China-Linked Shein Faces Uphill Battle For IPO In US Or UK

Some of the major investors in fast-fashion company Shein are losing patience as the company struggles to find a venue for an initial public offering (IPO) and have asked the firm to consider repurchasing their shares, the South China Morning Post reported.

Private trading of shares continues to take place amid concerns over the limited expectation of returns from a London IPO, said one of the Hong Kong newspaper’s sources.

Shein’s backers include Singapore-based Jafco Asia, IDG Capital, Greenwoods Asset Management, Abu Dhabi’s sovereign wealth fund Mubadala Investment Company, HongShan (formerly the Chinese arm of Sequoia Capital), Tiger Global Management and General Atlantic, according to CrunchBase.

The Chinese-founded, Singapore-based firm has been confidentially seeking IPO prospects in the US and London, but both possibilities are problematic against a background of political tensions between China and the West and elections pending in the US and the UK.

China exposure

While Shein’s official headquarters is in Singapore, the majority of its staff and vendors remain in mainland China, including a network of more than 3,000 suppliers in Guangzhou, according to a 2022 Wall Street Journal report, meaning an offshore IPO would be subject to approval by Chinese regulators.

The China Securities Regulatory Commission (CSRC) told Shein earlier this year that it would not recommend a US IPO due to supply chain issues, said a Reuters report in May.

The company, last valued at $66 billion (£52bn), confidentially filed for a US IPO in November.

It has since been rejected numerous times from joining the US National Retail Federation, CNBC reported.

Shein has achieved significant brand recognition in the US and is taking retail market share away from established domestic firms such as Gap, TJ Maxx, Macy’s, Walmart and Amazon, according to UBS data from last year.

Political challenges

But it faces political challenges at a time when elections are looming in November and lawmakers are seeking to force social media app TikTok to divest from its Chinese ownership or face a ban in the country, a decision being challenged by TikTok, parent ByteDance and US creators.

In December the House Committee on Energy and Commerce sent Shein a letter seeking information on its user data collection and its relationship to the Chinese government, saying a potential link to Chinese authorities was a “serious risk for e-commerce, consumer safety and people’s data privacy and security”. The panel sent a similar letter to TikTok.

A London flotation would raise less than in the US, but its corporate structure is facing scrutiny in the UK as well.

The company’s local entity, Shein Distribution UK, breached the law by failing to list a human as its “person with significant control (PSC)” in its filing to Companies House, The Guardian reported in March.

Shein later changed its filing to say it believes “there is no registrable person or registrable relevant legal entity in relation to the company”.