Why Shein is aiming for an IPO in London and not New York

Chinese ultra-fast fashion giant Shein could soon list on the London Stock Exchange. An initial public offering (IPO) prospectus is expected to be filed in the next few days, potentially valuing the company at 64 billion US dollars.

According to a source close to the matter at Business of Fashion, Shein is considering a London listing as early as this week. However, the timing and finalisation of the deal remain uncertain. If it goes ahead, Shein's IPO could become one of the largest ever on the London stock exchange, according to Euronews, providing a welcome boost in the face of an exodus of companies to New York.

According to the European news media, the decision to turn to London is explained by Shein's difficulties in the United States. The US Securities and Exchange Commission (SEC) has been dragging its feet over a possible IPO in New York, not least because of concerns about the company's commercial practices and lack of transparency about its activities in China. US Senator Marco Rubio was among those who argued for the SEC to block the IPO, saying that better disclosure of Shein's Chinese operations was needed.

Shein, which is based in Singapore but was founded in China, declined to comment. The company must also obtain approval from the China Securities Regulatory Commission to proceed with its IPO, under new rules tightening controls on Chinese companies wishing to list abroad.

The choice of London comes as the UK heads for general elections on 4th July, with the Labour Party leading in the polls. Donald Tang, executive chairman of Shein, is said to have met a number of Labour politicians, including Jonathan Reynolds, the shadow business minister, according to Sky News.

A breath of fresh air for London Stock Exchange

The potential arrival of Shein would give a breath of fresh air to the London Stock Exchange, which has seen a number of national flagships such as Flutter Entertainment, Arm Holdings and Tui migrate to the New York market in recent months.

However, a number of obstacles remain. The IPO still has to be approved by the UK financial authorities. In addition, the European Union is considering abolishing the tax benefits enjoyed by Shein and other online discounters, such as VAT exemption for low-value imports. This tax break previously allowed Shein, Temu and other players to waive customs duties and controls for any parcel arriving in the EU from abroad with a total value of less than 150 euros. This exemption certainly enabled Shein to offer ultra-competitive prices, but it obviously raises questions about compliance with European regulations.

Accusations of anti-competitive practices and forced labour

Shein is facing accusations of anti-competitive practices from its competitor Temu, which is also no stranger to questionable commercial practices. However, it has accused Shein of encouraging suppliers to sign exclusivity agreements and of increasing the number of requests to withdraw products for copyright infringement.

In addition to the accusations mentioned above, Shein is facing a multitude of complaints of intellectual property infringement. Designers claim that the brand shamelessly appropriates their designs, reproducing them at low prices and selling them en masse.

One emblematic case: H&M. In 2023, the Swedish ready-to-wear brand took Shein to court in Hong Kong for copyright infringement. H&M, that virtuoso of “legal plagiarism” as Trends Tendance magazine calls it, presented overwhelming evidence, highlighting disturbing similarities between its designs and those of Shein.

Zoetop Business, a company affiliated to Shein, is also involved in the proceedings. If the courts uphold the infringements, the company could be forced to withdraw the offending products from the market and pay considerable damages to the injured rights holders. This case illustrates Shein's controversial strategy of drawing heavily on the creations of others to fuel its ultra-fast production cycle. But while Shein is criticised for its use of controversial practices, the model is in no way innovative. On the contrary, it is part of a practice already used by its competitors, that is most of the fast-fashion players.

Beyond the legal aspects, these cases are tarnishing Shein's image and raising questions about its business ethics. The brand, known for its low prices and speed, seems to be based on a fragile model, where innovation is often achieved by copying.

Finally, in the United States, Shein is also suspected of failing to comply with the Uyghur Forced Labour Prevention Act by failing to declare the use of Xinjiang cotton in its products. The Chinese government and several companies are accused of exploiting the Muslim Uyghur minority in this region for forced labour, which has led to the inclusion of certain Chinese companies on a US blacklist.

This article was originally published on FashionUnited.fr. Edited and translated by Simone Preuss.