Shein pivots to HK from London
Online fast fashion company Shein is considering listing in Hong Kong after its London IPO plan stalled. According to people with knowledge of the matter, Shein’s planned IPO in London has not yet received approval from the Chinese regulators although the deal has been cleared by the UK’s financial regulator, the Financial Conduct Authority.
The company hopes to list as early as this year, but the timing will depend on approval from the China Securities Regulatory Commission, said the people.
Hong Kong is the third listing venue that Shein has explored, having first confidentially filed for a US IPO in November 2023.
The US listing plan met strong political opposition over Shein’s opaque labour practices and operations. US lawmakers called on the Securities and Exchange Commission to block the IPO until the company can prove that it does not use forced Uyghur labour in its supply chain. Shein has denied the allegations.
In June 2024, Shein filed for a London listing instead. Again, similar criticism continued and several political bodies urged the FCA to block Shein’s IPO application.
Awaiting approval
A Hong Kong listing may face less political opposition, but it remains to be seen how quickly the company can secure the CSRC’s approval.
Founded in 2008 in Nanjing by Chris Xu, Shein moved its headquarters to Singapore in 2022 and registered a key business unit there after reportedly deregistering itself in China. The move was seen as a way to distance itself from China given the political tensions between China and the US.
Even so, China accounts for such a significant part of Shein's production, and the CSRC's rules are so broad that market participants believe CSRC approval is required for it to list overseas.
Bankers away from the deal have said Shein is not in a sensitive industry so its approval should not take too long. However, it is another matter as to how willing the CSRC will be to give approval to a company which moved its registration to Singapore from China and keeps stressing it is a non-Chinese company, according to one of the bankers.
Shein works with suppliers in China but it does not generate revenue from the country. The management calls Shein a global company and insiders have said a listing in the West would better match its position as a global company.
Goldman Sachs, JP Morgan and Morgan Stanley are leading the transaction.
Improved sentiment
Shein is considering a Hong Kong listing on the back of improved sentiment in the Hong Kong IPO market. Shenzhen-listed Contemporary Amperex Technology, the world’s largest maker of electric batteries, raised HK$41bn (US$5.2bn) from a Hong Kong float this month – the world’s largest listing this year.
"Hong Kong is materially more accommodating, though London has been making steps in this area. When you look at the volume in Hong Kong and how strong institutional and retail demand is it feels like a venue that's having a bit of a comeback," said a London-based banker away from the deal.
By contrast, the London Stock Exchange has so far this year been limited to the £98m IPO of an accounting firm on its junior AIM segment and the ongoing listing of a new company that will buy and hold cobalt. Even so, bankers were not counting on a fillip from the controversial Shein listing.
"Not many people truly believed it was ever coming to London, so it isn’t that much of a loss in that context," said another UK banker. "Even banks didn’t really know what was going on – the client left them in the dark as to where this was going."
However, Shein will need to cut its IPO valuation target after both the US, its most important market, and the European Union tightened their grip over duty exemptions on parcels under a certain value, which is likely to impact the company's profits.
The US government closed the loophole of the de minimis exemption, which used to allow ecommerce packages from China worth less than US$800 to enter the country without paying custom duties. The parcels now are subject to a minimum tariff of 30%.
Parcels under €150 in value are currently exempt from duty in the EU, but the trading bloc is proposing to introduce a flat fee of €2 on those packages instead.
Shein was valued at US$66bn in a private financing round in May 2023.
To reduce its exposure to US-China trade tensions and high tariffs on Chinese goods, Shein is reportedly leasing a huge warehouse near Ho Chi Minh City in Vietnam. The company has also expanded its supply chains into other countries such as Brazil and Turkey.
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