Why Fast Fashion Giant Shein Is Going Public in London Instead of New York

Shein IPO" width="970" height="636" data-caption='Shein is now headquartered in Singapore but still has deep Chinese ties. <span class="media-credit">Xavi Torrent/Getty Images for SHEIN</span>'>

Shein, the Chinese-founded fast-fashion retailer once valued at $100 billion, is looking to file with U.K. regulators to list an initial public offering on the London Stock Exchange, the Financial Times reported earlier this month. Six months ago, Shein filed paperwork with the U.S. SEC to go public in New York. Pressured by political pushback and regulatory scrutiny around companies with Chinese ties, the e-commerce giant has decided to list elsewhere.

While Shein is now headquartered in Singapore, it was originally founded by Chinese billionaire Sky Xu in Nanjing, China in 2008 and is still heavily reliant on Chinese suppliers. Upon news of Shein’s potential New York IPO, U.S. Senator Marco Rubio, a Republican from Florida, reached out to the SEC to urge it to block the listing unless the company was willing to cough up disclosures about forced labor in its supply chain, ties to the Chinese government and other ethics concerns.

“The amount of disclosure asked for was above and beyond, and would put a lot of pressure on any company, let alone foreign ones,” Christopher Mora, head of capital markets at Centri Business Consulting, told Observer.

Since then, Shein has hired Rubio’s former chief to lobby on the company’s behalf in a bid to soften its regulatory risks in the U.S. Shein insists it has “zero tolerance” for the use of forced labor in its supply chain and claims it requires all suppliers to source material from pre-approved origins. However, likely sensing a tough road ahead with U.S. regulators, the company now plans to file a confidential prospectus with the Financial Conduct Authority (FCA), the U.K.’s securities exchange regulator.

A London listing won’t solve Shein’s headaches

Rubio has already written to the U.K. chancellor, the British title for their finance minister, urging them to look deeper into Shein’s China ties. Many in the British business and regulatory community have expressed similar concerns.

Shein’s roots in the world’s second-largest economy is not the only reason for its scrutiny. To ship inventory to the U.S. and U.K., Shein takes advantage of a “de minimis” loophole, created to allow people to bring souvenirs or small-value items into the country without paying import tariffs. Unlike other major retailers, Shein (and Temu) notoriously ship clothes in countless small packages, each less than the threshold to which an import tariff would apply. This controversial approach allows it to skip heavy taxes that domestic retailers don’t get to avoid, making it hard for them to compete.

However, the U.K. may not have the luxury to complain. At a $64 billion valuation currently, Shein’s IPO would be larger than every London Stock Exchange listing since 2018, combined. This is even after Shein’s valuation was cut down from the $90 billion it was targeting when filing to go public in New York. The London Stock Exchange is a lot smaller than its New York counterpart. It has a total size of around $3 trillion, approximately the size of Microsoft, just one of the several trillion-dollar companies listed publicly in the U.S. Amidst ongoing elections, Shein has won the support of the U.K. Labour Party leaders, who are predicted by pollsters to come into power after the election.