Ultra-fast-fashion giant Shein’s pursuit of a public listing has encountered significant obstacles, transforming its IPO journey into a protracted and contentious saga. Initially targeting a New York listing in late 2023, the company pivoted to London amid escalating US-China tensions and scrutiny of its business practices. However, the London Stock Exchange has presented its own set of challenges.
Shein’s meteoric rise, fueled by its disruptive “test-and-learn” manufacturing model and ultra-low prices, has generated an estimated $50 billion in revenue this year. This model enables the company to rapidly produce vast quantities of new styles in small batches. However, this success has been accompanied by a wave of criticism concerning labour practices, product safety, copyright infringement, and environmental impact.
Four formal letters of objection have been submitted to the UK’s Financial Conduct Authority (FCA) in an attempt to block Shein’s London IPO. These objections, revealed through a Freedom of Information request, highlight a range of concerns:
- Forced Labor Allegations: Stop Uyghur Genocide presented a dossier to the FCA alleging links between Shein’s supply chain and forced labour in Xinjiang, China. While Shein denies these allegations and emphasises its zero-tolerance policy towards forced labour, the claims have added to the scrutiny.
- Transparency and Labor Standards: Corporate accountability group Eko, along with the British Fashion Council, has raised concerns about Shein’s lack of transparency, potential greenwashing, and broader labour standard issues.
- Regulatory Scrutiny: These challenges have reportedly led the FCA to conduct a more extensive review of Shein’s IPO application.
Beyond the FCA’s review, the UK’s Independent Anti-Slavery Commissioner has also voiced concerns to the government regarding Shein’s alleged human rights failings. Furthermore, the company requires approval from China’s securities regulator before proceeding with any public listing.
Industry analysts suggest that these combined hurdles make a near-term IPO unlikely, if not impossible. The situation is further complicated by increasing competition from rivals like Temu and Amazon, as well as potential regulatory changes in Europe and the US that could impact Shein’s business model. These include potential changes to import-duty exemptions and new environmental regulations.
Despite the challenges, Shein has launched a charm offensive, engaging with politicians and investors while emphasising its “on-demand” fashion model and pledging investments in sustainability and design initiatives. The company has also formed an external advisory board to address environmental, social, and governance (ESG) concerns.
The UK government’s desire to revitalize the London Stock Exchange adds another layer of complexity. A successful Shein IPO could be a significant boost for the LSE, potentially outweighing some concerns about the company’s practices. However, the ethical and financial risks associated with Shein remain a significant consideration for potential investors and regulators alike.
