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Shein Weighs London IPO as US Listing Hurdles Mount

Published February 27, 2024
4 months ago

In a strategic shift precipitated by regulatory challenges in the United States, Shein, the fast-fashion behemoth, is contemplating a move that could see its initial public offering (IPO) debut on the London Stock Exchange (LSE). This potential pivot comes as the company grapples with increased scrutiny from US authorities and broader trade tensions between the US and China.

Shein, originally founded in China and now headquartered in Singapore, has been pursuing a US listing as its favored option. However, the prospects have dimmed due to perceived difficulties in obtaining approval from the US Securities and Exchange Commission (SEC). As an alternative, the company is in the preliminary stages of evaluating a London listing. Should Shein opt for the LSE, it would mark a significant boost for the city's IPO market, which has recently experienced a sharp decline in activity, with just about $1 billion garnered in IPOs last year – the lowest in several decades.

Nevertheless, the London market presents its own challenges, unable to match the liquidity and valuation depth of the American markets, as well as the exchanges in Hong Kong and China. A move to the LSE may be seen as a stopgap measure rather than a long-term strategy for Shein. This is corroborated by Ke Yan, a research analyst at DZT Research in Singapore, who doubts that a Shein listing in London would spark a broader trend among Chinese companies.

The US has become an increasingly difficult landscape for Chinese firms to launch IPOs. Chinese-backed businesses have faced intense scrutiny, exemplified by the forced delisting of Didi Global Inc. in New York, which has all but shut the door on such companies seeking to go public in the US. The call for a more transparent accounting of Shein's ties to China, especially its operations in the Xinjiang region, is part of the growing concern from figures like Senator Marco Rubio, applying further pressure on the company and painting a complex picture of the cross-border regulatory environment.

Despite the difficulties, Shein's ambition reflects the resilience of its global fashion presence. With a reputation for delivering trendy clothes at exceptionally low prices, Shein has redefined the fast-fashion landscape, disrupting legacy brands and asserting itself as a leader in the space. The company aimed for a valuation of up to $90 billion at its proposed US IPO.

London thus emerges as a vital contingency for Shein, but the decision to relocate the IPO remains in limbo. Even as Shein continues to work on its US application, the feasibility of alternative venues like Hong Kong or Singapore remains part of the conversation. London's potential recovery through Shein's listing is juxtaposed with the recent trend of other firms exiting the UK market, in search of more lucrative or stable conditions elsewhere.

Observers and investors alike are closely monitoring the developments surrounding Shein's IPO journey. Its final decision is poised to be a barometer for the market dynamics and geopolitical considerations that are reshaping the ways in which global companies approach public finance, amid an increasingly fragmented global economic landscape.

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