Valued at over £50 billion, Shein's flotation would rank among the most significant – and contentious – to happen in the UK in the last decade.
Shein, the Chinese fast fashion company, is planning to file a confidential IPO prospectus in London as soon as next week.
So what? Valued at over £50 billion, the flotation would rank among the most significant – and contentious – to happen in the UK in the last decade. London’s beleaguered stock market needs an adrenaline jab. But Shein’s track record on ESG, plus the expectation the US regulator will reject a listing in New York, have caused concern among investors and policymakers that
- London has become the bourse of “last resort”;
- asset managers won’t have the appetite; and
- the IPO will become a political football.
The politics. For a listing of this magnitude to take place during an election campaign would be unprecedented – a flotation in the late summer or autumn is far more likely. That said, Jonathan Reynolds, the shadow business secretary, still found time in his diary last month to meet Donald Tang, Shein’s executive chair. Two other shadow ministers also attended, while the chancellor Jeremy Hunt has met Tang on several occasions in the past year.
For Labour, Shein’s IPO presents a particular dilemma. In 2022 an investigation found that clothes shipped by Shein to the US were made with cotton from Xinjiang. Last year, the party committed itself to pursuing legal avenues toward declaring China’s crackdown on Uyghur Muslims in the region a “genocide”. At the same time it needs to appear “pro-growth” and in favour of rejuvenating UK capital markets. The party also faces parliamentary pressure:
- Three select committee chairs have voiced objections to the IPO. They include the Labour MP Liam Byrne, who says parliament needs first to address concerns raised recently by the US Congress of forced labour in Shein’s supply chains.
- Lord Alton of Liverpool, a crossbench peer, described concerns as “extensive”, and cited Shein’s obligation to work “hand in glove with the [Chinese] state when it comes to data and intelligence collection”.
Labour did not respond to requests to clarify its position on genocide in Xinjiang. On the meetings with Tang, a spokesperson said: “We expect the highest regulatory standards and business practices from any company operating in the UK. We believe the best way to ensure this is to have more companies operating from and regulated by UK law.”
Shein says it has a zero-tolerance policy for forced labor and is committed to respecting human rights. It says it requires contract manufacturers to only source cotton from approved regions and that data security and privacy are top priorities.
The money. Peter Hugh Smith, chief executive of CCLA Investment Management, pointed to a wider backlash against “fast fashion” as another reason investors might be reluctant to support the IPO. “We don’t want to become a dumping ground of goods made through labour abuse in our supply chains, because they can’t be sold in other developed markets.”
The regulatory map is changing: earlier this year France pioneered a €5 levy on each fast fashion item sold while the state of New York is seeking to bring in a “Fashion Act”.
But other investors say a Shein flotation is crucial to the future of the exchange. Speaking on the BBC Today programme, Martin Graham, Chairman of Clear Mountain, described Shein as a “genuine growth company” and “a real competitor to global leaders like Amazon”.
The UK regulator has to make sure Shein’s prospectus meets the listing criteria. After that, investors make up their own minds.
The public. Shein’s valuation, if achieved, would put it in the top 20 companies in the FTSE. That means anyone investing in FTSE tracker funds through their pension would be exposed to the company and its risks. Some may baulk at having their savings invested in a company which in 2022 emitted the same amount of CO2 as 1.8 million US homes.
Shein’s success depends on how well it’s swabbed the decks ahead of an investor roadshow. One source, who was approached to advise Shein but declined, said it had undergone a comprehensive review of its supply chain, but admitted it was still “a work in progress”.
Shein’s top team is reportedly keen to get moving with a float this year. No doubt the LSE is keen too. Moving fast is fine – as long as it clears the hurdles.
