Chinese fast fashion retailer Shein is preparing for a potential listing on the London Stock Exchange (LSE) after facing regulatory hurdles in its pursuit of an initial public offering (IPO) in New York, according to a report by Reuters. The company, valued at $66 billion in a fundraising campaign last year, aims to update China's securities regulator about its change in IPO venue within this month before filing papers with the LSE.
Shein's decision to explore a London listing comes as the company faces increased scrutiny from US lawmakers over its ties to China and allegations of labor malpractice. Critics have raised concerns that Shein might outsource manufacturing to contract companies in China's Xinjiang province, where governments and activists have accused China of incarcerating Uyghurs and other mostly Muslim minorities, a charge Beijing disputes.
In November 2022, Shein confidentially filed for an IPO with the US Securities and Exchange Commission (SEC) and approached the China Securities Regulatory Commission to obtain Beijing's approval. However, regulatory hurdles in the US have delayed the process, prompting the company to consider alternative listing venues.
Shein, which sells cheap fashion clothes in more than 100 countries, relies primarily on contract manufacturers and does not have any manufacturing facilities of its own. This business model subjects the company to the rules of the China Securities Regulatory Commission, adding another layer of complexity to its IPO plans.
As part of its preparation for a potential London listing, Shein has been corresponding with its financial and legal consultants based in the city since early this year. The company has also approached London-based fund managers for introductory meetings ahead of the planned float.
While preparing for its US IPO, Shein faced demands from US lawmakers to prove that it was not using forced labor in its operations. The company has been working to address these concerns and convince lawmakers that it can be trusted as a public company listed on American exchanges.
Shein's move to consider a London listing could signal a turning point for the city, which has seen businesses like British chip designer Arm opt for New York listings in an effort to access larger liquidity pools. Out of over thirty IPOs in Europe so far this year, only four have taken place in the United Kingdom.
The fast fashion retailer's IPO plans have also been complicated by its efforts to gain membership in the National Retail Federation (NRF), the largest and most powerful retail industry trade association in the US. Despite repeated attempts, Shein has been rejected by the NRF, according to people familiar with the matter.
Membership in the NRF could help legitimize Shein in the eyes of federal lawmakers and smooth its path to a US IPO. However, the trade group's decision to deny Shein's application has raised questions about the reasons behind the rejection and the potential impact on the company's IPO plans.
