Virginia Democrat Lashes Out After Shein IPO Reports Hit Headlines
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Has Shein filed for an initial public offering in the United States? The Chinese e-tail juggernaut, for one, is staying tight-lipped.
“No comment from us,” a spokesperson from the Chinese-founded e-tail juggernaut told Sourcing Journal in response to claims by Bloomberg, the New York Times and others that it had made the long-anticipated move, with Goldman Sachs, JPMorgan Chase and Morgan Stanley serving as lead underwriters. The banks, too, declined to comment.
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But Shein, which is known for its rapid turnover and ultralow prices—$10 dresses and $12 shoes are typical—didn’t outright refute the news, which it did when similar rumors arose in June. Then, Reuters alleged that the Singapore-headquartered firm had confidentially lodged paperwork with the Securities and Exchange Commission for plans to trade on the New York Stock Exchange. The current filing, reports say, is similarly hush-hush, though insiders suggest that the Forever 21 stakeholder could start hawking shares sometime in 2024.
With sales outstripping both H&M and Zara in the United States—but lacking sufficient value to crack the Apparel 50, according to a Brand Finance exec—Shein has been angling for a valuation to the tune of $90 billion, Bloomberg reported earlier this month. In May, however, it was valued closer to $60 billion, according to stakes exchanged on the secondary market, making it twice as valuable as H&M, which has a market capitalization of roughly $26 billion, but half as much as Zara owner Inditex, which tops out at $124 billion, according to InFront Analytics.
Rumors of an IPO have been floating around for years, with its last major attempt in 2022 purportedly scuppered following Russia’s invasion of Ukraine. But Shein has reason to be cautious. Even rumblings of a public offering have drawn regulatory rubbernecking, including from nearly two dozen House of Representatives members who urged the SEC in May to delay registering the new Missguided owner until it can independently certify—“free from state influence”—that Shein doesn’t use forced labor from China’s persecuted Uyghur minority.
“If fast-fashion giant Shein wants to go public, they should have to prove their products are not sourced from forced labor,” Congresswoman Jennifer Wexton, the Virginian Democrat who spearheaded the coalition, wrote on X, formerly known as Twitter, on Tuesday. “I’ve led the bipartisan effort in Congress for greater scrutiny of Shein’s labor practices because American dollars cannot prop up this brutal oppression.”
Though the free-spending lobbyer has insisted that it has “zero tolerance for forced labor,” Republican attorneys general from more than a dozen states, too, have urged the SEC to require a third-party audit of its supply chain before any IPO inches forward.
“Shein’s growth has been built on nefarious business practices,” wrote Austin Knudsen of Montana, Tim Griffin of Arkansas, Alan Wilson of South Carolina, Jonathan Skrmetti of Tennessee and 12 others in a letter to chairperson Gary Gensler dated Aug. 24. “While the advertising puts a bright face on the company, there is a dark side to its rapid growth. Various government, watchdog, and media reports have alleged that its rise has been ‘made possible by forced labor, human rights violations, stealing other designers’ work and the peddling of clothing made with potentially hazardous materials.’”
Neil Saunders, managing director of retail at GlobalData, an analytics company, said that Shein’s “ethical dimension” will come under the klieg lights as part of its filing, though it would have already “thought through all of this” before handing in its paperwork, meaning that it likely has answers to most of the questions that might crop up, including from Congress.
And the pros could outweigh the cons, as well, he noted.
“An IPO is part of the formalization of Shein and will bring the company into the mainstream market in terms of raising capital,” Saunders told Sourcing Journal. “Arguably, this is helpful to Shein as it will allow the business to expand more rapidly and undertake more expansion following a period of already rapid growth.”
While going public would give investors and members of the public “some degree of accountability” over the Temu rival, said Elizabeth L. Cline, author and professor of fashion policy at Columbia University, there is “also grief” for those who care about human rights and the environment.
“It really is just formalizing the company’s huge success and our society’s inability to control it,” she said. “The sad fact is that as long as fast fashion is making people a lot of money—now including investors and American banks—it’s going to remain dominant.”
Cline said that regulators need to “majorly step up” and ensure that companies like Shein—which has resisted the label of fast fashion, preferring instead to use “digital first” or “on-demand” to describe its business model—are not able to capture “this kind of” market share through “wastefulness and exploitation.”
While the Romwe parent has tried to counter its negative image through waste-whittling partnerships with the likes of The Or Foundation and Queen of Raw, a Supplier Community Empowerment Programme for factories and workers, and its EvoluShein by Design initiative to embed circularity principles and so-called preferred fibers into its supply chain, Cline isn’t convinced.
“I hope Shein’s rise has served as a wake-up call to Congress that they’ve been asleep at the wheel on the problem of fast fashion,” she said.
One thing’s for sure, Shein isn‘t slowing down. Besides getting in bed with former rivals, such as the aforementioned Forever 21 and Missguided, it’s growing its manufacturing footprint beyond China to engulf Brazil, Turkey and possibly Mexico. With its embrace of the third-party marketplace, à la Alibaba and Amazon, it’s also no longer in the business of selling only fashion. The Alice McCall and Christian Siriano collaborator has also inked deals to sell mid-to-high-end brands like Paul Smith and Skechers on its platform.
“One of the angles Shein seems to be pursuing is diversification,” Saunders said. “It is moving beyond being a site for cheap fashion to offering a wider range of products and price points. This is facilitated by the move into retail via Forever 21 and Misguided. As part of this, the manufacturing and sourcing base is likely to become more diversified and globalized.”
Still, he noted that because Shein remains a huge fashion player, it cannot help but have an impact on the environment “by its very nature.”
“Shein is no different in this regard to any other major corporation, so it can’t be judged too harshly,” Saunders said. “But there is an inherent conflict between driving for constant growth and being totally focused on sustainability. This will be something of a tightrope to walk in any IPO as Shein will need to focus on the returns it can make investors and its environmental credentials.”
