A London listing by online fashion giant Shein would be a blockbuster arrival on an ailing stock exchange. But would the City welcome it with open arms or turn its back?
A valuation of as much as $100bn has been talked about in the past for Chinese retailer Shein. Although that seems to have fallen to somewhere in the region of $60bn more recently, it would undoubtedly be a mega-IPO, whatever the final figure.
It’s little wonder then that the prospect has prompted salivating in the Square Mile, which has been losing ground to other financial centres as big names have departed – chip designer Arm Holdings has listed in New York, for instance, while travel group Tui is off to Frankfurt.
However, should Shein choose to float here, it might represent not so much a victory for London as a snub from Wall Street.
Stateside, Shein has not exactly been welcomed with open arms by the powers that be.
Senator Marco Rubio, who has made confronting the Chinese Communist authorities one of his main platforms, has written to the Securities and Exchange Commission urging “additional disclosures” from Shein before any IPO in the US.
“The level of political scrutiny in the US is understood to be a reason why Shein is considering London for a listing”
His demands include an acknowledgment that Shein “is subject to the whim of the Chinese government and, by extension, the CCP [Chinese Communist Party]”, that it has used cotton from Xinjiang where it has been alleged there has been use of Uyghur forced labour, and that Shein is embroiled in “protracted and costly legal disputes” over alleged copyright infringement.
Shein would no doubt strongly reject such claims. It has said in the past, for instance, that it has “zero tolerance for forced labour” and that it is “committed to respecting human rights and adhering to local laws and regulations in each market we operate in”.
The level of scrutiny, however, is understood to be a reason why Shein is considering London for a listing, although the US remains its preferred option.
On the surface at least, given its travails, London would likely celebrate a Shein IPO. Would it face a similar level of political opposition on this side of the Atlantic, though?
While Shein chair Donald Tang has had an “introductory chat” with chancellor Jeremy Hunt – when a possible London listing was reportedly discussed – others have adopted a more combative stance.
“Potential investors would be wise to bear in mind previous big IPOs before getting caught up in any possible irrational exuberance if a bumper London flotation went ahead”
Former Tory leader Sir Iain Duncan Smith – like Rubio, no fan of China – told the Financial Times: “If a company moves to London, you need to do due diligence on their whole production line. If they sell their product over here, they should be tested.”
Aside from any political considerations, potential investors in Shein would be wise to bear in mind previous big IPOs before getting caught up in any possible irrational exuberance if a bumper London flotation went ahead.
The fact is that, to the detriment of retail’s reputation more widely, many of the sector’s most recent and widely touted IPOs – notably pureplays – have flopped.
Investors bought into impressive growth stories but the reality has been share price underperformance – such as with THG – or in some cases, such as Made.com, business collapse.
Online is firmly part of the contemporary retail landscape but, with some exceptions, it is hardly having a golden moment as even some of its poster children, such as Asos and Boohoo, have found life tough.
Shein would not necessarily follow in such footsteps. Its popularity, especially among younger shoppers attracted by prices lower than the Dead Sea, is huge.
Analysis for Retail Week indicated that Shein will knock Asos out of UK’s top 30 retailer ranking by 2027.
But whether Shein can keep up its relentless growth remains to be seen as it faces increased competition from rivals such as Temu.
Ultimately, subject to any regulatory considerations, it’s up to Shein to decide where and when to press the button on an IPO and for investors to judge its merits.
However, while a Shein flotation might come with a mighty big valuation, the risks might mean it would be a big case of caveat emptor, too.
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