The Chinese fast fashion giant Shein appears to be leaning towards London, rather than New York, for its planned stock market listing. This potential move could be a significant boost for London, especially given the recent trend of major UK and Irish companies shifting their primary stock market listings to New York.
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However, some skepticism surrounds Shein’s choice of London over New York. Critics argue that British regulators and politicians might be less stringent on China compared to their American counterparts, potentially avoiding tough questions about Shein’s supply chain practices. The fact that Jeremy Hunt, the Chancellor, met with Shein’s executive chairman Donald Tang to advocate for London only fuels this speculation.
This situation is reminiscent of the Financial Conduct Authority’s (FCA) consultation in 2017 on modifying UK listing rules to attract Saudi Aramco for a secondary listing. The FCA faced significant criticism from UK asset managers then, and a similar backlash is expected if there is any perception that Shein is receiving special treatment.
Shein’s activities, particularly its supply chain, will likely undergo intense scrutiny if it lists in the UK. Several leading fund managers have expressed reservations about supporting the flotation, and the UK Sustainable Investment and Finance Association (UKSIF) has voiced concerns about London becoming a “listing place of last resort” for companies with poor human rights records.
Chinese fast-fashion giant Shein is planning for an IPO in London.
Valued at $66 billion, Shein will be the second largest IPO in the history of UK stock market.
Shein wanted to do a NY IPO, but anti-China hysteria sabotaged that.
But no worries, US companies like Goldman… pic.twitter.com/CgOz7gEOox
— S.L. Kanthan (@Kanthan2030) June 2, 2024
Shein, aware of these concerns, has been engaging with UK politicians and regulators. Besides meeting the Chancellor, Tang has also met with several frontbench Labour politicians, including Jonathan Reynolds, the Shadow Business Secretary.
Despite perceptions that the UK might be more lenient on Chinese businesses, recent actions suggest otherwise. For instance, Huawei, the telecoms equipment maker, was barred from the UK’s 5G rollout. However, the US remains a more hostile environment for Chinese companies. In May 2020, US Congress passed a law giving the Securities & Exchange Commission (SEC) the authority to delist Chinese companies from US exchanges if American regulators were not allowed to review their audits for three consecutive years. Although China sought an accommodation with this law two years later, the damage to investor sentiment was already done.
A notable example of this hostility was the July 2021 IPO of Didi Global in the US, which was followed by a severe crackdown by Chinese authorities on their tech sector. Didi Global’s shares plummeted, and the company delisted from the New York Stock Exchange the following June. This backdrop makes it understandable why Shein, whose profits more than doubled to over $2 billion in 2023, is cautious about listing in New York.
🌍 Fast fashion giant Shein plans to secretly apply for an IPO in London in the coming days, sources say. While Shein explores all options, including a potential US listing, it may also consider a secondary listing in New York after London. #Shein #IPO #FashionIndustry #London pic.twitter.com/kDSxnC9eLH
— BizNeos✨ (@BizNeos) June 3, 2024
The Biden administration has maintained a tough stance on China, exemplified by the threat to ban TikTok unless its Chinese parent company, ByteDance, sells the business within a year. Additionally, the US has banned imports from Xinjiang due to allegations of forced labor and repression of the Uyghur ethnic group, allegations that China denies. A US listing would likely require Shein to disclose details about its supply chain, particularly concerning Xinjiang cotton, potentially displeasing Beijing.
While London would still demand transparency from Shein, including compliance with the UK’s Modern Slavery Act, UK politicians are pushing for more comprehensive disclosures. Three select committee chairs have even suggested that Shein’s IPO should not proceed while parliament is dissolved.
There are compelling reasons why London might be more attractive for Shein. Europe hosts the world’s two largest listed fashion retailers, Inditex and H&M, which Shein regards as peers. London is home to online fashion retailers Asos and Boohoo, whose business models are similar to Shein’s, suggesting that analysts in London are well-versed in evaluating such companies.
The key question is whether hosting Shein is worth the potential risks to London’s reputation. Other European countries, including France, are also vying for Shein’s listing, despite recently introducing legislation against throwaway fashion. This competition underscores why Chancellor Hunt sees the Shein IPO as a valuable opportunity.
Ultimately, the decision will rest with the UK’s asset managers, who will weigh the potential benefits and risks of Shein’s listing.
Major Points:
- Chinese fast fashion giant Shein is considering London over New York for its stock market listing, which could be a significant boost for London’s financial market.
- There is skepticism that British regulators may be less stringent on China’s business practices compared to their US counterparts, raising concerns about Shein’s supply chain scrutiny.
- Shein’s executive chairman, Donald Tang, has engaged with UK politicians, including Chancellor Jeremy Hunt, to discuss the potential London listing.
- The US has become a hostile environment for Chinese companies due to stringent regulatory requirements and political tensions, making London a more attractive option for Shein.
- Despite the potential benefits, UK asset managers and politicians demand comprehensive transparency from Shein, especially regarding its labor practices and supply chain.
RM Tomi – Reprinted with permission of Whatfinger News