Shein: After missing out on a New York float, is a London listing likely to get the green light?

The anticipated blockbuster IPO of fast-fashion giant Shein has been the hottest topic in the City of late as rumours of its London debut continue to swirl. 

Discussions of a float first started in November last year, when New York was front of mind for Shein at that time. However, Shein’s dreams of floating in America were shattered by strident political pushback and the likely possibility of facing “tougher than expected scrutiny” of its practices. 

So why is the City willing to take a bet on a Shein float when the US won’t touch it? And what will it mean if the Chinese retail giant ends up landing in London? 

In a New York minute

In an open letter to the US securities regulator earlier this year, Republican senator Marco Rubio called on US officials to block a potential IPO if Shein failed to make “extraordinary disclosures” regarding the production of its cheap clothing and its links with the Chinese government. 

While Shein is now headquartered in Singapore, it was launched in Nanjing, China. It has remained at the centre of arguments over its use of cotton from China’s conflict-ridden Xinjiang region, as well as other issues relating to workers’ rights abuses and conditions within its (what it would be fair to call secretive) supply chain. 

As well as this, political debate relating to a lack of trust in China’s intentions and motivations remains a slippery slope, making Chinese or heavily-linked investments to China appear risky to some. 

A senior source at a major UK bank says that a listing on the New York Stock Exchange has now been written off on both sides, with the US and China being keen to steer clear of each other. 

He adds that while there are political differences at stake, the crackdown on the controversial loophole allowing cheap products from Shein and the likes of its rival Temu to arrive in the US tariff-free has also been a contributing factor in the pushback. 

Edison Group director of consumer Russell Pointon says that with this in mind – and a “more concrete proposition” on the cards in London – these concerns will inevitably weigh on the minds of potential City investors. 

Is London going soft?

So, with plans in New York failing to materialise, Shein turned its attention to its next best option – London. 

Shein executive chair Donald Tang reportedly held talks with executives from the stock exchange during a visit to the UK in December last year, which was closely followed up by a meet-up with chancellor Jeremy Hunt in February. 

An insider told Sky News at the time that Hunt and Tang had held “productive” discussions about a float that could be essential in bringing life back to the LSE.

But with the decision looking likely to fall to Labour after the upcoming general election, it seems both political parties can agree on one thing – that the IPO isn’t regarded as a threat to the same degree as it is in the US. If anything, it’s a potential success story for the City.

Labour has since shown support for the listing and held its own talks with Shein, among other companies looking to invest or list in London, and a spokesperson for the party said that “raising investment, productivity and growth is one of Labour’s missions for government”. 

So, Shein might just be a way to get London’s previously thriving stock market out of a rut after the lingering slump in post-Brexit business investment. 

Shore Capital director Clive Black echoes this view, saying that the LSE has tried to court potential companies to list for a while. “It’s a bit of a two-way play here,” he says. “It’s good in some respects that a company with its potential market capitalisation would come to the London market. 

“At the same time, there will no doubt be a very considerable volume of noise around Shein’s corporate governance, its relationship to the Chinese authorities, supply chain, transparency and ethics. All of these things will undoubtedly come out in the wash in what would be a high-profile IPO.” 

Black adds that while the challenges to Shein will be the same in London as in New York, the motive for the move remains unclear. He says it is probably for one of two reasons: to raise capital for growth or to offer an exit route for its original investors. 

AJ Bell investment director Russ Mould says that while London is keen to be seen as involved in a high-profile international deal, investors will be “proceeding with caution” for fear of being associated with a business that has any whiff of supply chain or governance issues.  

He adds: “London has come into criticism by some parties previously because its rules and regulations are seen as too strict, so if Shein does get past all of those tests, then you would hope that would be a good thing.” 

Surviving the microscope 

It is yet to be seen what will happen next but it will be a first for Shein to be under the spotlight to this degree. The pureplay retailer has never faced the kind of scrutiny the likes of other fast-fashion public companies, such as Asos, Boohoo and Primark, have been subjected to. 

Primark was forced to address serious ethical issues after the collapse of its factory in Bangladesh and Boohoo continues to face ongoing accusations relating to breaking its promises to produce its clothing fairly and ethically – Shein certainly isn’t alone in some of the concerns being raised. 

And while some consumers are leaning into the likes of Vinted and Depop to avoid these embattled fast-fashion players, Mould adds that ethical concerns clearly aren’t a high-priority issue for a lot of fashion seekers who continue to shop at Shein and its competitors. 

And the City?

“There are some investors who will be looking at the early stages of the Asos and Boohoo stories, and how fantastically successful they were,” says Mould. “You can see how retail fascias can be great investments, particularly in their growth stages, and clearly there is a lot of growth expected of Shein; it’s got a pretty good track record there. 

“The fundamental issues that investors must address will be factored into the valuation as and when it comes. That’s going to be one of the interesting things about the initial public offering process.” 

With its post-float performance, behaviour and reputation still to be seen, only time will tell whether LSE will be a good move for Shein or arguably, more importantly, for the City of London.