and intensifying competition. The company is set to go public in Hong Kong on Tuesday at just over a quarter of the $100 billion valuation it commanded in 2022. At the listing price, Xu's personal wealth — based on his 30% stake — drops to roughly $8 billion, according to the Bloomberg Billionaires Index.

The more than $15 billion decline in Xu's wealth also reflects poor timing. Chinese consumer brands that went public over the past year or so initially attracted strong investor interest, until a wave of artificial-intelligence companies made their debuts, stealing the spotlight and minting a new class of billionaires. The shift underscores how quickly investor appetite in Hong Kong's new-issue market can rotate between themes, leaving companies that waited on the sidelines with a narrower window.

"They definitely missed the window," said Sam Wyatt, an international-equities portfolio manager at Melbourne-based U Ethical Investors, referring to Shein's initial public offering. E-commerce, he said, is now a less compelling story to investors than AI.

While some AI companies have delivered blistering first-day gains, Hong Kong's IPO market has turned in a mixed performance overall. Shares of beverage maker Eastroc Beverage Group Co. and pig breeder Muyuan Foods Co. are both trading below their listing prices after debuts that raised more than $1 billion each. The brothers who founded Mixue Group, a fast-growing bubble-tea chain, have seen their wealth shrink by more than a fifth since the company went public last year.

A Shein spokesperson did not respond to a request for comment.

Xu, 43, founded Shein in 2012 with three partners. All four had worked at the same search-engine marketing company, and they used that experience to build Shein into an online retailer known for cheap, trendy clothing. The business flourished during the Covid-19 pandemic, when young shoppers drove an explosion in sales. Its model — directly sourcing from a vast network of Chinese suppliers and shipping cheaply to consumers abroad — upended traditional fast-fashion supply chains, which is part of why its valuation once rivaled established retail incumbents.

Revenue growth has slowed since then, according to data Shein disclosed in July ahead of its IPO. One of the company's core strategies — sidestepping import taxes in the US and Europe through small shipments — was upended last year, when the Trump administration ended a key tariff exemption and the European Union announced a fixed customs duty on small parcels. The policy changes struck directly at the low-cost logistics model underpinning Shein's pricing advantage, and similar duty changes have also weighed on rivals that rely on direct-from-China shipping.

"The direction of the market is changing, not in Shein's favor, especially in the recent years," said Sheng Lu, a professor of fashion and apparel studies at the University of Delaware. AI is also leveling the playing field for Shein's competitors, which can now cater to shifting consumer tastes better and faster, he said.

Shein attempted to go public during its heyday but struggled to gain traction in New York and London, where the company faced scrutiny over its labor practices. Although Shein's supply chain is rooted in China, it depends on the US and Europe as key markets. Executives distanced the brand from its Chinese origins and relocated its global headquarters to Singapore, though the company ultimately required approval from Chinese regulators to proceed with an IPO.

"Shein was the hottest topic two to three years ago — a Chinese firm that could have IPO'ed in the US because it already had a strong fast-fashion brand in the US and strong consumer recognition," said Jason Hsu, chief investment officer at Rayliant Global Advisors. "But the hot topic now is AI."

Source: Fortune