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Online fast-fashion group Shein has an alternative plan to list in Hong Kong as its ambition to hold an IPO in London faces increasing criticism in the UK and China.
Singapore-headquartered Shein is keeping open an option to list in Hong Kong despite filing confidential documents with Britain’s financial regulator earlier this month in preparation for an initial public offering in London, five people with knowledge of the matter said.
While a London IPO could give the Chinese-founded e-commerce group a market value of £50 billion – a major success for Britain’s otherwise lackluster capital markets – Shein is also facing opposition to the plan, from activists who have launched a legal challenge to some fund managers who warn that a British listing could “struggle” to gain investor support.
The choice of Hong Kong as an alternative underlines the difficult geopolitical situation Shein finds itself in, as it walks the line between an increasingly assertive Beijing and Western corporate governance norms.
Shein’s plans remain in flux and there is no certainty it will ultimately list in London, even though that is the company’s current focus, the people familiar with the matter warned. The group’s Chinese ties have disrupted previous plans to go public in New York, an ambition the fast-fashion group shelved after a barrage of criticism over issues including its supply chain and alleged ties to forced labor in China region of Xinjiang, which Shein denies.
The company’s founder, Sky Xu, is pushing for an IPO before the end of the year, amid pressure from investors and amid growing concerns that the company’s explosive growth in key markets will slow, according to several people close to the exchange . company. They added that trading in an overseas location would help Shein distance itself from China, where it was founded in 2008 and still houses most of its workforce and production.
However, Shein has still not received approval from China’s Securities Regulatory Commission for a London stock exchange listing. The company would also need prior approval from other Chinese authorities scrutinizing its offshore business model, a person familiar with the matter said. It is not clear whether this agreement has already taken place.
“If CSRC didn’t approve London, they probably would have let Shein know. So the fact that they went ahead with London means it’s unlikely that CSRC would prefer Hong Kong over London,” said Ming Liao, founder of Prospect Avenue Capital, a venture capital fund based in Beijing.
He added: “Shein is heavily dependent on China’s flexible supply chain and any due diligence investigation into an IPO could reveal related information, which is one of Beijing’s concerns.”
Chinese regulators normally wait for the British regulator to approve such a listing, said an adviser who helps Chinese companies abroad but does not work with Shein. The British watchdog, the Financial Conduct Authority, has made no public statements about Shein.
The company could also pursue a dual listing in Hong Kong, two of the people familiar with the plans said, one of whom added that a secondary listing was also an option. It has also largely abandoned plans for such a presence in New York after run-ins with U.S. regulators, one of the people said.
While Hong Kong is a backup option, capital markets have had their own challenges amid subdued trading and fewer new listings. Xu is also less enthusiastic and would see it as an “admission of failure,” a person close to the company said. The whole point of seeking an overseas IPO in the first place was to get listed on a Western market that has no ties to China in an effort to distance Shein from Beijing, another person added.
However, Shein’s foreign plans could fall prey to international geopolitics as Britain prepares to elect a new parliament next week.
“If the British government makes political statements in this process that portray China in a bad light, for example on issues surrounding Taiwan, CSRC is likely to hit back and ask Shein to cancel the IPO,” said the consultant who helps Chinese companies.
A former senior Shein employee said: “An overseas listing plus a Hong Kong listing would be perfect: [it would keep] Shein’s ties with China and its image as a global company, in terms of business and user base.”
A representative for Shein declined to comment.
Additional reporting by Ryan McMorrow and Tina Hu in Beijing, Kaye Wiggins in Hong Kong and Laura Onita in London