Shein Could Face New Hiccup in Proposed London Flotation
Vicki M. Young
5 min read
Human rights concerns continue to dog Shein’s initial public offering (IPO) plans.
If Liam Byrne—a British Labour Party politician who leads parliament’s business and trade committee—gets his way, Shein might need to redirect its planned IPO float to Hong Kong or its home base in Singapore. He is calling for the U.K. government to ban imports made in the Xinjiang region in China, according to the Financial Times. That kind of legislative change will result in greater intensive scrutiny in the supply chain, and ultimately on producers such as Shein over alleged use of forced labor.
Xinjiang is the Chinese region with links to the exploitation of Uyghurs and other Muslim ethnic groups via forced labor. The evidence of crimes against humanity are widely documented.
Shein has said that the company doesn’t have suppliers in the Xinjiang region and it told Sourcing Journal previously that its suppliers must adhere to a strict code of conduct “aligned to the International Labour Organization’s core conventions.”
“Shein has a zero-tolerance policy for forced labour,” a company spokesperson said on Friday. “Visibility across our entire supply chain is of the highest importance to us and we are wholly committed to respecting human rights. To comply with applicable laws, we not only require that our contract manufacturers only source materials from approved regions, but we also verify this independently.”
While it still has many naysayers, Shein has tried to redirect the conversation in connection with who it is and what it does. At a Sourcing Journal Summit in 2023, the company’s head of strategic communication Peter Pernot-Day pointedly declared that Shein is not a fashion-fashion brand, but rather “digital-first retailer that does on-demand fashion” using a test-and-learn model. He also spoke about how the company is looking at circularity and has a “vision of making clothing that’s both sustainable and accessible.”
This past July, a story from Reuters noted that Shein said it would invest 250 million euros ($271 million) over five years in the U.K. and Europe. The bulk of that investment was expected to be used to support start-ups that are involved in textile recycling capabilities.
And last month, Shein pushed the feel-good envelope with a brand collaboration with The Smiley? Company, bringing the SmileyWorld? icons together with Shein’s trendy designs in home and accessories. The collection includes hair accessories, tote bags, jewelry, socks, and home decor. Priced between $1 and $20, the items are meant to add some fun and joy to any outfit or living space. “Our collaboration with Shein perfectly aligns with our mission to spread happiness and positivity through fashion,” said Janet Wilson, chief product officer for lifestyle consumer products at SmileyWorld?.
But efforts to recast the public perception of the e-tailer’s operations has Shein facing an uphill battle every step of the way.
Even those connected to the fast-fashion firm end up getting pulled into Shein controversies.
Last month, Italy launched a greenwashing probe into Shein. The Italian antitrust watchdog is probing Infinite Styles Services Co., a Dublin-based operation that manages Shein’s online presence. The probe’s focus is over the possibility of misleading sustainability claims connected with Shein’s clothing.
And in August, David Schwimmer, the leader of the London Stock Exchange Group, found himself pushing back on allegations that the Exchange had lowered its standards to court Shein so it could switch course from the U.S. to the U.K. for its flotation.
Former U.K. Chancelor Jeremy Hunt earlier this year met with Shein chairman David Tang to persuade him to consider a U.K. IPO. Accomplishing that task would have been considered a coup, as well as a message sent across the globe that London is a viable financial center for IPO listings. Following the U.K. general elections in July, Hunt now serves as shadow chancellor.
Shein initially planned to file its IPO in the U.S., but drew scrutiny from Washington lawmakers, who urged the Securities and Exchange Commission to block the firm due to concerns over ties to the Chinese government and alleged use of forced labor in its supply chain. American politicians also have concerns over whether the U.S. de minimis loophole, which exempts from tariffs any shipment less than $800 in value, would allow the e-commerce juggernaut to circumvent scrutiny from the Department of Homeland Security or Customer and Border Protection.
Shein was founded in China, but operates out of headquarters in Singapore. The e-tailer in June confidentially filed for a London IPO valued at about 50 billion pounds ($65.61 billion). It is believed to be awaiting approval from the Chinese securities regulator and the U.K.’s Financial Conduct Authority (FCA). The British advocacy group Stop Uyghur Genocide began a legal campaign in July to halt the London listing that included an outreach to the FCA.
As scrutiny in the U.K. over Shein’s operations rise, much like the concerns in the U.S., the most likely scenario could be a listing on the Hong Kong Stock Exchange. Given Shein’s roots in China, a Hong Kong flotation is not likely to garner the same kind of attention found in the West. That’s mostly because the Western nations are focused on how Shein’s operations result in perceived competitive harm to their own home-based companies.
But how a Hong Kong listing would fare also remains a big question mark. Hong Kong isn’t exactly the go-to choice for companies aiming to go public. Exchanges elsewhere, such as the U.S. or London, are seen as more active, and therefore get to attract more investors.
And there’s not much guidance for Shein if it’s looking to other Chinese firms to see how they have fared post-IPO by way of comparison. The big marketplaces such as Alibaba and JD.com went public on U.S. exchanges, the New York Stock Exchange and the Nasdaq, respectively, in 2014. And while Shein’s Chinese nemesis and rival Temu is based in Boston, Mass., its parent is Shanghai-based PDD Holdings, which trades on the Nasdaq after having completed its IPO in 2018. PDD also owns the online marketplace Pinduoduo.
Shein also was asked for an update on IPO plans and its planned investments in the U.K. and Europe, but the spokesperson declined comment.
