‘Nigel Farage says Shein London IPO is a “very bad idea”. Is he on the money?’

With each week that passes, an IPO of online fast-fashion giant Shein on the London Stock Exchange looks more likely.

However, if an IPO does go ahead, questions over Shein’s future success loom large.

The etailer has to be admired for its supply chain prowess and efficiency. Although questions over the ethics of its sourcing and the low prices that result are also among the biggest concerns, Shein’s powerful appeal to younger shoppers is indisputable.

The numbers, too, are impressive. Founded a decade and a half ago, it is understood that the gross merchandise value of products sold on Shein’s site stood at $45bn last year, when earnings reached about $2bn.

On a prospective valuation of about £50bn, a London IPO would be the second biggest ever staged in the City.

“A Shein listing would be a big step forward in burnishing London’s credentials as a financial home to a new breed of businesses”

So no wonder that London, which has been cold-shouldered by companies of late in favour of rival stock exchanges – notably the US – would welcome a blockbuster new arrival.

Following the highly successful flotation of specialist tech company Raspberry Pi, a Shein listing would be a big step forward in burnishing London’s credentials as a financial home to a new breed of businesses.

And despite controversies that have embroiled Shein, such as allegations about labour conditions in supplier factories, politicians here – unlike some of their peers in the US, where the retailer originally hoped to list – seem relaxed about a UK IPO.

The likelihood is that, by the time of any listing, there will be a new Labour government here. However, they are likely to be preoccupied by top-level priorities such as energising the economy – even though some of their activist base might want action on business ethics and sustainability.

Indeed, Labour politicians have apparently given the nod to a Shein flotation. The Guardian reported last week that Labour MPs had met representatives of Shein, as well as other companies interested in investing or listing in the UK.

A spokesperson told the paper that the party expected the “highest regulatory standards and business practices” from companies, and “the best way to ensure this is to have more companies operating from and regulated by UK law”.

However, the prospect of political storms – including over perceived links to China – around a Shein listing remains.

The Conservative chair of the Commons Foreign Affairs Committee and the Labour chairs of the International Development and Business and Trade select committees all raised concerns last month (the committees are now dissolved until a new parliament is elected).

“While Shein may face opposition in the corridors of power, investors may harbour more typical worries about a Shein flotation”

And Reform leader Nigel Farage, one of the most populist, adept and mischief-making politicians of the moment, has weighed in.

Farage described a London IPO of Shein as “a very bad idea” that “won’t change the IPO crisis in the City”. Is he on the money?

While Shein may face opposition in the corridors of power, investors may harbour more typical worries about a Shein flotation.

Whenever a company floats, the obvious question is to what extent it offers growth or whether founders are realising the fruits of their entrepreneurial endeavours when performance is at its peak.

The most recent raft of online retail IPOs have infamously failed to reward investors who bought into their growth stories.

Established players in the category, such as Asos and Boohoo, have also been going through the mill for some time. It remains to be seen whether they can ever scale past heights again.

That should prompt some thought about how enduring Shein’s model is, especially as competitors such as Temu grow, and inevitably competition will arise in still unthought-of ways.

Reuters reported this week that Shein has been increasing its prices significantly in some core categories, although it is still cheaper than rivals such as H&M or Inditex-owned Zara.

Some might see that willingness to increase prices as a sign of confidence in Shein’s continued customer appeal, helping its valuation. Others might wonder if it’s driven by shorter-term interest in delivering impressive sales growth ahead of an IPO.

While the wheels may be in motion for a listing, as with all IPOs, the old maxim of ‘buyer beware’ is as applicable as ever.