Chinese Fast Fashion Giant Shein Considers London for Stock Market Listing
In a surprising move, Chinese fast fashion company Shein is reportedly looking to list on the London Stock Exchange, rather than in New York. This decision has sparked excitement among London’s financial community, especially after several UK and Irish companies shifted their primary listings to the US last year.
However, some are skeptical about Shein’s decision, speculating that it may be due to London being less strict on Chinese companies than New York. It has been suggested that British regulators and politicians are less likely to ask difficult questions about the company’s supply chain. Additionally, it has been reported that Shein’s executive chairman, Donald Tang, has met with UK politicians, including the chancellor, to advocate for the company’s listing in London.
There are concerns that listing in London could result in Shein receiving special treatment, as seen in the past with the UK’s consultation on listing rules to attract state-controlled oil giant Saudi Aramco. However, Shein has shown a willingness to address these concerns. As reported by Sky’s Mark Kleinman, the company has met with both the chancellor and frontbench Labour politicians to discuss potential concerns.
Despite the perception that the UK may be a “soft touch” for Chinese businesses, the reality is quite different. The UK’s recent ban on Huawei’s involvement in the country’s 5G roll-out is evidence of the government’s tough stance on Chinese companies. This suggests that Shein would still be subject to heavy scrutiny if it were to list in London.
Nevertheless, the UK may still be a more hospitable environment for Shein than New York, given the US’s increasingly hostile attitude towards Chinese companies. In May 2020, US Congress passed a law allowing the Securities & Exchange Commission (SEC) to delist Chinese companies from US exchanges if American regulators were not allowed to review their audits for three years. China eventually sought an accommodation with the law, but the damage had already been done. In July 2021, Chinese ride-hailing app Didi Global’s IPO in New York was met with a crackdown on the country’s tech sector, resulting in a significant drop in the company’s share price.
With this context in mind, it is understandable why Shein may be hesitant to list in New York. The company’s annual profits in 2023 exceeded $2 billion, making it a lucrative target for any stock exchange. However, the Biden administration’s stance on China, as evidenced by the recent threat to ban TikTok unless it is sold within a year, may make listing in New York a risky move for Shein.
In contrast, London offers a more attractive listing environment for Shein. Europe is home to the world’s two largest listed fashion retailers, Inditex and H&M, and the UK is Europe’s largest stock market, making it a natural destination for Shein’s listing. Furthermore, London is also home to two online fashion retailers, Asos and Boohoo, whose business models are similar to Shein’s. This means that the analyst community in London is familiar with companies like Shein, making it a more comfortable listing destination.
However, the question remains whether London is willing to take the risk of hosting Shein, given the ongoing concerns about the company’s business practices. Other European countries, such as France, have also expressed interest in hosting Shein’s listing. It will ultimately be up to UK asset managers to decide if the potential rewards of hosting Shein are worth the risks.
