U.S. Investors to Miss Out as Shein Eyes London Listing

The fast-fashion giant Shein has filed the paperwork for an initial public offering in London, according to multiple reports, ditching earlier plans to list on Wall Street.

The company currently fetches a valuation of US$66 billion, according to CB Insights, ranking it the fourth-largest private “unicorn” in the world. It’s behind only TikTok parent ByteDance, SpaceX and OpenAI.

Shein confidentially filed the paperwork earlier this month for its offering in London, both Reuters and the Financial Times state, with the listing due later this year. Shein and the U.K. markets regulator the Financial Conduct Authority (FCA) have declined to comment.

We shall see. It has also been looking at a potential Hong Kong listing, and some of its investors are apparently getting impatient at the persistent delays in the company’s long-mooted intention to list. Market conditions and regulatory issues have forced a series of delays.

I first started looking at the potential for a Shein IPO back in 2022, when the company had recently been valued at US$100 billion in a round of private financing.

But that lofty valuation was soon undermined, and I noted in a column in October 2022 that Shein appeared to have met its match in the U.S. Federal Reserve. Insiders keen on liquidity were being forced to trade shares at deep discounts of as much as one-third.

A subsequent financing round produced the US$66 billion valuation, and it’s likely to look to achieve something like that in London. Shein has the backing of prominent international private-equity investors General Atlantic, Tiger Global Management and Sequoia Capital, the latter via its China unit.

Trade tensions between Washington and Beijing disrupted the Chinese-founded company’s initial aspirations for an IPO in New York. Lawmakers and regulators on both sides of the Pacific were due to look hard at the requirements for a U.S. listing, with some U.S. politicians voicing public opposition to the idea.

U.S. Senator Marco Rubio, who sits on the U.S. Senate intelligence committee, has now written to British Chancellor Jeremy Hunt as well as FCA chief Nikhil Rathi recommending that the U.K. government investigate whether Shein has used forced labor in getting its clothes made. He insists that Shein “failed” to list in New York “due to concerns about its unethical and irresponsible business practices.”

The issue relates to any use of cotton from China’s Xinjiang region, where there’s concern members of the Uighur population and other ethnic minorities are forced into labor. The Biden administration has ruled that Beijing’s treatment of the Uighurs, with up to a million detained in prison camps, amounts to genocide.

Shein has denied such claims and says it has a “zero tolerance policy for forced labor.” It has proved hard for producers globally to disentangle Xinjiang cotton from their long and sometimes opaque supply chains.

The British government has been courting Shein, however, with a bipartisan group of both Conservative and Labour politicians meeting with the company to solicit a listing in London. Britain has recently missed out on prize IPOs such as the September 2023 listing of Arm Holdings ARM, the British chip designer taken public on Nasdaq by Japanese parent Softbank Group SFTBY (T:9984).

It is also likely that a London listing is more acceptable to Chinese authorities. Shein, now domiciled in Singapore, still gets the bulk of its clothes made cheaply in China. Its popularity and valuation has been boosted by frequent snap online sales as well as Western influencers showing off “hauls” of super-cheap clothes they’ve picked up.

Shein does not sell clothing in China. So it’s a gray area as to whether any listing of a Singapore company would require an assessment by Chinese authorities, including the China Securities Regulatory Commission and the Cyberspace Administration of China. The company has reportedly alerted the CSRC to the change of venue, while it has yet to win formal approval.

Even if the Singapore company does not officially require the approval of Chinese officials to list overseas, it would be wise to get tacit consent. We saw what can happen if you do not during the fiasco surrounding the 2021 listing of Chinese ride-hailing app Didi Global, which pushed ahead with a Wall Street listing despite a “suggestion” it delay the move from Chinese regulators. Didi was blocked from signing new customers inside China, and ultimately forced to delist from the New York Stock Exchange.

Although Shein previously filed confidentially for a Wall Street listing, and approached Chinese regulators, the Chinese authorities said they did not recommend a U.S. listing.

Shein (pronounced “she-in”) started life in the city of Nanjing as an online wedding-dress retailer. Founder Xu Yangtian, who also goes by Chris Xu, took his background in search-engine optimization at a clothing-sourcing company, and built out www.Sheinside.com, which soon expanded to other forms of women’s clothing and later shortened its name to Shein.

It has undercut previous fast-fashion industry leaders such as Zara, the chief brand of the Spanish company Inditex, sometimes producing near-identical versions of items of clothing immediately after they’re released on other sites.

Xu has been extraordinarily publicity-shy. Shein has never published a picture of him, and he has deliberately avoided becoming the public face of the company, both because it specializes in women’s fashion and because he is concerned he would cause heightened scrutiny of the company. He has reportedly also become a permanent resident of Singapore.

Another issue concerning lawmakers in the West is that Shein uses its system of shipping direct to consumers to minimize or avoid import duties. It and rival apps such as Temu use a U.S. law, for instance, that typically avoids customs on packages worth less than US$800, if shipped individually to consumers.

Will Shein finally overcome all the obstacles, and satisfy its private-equity backers with a listing? It is now the case that London or Hong Kong or both would benefit, while Wall Street will miss out.