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Online fast-fashion group Shein has a back-up plan to seek a listing in Hong Kong, as its ambition for an initial public offering in London encounters rising scrutiny in both the UK and China.
Singapore-headquartered Shein is keeping alive a fallback option to list in Hong Kong despite filing confidential paperwork earlier this month with the UK’s financial regulator as a prelude to a London IPO, according to five people familiar with the situation.
While a London flotation could fetch the China-founded ecommerce group a £50bn market valuation — marking a blockbuster success for the UK’s otherwise lacklustre capital markets — Shein is also facing pushback over the plan. This ranges from activists who have set up a legal challenge, to some fund managers warning that a UK listing could “struggle” to gain investor support.
Its fallback option of Hong Kong underscores the tricky geopolitics Shein is trying to navigate as it treads a line between an increasingly assertive Beijing and western corporate governance standards.
Shein’s plans remain in flux and there is no certainty that it will end up listing in London even if that is the company’s current focus, caution the people familiar with the matter. The group’s Chinese ties have already disrupted previous plans to go public in New York, an ambition Shein ditched after a barrage of criticism over issues including its supply chain and alleged links to forced labour in China’s Xinjiang region, which Shein denies.
The company’s founder, Sky Xu, is pushing for an IPO to take place before the end of the year, under pressure from investors and as concerns mount that the company’s explosive growth will start to decelerate in key markets, according to several people close to the company. They added that trading on a foreign venue would help Shein distance itself from China, where it was founded in 2008 and still bases the majority of its staff and manufacturing.
However, Shein still has not received a sign-off from the Chinese Securities Regulatory Commission for a London listing. The company would also need prior approval from other Chinese authorities that are scrutinising its offshore business model, according to a person familiar with the matter. It is not clear if this assent has yet been forthcoming.
“If CSRC didn’t approve of London, they would likely have signalled that to Shein. So the fact they went forward in London means it’s unlikely CSRC has a preference for Hong Kong over London,” said Ming Liao, founder of Prospect Avenue Capital, a Beijing-based venture capital fund.
And he added: “Shein has a heavy reliance on China’s agile supply chain and any IPO due diligence might disclose some related information, which is one of Beijing’s concerns.”
Chinese regulators would typically wait for the UK regulator to approve such a listing, according to an adviser who helps Chinese companies abroad but who is not working with Shein. The UK watchdog, the Financial Conduct Authority, has not made any public statements about Shein.
The company could also target a dual listing in Hong Kong, according to two of the people familiar with its plans, one of whom said a secondary listing was also an option. It has also largely given up on plans for such a presence in New York after difficulties with US regulators, one of the people said.
While Hong Kong is a back-up option, its capital markets have faced their own challenges amid subdued trading and fewer new listings. Xu is also less keen and would view it as an “admission of failure”, according to one person close to the company. The whole point of seeking an overseas IPO in the first place was to be listed in 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 the UK prepares to elect a new parliament next week.
“If in this process the British government makes some political statements that make China look bad, for example on Taiwan issues, CSRC would probably retaliate asking Shein to cancel the IPO,” the adviser who helps Chinese companies said.
One former senior Shein employee said: “An overseas plus a HK listing would be perfect: [it would keep] Shein’s ties with China and an image of a global firm, regarding 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
