Goldman Sachs bought $220mn worth of Shein shares after the fast-fashion retailer’s rocky stock market debut. The Wall Street bank purchased 42mn shares, or 13 per cent of Shein’s initial float, as part of its role as an underwriter to stabilise a stock shunned by investors. Goldman bought the shares, colloquially known as the “greenshoe”, for between HK$35.90 and the listing price of HK$48.56 in a filing to the Hong Kong Stock Exchange. At an average purchase price of HK$42.23, Goldman’s purchases would have produced a trading profit of about $34mn.
Shein’s long-awaited $26bn initial public offering was labelled a “disaster” by analysts after shares plunged as much as 10 per cent on the first day of trading. The stock has now fallen 38 per cent, valuing the company at $16.3bn. Underwriting banks sell more stock at the issue price than they are given by the company. They then cover their short position either by exercising an option to issue more shares — known as the overallotment option — or buying them on the open market below the listing price if they fall. Buying back shares on the open market allows Goldman to prop up the share price to some degree by increasing demand. The standard agreement among underwriters, as set out by the International Capital Markets Association, states that any profits from stabilisation would be shared between the banks responsible for underwriting the IPO. Goldman declined to comment. In some cases, as with Deliveroo’s disappointing London listing in 2021, the underwriters agreed in advance to surrender any stabilisation trading profits to the company.
Shein had cash and cash equivalents of $15bn on its balance sheet as of June 30 according to its latest results, just $1.3bn under its market capitalisation. Shein’s IPO value represents a sharp fall from its peak. Pandemic lockdowns and social media hype from “Shein hauls” drew young consumers to its affordable fashion and earned the company a valuation of about $100bn following a 2022 private fundraising round.
Source: Financial Times Companies · Summarized by HeadlinesBriefing