Will Shein go to London for its IPO because of pushback in the US?

The backstory: Fast fashion company Shein, founded in China in 2012 and headquartered in Singapore, has become one of the world's largest online fashion retailers, operating in over 150 countries. It was valued at over US$100 billion last year, more than H&M and Zara's parent company, Inditex, combined. The company's super-low prices and on-trend looks are a big draw for customers. So, Shein has been looking to list publicly in the US, filing for an initial public offering (IPO) in New York last November. But, it's been facing backlash over concerns about its labor practices and supply chain. So, the US Securities and Exchange Commission (SEC) has been under pressure from US lawmakers to block the listing. On top of that, geopolitical tensions between the US and China have weighed on US listings for Chinese companies.

Shein has commented on the pushback, saying that it regularly audits its supply chain and takes steps in all its global markets "to ensure we comply with local laws and regulations."

The development: Now, Shein reportedly could be considering a listing in London instead amid all the scrutiny and pushback it's facing in the US. The UK's Chancellor of the Exchequer, Jeremy Hunt, had talks with Shein's Executive Chairman Donald Tang, who showed interest in a London listing, according to a person familiar with the situation and first reported by Sky News on Tuesday. 

London's stock market has recently seen firms leaving for the US and elsewhere. For example, it took a hit last year when the UK artificial intelligence (AI) company Arm chose the US over the UK for its IPO. And, with London's stock market at a low, the prospect of Shein's multi-billion dollar listing could give it the boost it needs and become London's biggest-ever IPO. But, analysts are saying the move could see similar pushback in the UK, so it's not clear if it will happen. Shein may also consider listing in other markets instead, like Hong Kong or Singapore, according to inside sources.

Key comments: 

"The potential listing of Shein in London would be a huge gain for the stock market," said Joachim Klement, Head of Strategy, Accounting and Sustainability at Liberum Capital. "We have seen many UK businesses move to the US recently, but attracting a fast-growing business in the intersection between technology and retail would be a major win."

"I would be stunned if Shein goes public in London over Hong Kong or NYC," said Ben Harburg, managing partner at Magic Stone Alternative Investment in Beijing, adding that the company may be seeking leverage in its battle to overcome political barriers in the US.

"Firms closely linked to China will find it more challenging to comply with US requirements regarding transparency and how to satisfy Chinese regulators simultaneously," said Gary Ng, a senior economist for Natixis in Hong Kong. "There will be more trials to find alternatives, and the Shein case can serve as a case to test water. … If Hong Kong's sentiment improves eventually, it may still be the best and easiest choice."