The Chinese fast fashion giant continues to face major scrutiny in the United States. It now is expected to (try) to go public across the pond.
It’s been awhile since we checked in on what’s happening with SHEIN, the retail behemoth known for its ultra cheap, allegedly forced labor-made and possibly toxic apparel, which it delivers directly to consumers via exploitation of a U.S. trade loophole.
As it turns out, things have been pretty busy for SHEIN! Up on Capitol Hill, Sen. Marco Rubio (R-Fla.) is leading fresh calls to investigate the brand for its use of forced labor, joining bipartisan Members of Congress who previously urged an investigation into the company’s practices. Meanwhile, SHEIN received the Saturday Night Live treatment, spoofed in a skit featuring guest host Jake Gyllenhaal:
This criticism hasn’t seemed to affect SHEIN sales at all. It continues to rake in the dough, bringing in more than $2 billion in profits in 2023. But the scrutiny has made it harder for SHEIN to achieve its ultimate goal of going public.
The Wall Street Journal reported last week that SHEIN’s “hopes for a New York initial public offering have faded,” as “Washington lawmakers are suspicious of Shein’s China ties and have demanded more details on its supply chain.” At the same time, SHEIN is also facing the ire of China’s government, which is complicating the company’s attempts to show U.S. officials that it operates independently and without Chinese government interference.
Not that SHEIN isn’t trying. SHEIN filed for an IPO confidentially with the Securities and Exchange Commission in November, according to the WSJ. That allows it to keep its business and financial data private, but it also creates another hurdle:
“The SEC told Shein its application wouldn’t be accepted unless the company submitted a public filing, people with knowledge of the matter said—a move that securities lawyers say is unusual. Shein still hasn’t done so.
“A public filing wouldn’t guarantee Shein SEC approval, but could set off scrutiny from lawmakers, government officials and the media over sensitive issues, securities lawyers say.
“Shein filed the same paperwork with China’s stock regulator, something companies with substantial operations in China are required to do when they seek to go public.”
With the road for a U.S. IPO covered in landmines, it appears SHEIN is now heading across the Atlantic for its hopes of going public.
Sky News reported Monday that SHEIN is “on the verge of taking a huge stride towards a London flotation that would value it at about £50bn and rank among the most significant – and contentious – deals in the UK’s capital markets for years.” The filing is likely to happen this month, potentially as early as this week, Sky reports.
SHEIN is likely to face an easier time with London Stock Exchange regulators than it did in the United States. According to Sky, SHEIN executive Donald Tang already has met with Chancellor of the Exchequer Jeremy Hunt and other exchange officials, along with Labour party politicians. And as CNN noted on Monday, the London exchange is “desperate for IPOs,” as several big corporations have left it in recent years. SHEIN may provide a shot in the arm.
While SHEIN has more public support in London than it does in the United States, it still is facing potential opposition. Senior politicians in the United Kingdom already have called for scrutiny of the deal, with conservative lawmaker Alicia Kearns remarking, “With Shein’s prices so low the London Stock Exchange needs to ask itself, whose suffering is subsiding those prices?” and Labour member Sarah Champion saying, “Transparency in supply chains is vital and something all governments should be demanding. Serious concerns have been raised about the use of modern slavery by Shein which need investigating.”
“It is not ideal that Shein’s floating in London could get the green light without parliamentary scrutiny,” said Liam Byrne, a Labour party member who chairs the business select committee in Parliament. “Parliament needs to satisfy itself that the concerns raised recently by the US Congress of forced labour in Shein’s supply chains have been thoroughly addressed.”
So, will SHEIN get its IPO? We’ll keep monitoring the potential SHEIN IPO, both here in the United States and in the UK. But regardless, the U.S. Congress would be wise to pass the Import Security and Fairness Act, which would close the “de minimis” loophole that has allowed SHEIN and rival Temu to ship its goods to the U.S. tariff-free.