As a US IPO listing looks increasingly unlikely for Shein, the fast-fashion giant is considering floating on the London stock market instead.

Now headquartered in Singapore, Shein was originally founded in China, and it is these ties that have poked holes in its IPO plans.

Relations between the US and China took a significant hit in 2021 when the Cyberspace Administration of China (CAC) opened a probe into Didi, the Chinese vehicle-for-hire company, days after its $4.4bn US listing.

It essentially closed the market to Chinese firms looking to list in the US, with the largest successful subsequent China-backed listing being Amer Sports $1.6bn offering in February. It actually only reached $1.37bn, but it was the first company to raise over $200m since the CAC probe.

Last valued at $66bn, Shein will be a significant offering wherever it floats. Yet with concerns about the involvement of Chinese regulators and the ethical problems that plague Shein’s reputation, it looks likely that US investors will miss out. Instead, London could take the stage.

What are the problems with Shein’s IPO listing in the US?

On 15 February, Republican senator Marc Rubio sent a letter to the US Securities and Exchange Commission, asking it to block Shein’s IPO listing.

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His letter said: “Shein’s collaboration with Chinese regulators raises serious doubts that its IPO filings are complete and accurate. As I have written to you in the past, those very regulators order Chinese companies to deceive US authorities and investors about the risks of doing business in the People’s Republic of China.”

Having never sold products in China, Shein had hoped to avoid being subjected to Chinese regulation, particularly after it moved its headquarters to Singapore in 2022. However, the China Securities Regulatory Commission has been firm, introducing new rules to tighten scrutiny around IPO listings, and promising to protect investors with “teeth and horns”.

Concerns about Shein ethics proliferated US worries around Shein’s IPO listing.

GlobalData analyst Louise Deglise-Favre says: “Shein is running into some issues with its plans to list in the US as regulators are concerned about the ethics of supply chain causing unforeseen hurdles for the Chinese retailer. These hurdles come within a context of a tense commercial and economic climate between the US and China.”

The supply chain ethics in question are in relation to Shein’s alleged use of cotton produced in the Xinjiang region, as alleged by Bloomberg in 2022. The US State Department has also alleged that human rights abuses are committed against the Uyghur people in the Xinjiang region and has prohibited the importation of goods made there, under the Uyghur Forced Labor Prevention Act (UFLPA).

In October 2023, Virginia Democratic Representative Jennifer Wexton wrote to the Forced Labor Enforcement Task Force (FLETF), urging an investigation into whether Shein’s products were in violation of the act.

Could London be different?

Ethical qualms around Shein raise eyebrows globally, but the UK’s chancellor of the exchequer, Jeremy Hunt, has seemingly expressed enthusiasm for the possibility of a London IPO listing for Shein, following talks in February.

London has struggled to attract high-profile listings over recent years, with London Stock Exchange Group reporting that its equities division fell 8.5% in 2023.

Elaborating on this, Russell Pointon, director of consumer at Edison Group, says: “An IPO could bring a much-needed boost to the London stock market, with only 23 issuers listing in 2023, the quietest year since 2010. Shein’s disruptive business model and popularity among consumers also indicate its potential to thrive in the market and attract other major listings, reflected in its $68bn valuation.”

However, Alexander Otto, head of corporate relations at Tradebyte, suggested that if Shein were to successfully list in London, a conflicting point must be raised.

“Why is it so much easier for a company like Shein to set foot in Europe than in the US, and how [does this reflect] on our regulatory landscape?” he asked.

In 2022, Global Legal Action Network and the World Uyghur Congress (WUC) challenged the imports of goods using Xinjiang cotton in a legal proceeding, arguing that it violated The UK’s Foreign Prison-Made Goods Act 1897. However, the court ruled in the favour of the UK authorities.

According to a joint statement from the WUC and GLAN at the time, the outcome positions the UK as “a safe haven for importers of goods produced as a result of crimes against humanity, and genocide.”

Considering whether Shein’s potential IPO listing could materialise, Deglise-Favre concluded: “These hurdles with the New York listing have allegedly prompted the retailer to consider London for its IPO, which while it would be beneficial to the London Stock Exchange due to its forecasted gigantic size, may not come to fruition for similar issues to what Shein is facing in the US.”

She added: “There is no telling if UK regulators will be less scrutinising of Shein’s supply chain than their US counterparts.”

Shein declined to comment.