London Calling? Shein Considers Change of Course for IPO
When the going gets tough, the tough get going.
Shein wants to do an initial public offering (IPO) in the U.S., but whether the U.S. Securities and Exchange Commission (SEC) will approve its IPO remains to be seen. With U.S. lawmakers continuing their efforts to raise roadblocks, Shein’s idea of how to “get going” could see it move its IPO to a different foreign exchange.
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That’s not necessarily a bad idea, although it does present a tough decision for the Chinese fast-fashion e-tailer. That’s because the sooner the e-tailer can get out of the IPO gate, the faster Shein can provide an exit strategy for investors.
The word is that Shein is reviewing its options for listing shares and London has come up as a viable alternative, according to a Bloomberg report. Other IPO venues could include Hong Kong and Singapore, where the Chinese firm is now headquartered. A Sky News report indicated that U.K. Chancelor Jeremy Hunt has already met with Shein chairman Donald Tang in a bid to persuade him to float the shares in London instead of New York.
While Shein’s valuation has decreased over the years for one reason or another, one negative about floating its shares elsewhere is that the U.S. equity markets is still relatively strong in comparison to overseas exchanges. That means that the U.S. could still be its best bet at getting a higher valuation.
The most recent fashion IPO for a Chinese-owned firm was on Jan. 31 when Amer Sports, the Arc’teryx apparel brand owner, raised $1.37 billion. Amer Sports sold 105 million shares at $13 a share, below its targeted range of $16 to $18, but nearly one month later, shares are trading in the $16.05 range, giving it a market capitalization of $8.12 billion.
Shein is still in working on its U.S. application, and a decision to go elsewhere would entail further delay and having to start the process anew.
A Shein representative declined comment.
Shein scrapped plans to file an IPO in the wake of Russia’s attack on Ukraine in February 2022, which resulted in chaos in the financial markets. At the time, TikTok’s most-buzzed-about brand had planned to publicly list shares later in 2022 in New York.
Nearly one year later, the Christian Siriano collaborator eyed a capital raise since the IPO plan was temporarily off the table. But while a 2022 funding round valued Shein at more than $100 billion, that valuation was believed to have dropped to $64 billion when the fast-fashion firm in March 22023 raised $2 billion from an investor group led by private equity firm General Atlantic. By January 2024, that valuation was believed to have fallen further to the range of $45 billion to $55 billion, mostly because investors were concerned about regulatory scrutiny ahead of a planned U.S. listing.
Shein first caught the ire of nearly two dozen members of the U.S. House of Representatives—led by Jennifer Wexton, a Democrat from Virginia, and John Rose, a Republican from Tennessee—who urged the SEC last spring to hold off on registering the e-tail Goliath until there is independent certification that it doesn’t use forced labor from China’s persecuted Uyghur minority. In June 2023, a U.S. congressional report on preliminary findings regarding forced labor in the supply chain detailed human-rights risks at Shein. Shein has routinely said that it has “zero tolerance” for forced labor. The Chinese firm also has been accused by the Shut Down Shein coalition of exploiting U.S. customs laws to avoid paying billions in tariffs.
Most recently, U.S. Senator Marco Rubio, R-FL, earlier this month wrote a letter to Gary Gensler, SEC commissioner, requesting that American securities watchdog require extraordinary disclosures from Shein—or block the IPO proceedings altogether. A longtime foe of the Chinese firm, Rubio has in the past slammed Shein’s use of the de minimis loophole, a backdoor policy exception which allows the e-commerce juggernaut to import packages worth less than $800 without scrutiny from the Department of Homeland Security or Customs and Border Protection. De minimis was in the news again this past weekend as more lawmakers lobbied President Biden to step in.
Known for its $10 dresses and $12 shoes, Shein has been sued in a federal district court in Los Angeles alleging that its egregious copyright infringement constituted racketeering under the federal Racketeer Influenced and Corrupt Organizations Act. It is also on the receiving end of a lawsuit from fast fashion competitor H&M over copyright infringement with the Hong Kong High Court, as well as a legal battle with Chinese competitor Temu over trademark and copyright infringement and anticompetitive conduct. Competition between Shein and Temu have been intense as each jockeys for U.S. market share, particularly as Temu reportedly is considering opening its marketplace platform to U.S. and European sellers. Moreover, a survey from Jefferies indicates that U.S. consumers plan to spend more this year on Temu and less on Shein. And Shein was again in the legal hot seat last month when Uniqlo Co. Ltd., part of Fast Retailing Co. Ltd., filed a lawsuit in December in a Tokyo District Court alleging infringement of a handbag.
