Shein’s Potential London IPO – Why You Should Care

David
Swartz,
senior
equity
analyst
at
Morningstar,
believes
that
the
New
York
Stock
Exchange
would
want
Shein
to
list
because
of
the
sheer
size
of
the
company,
with
estimates
that
Shein
is
worth
$66
billion,
according
to
Pitchbook
Data
as
at
May
2023¹.
 

However,
geopolitical
tensions
have
been
just
too
hard
to
overcome. 

“There
is
just
a
huge
amount
of
animosity
between
the
US
and
China
recently
on
trade,”
he
says.

Shein’s
ESG
Risks
on
Labour
and
Governance

Swartz
also
points
to
controversy
around
Shein’s
use
of
cotton
from
the
Xinjiang
region
of
China,
where
the
Chinese
government
are
reportedly
forcing
the
Muslim
minority
Uyghur
population
to
work
in
labour
camps.

“There’s
also
issues
with
the
way
that
Shein
gets
around
tariffs.
So,
in
the
US
shipments
below
$800
are
not
subject
to
them.
And
so,
this
allows
Shein
to
get
around
the
rule
because
they
ship
directly
to
the
American
consumer,”
he
adds.

“But
Shein
would
be
a
large
IPO
in
the
apparel
industry.
There
aren’t
that
many
apparel
companies
in
the
world
with
valuations
that
large.
Yet
Shein,
is
really
stuck
in
the
middle
of
greater
geopolitical
forces.” 

Dan
Coatsworth,
investment
analyst
at
AJ
Bell,
picks
up
on
the
ESG
risks
associated
with
the
float. 

“The
key
negative
is
that
Shein
comes
with
more
baggage
than
a
celebrity
takes
on
holiday.
Questions
continue
to
be
asked
about
its
corporate
governance
standards,
working
conditions,
supply
chain
and
accusations
of
intellectual
property
theft.

The
float
is
likely
to
provoke
mixed
feelings
on
the
exchange,
and
probably
in
the
UK
government,
which
has
recently
tightened
up
rules
on
foreign
companies
in
sensitive
states
like
China
listing
in
London.
China
telecoms
firm
Huawei
has
been
banned
from
the
UK’s
5G
network,
for
example.

“Shein
wants
to
be
seen
as
a
global
player
and
not
simply
a
Chinese
firm
flogging
cheap
togs
overseas.
It
will
have
to
do
things
the
right
way
and
become
a
good
corporate
citizen
to
support
this
ambition,
so
it’s
on
a
learning
journey.
London
Stock
Exchange
will
publicly
welcome
the
company
with
open
arms
but
behind
closed
doors
it
will
no
doubt
be
hoping
Shein
has
no
skeletons
in
its
closet,”
Coatsworth
adds.

Susannah
Streeter,
head
of
money
and
markets,
Hargreaves
Lansdown,
agrees
on
the
ethical
concerns
the
IPO
would
trigger:

“While
this
would
be
a
boost
for
the
City,
it
is
likely
to
present
deep
ethical
issues
for
investors
to
navigate.
Shein
has
come
under
significant
criticism
for
the
huge
volumes
of
cheap
clothes
it
produces,
the
lack
of
transparency
in
its
supply
chain
and
its
appropriation
of
other
designers’
work.
Given
these
concerns,
there
may
well
be
wariness
among
investors
who
put
ESG
in
their
priority
list,
if
the
firm
does
list
in
London.”

LSE
Needs
a
Win
Against
New
York 

A
flotation
of
Shein’s
size
would
be
welcome
because
it
has
lost
ground
to
its
larger
and
more
liquid
counterparts,
the
NYSE
and
the
Nasdaq. 

London
was
rejected
by
Cambridge-based
chip
designer
Arm
Holdings,
which
sought
a
higher
valuation
on
the
Nasdaq
–
and
has
since
prospered,

with
shares
up
nearly
60%
so
far
this
year.

Betting
firm
Flutter
has
just
ditched
its
primary
London
listing
in
favour
of
New
York,
and
the
cyber
security
giant
Darktrace
which
floated
in
London
2021,
has
accepted
a
US
private
equity
bid.

BHP’s
takeover
plans
for
Anglo
American
could
see
the
London-listed
miner
leave
the
FTSE
100,
although
the
demerger
could
see
diamond
maker
De
Beers
floated
on
the
LSE. 

Looking
at
London’s
recent
high-profile
IPOs,
investors
may
be
cautious:
Deliveroo
(ROO)
has
a
long
way
to
go
before
it
reaches
its
lofty
IPO
price,
and
Darktrace
shares
were
volatile
before
the
company
was
bought.
Currency
and
transfer
specialist
Wise
(WISE)
was
London’s
biggest
tech
float
in
2021,
but
shares
are
still
just
below
their
float
price
of
800p.
The
stock
is
worth
£8
billion
at
current
prices,
so
Shein’s
value
around
£50
billion
would
dwarf
that.

“Obviously
it
is
quite
good
for
the
London
market
regardless
of
what
you
think
about
fast
fashion,
it
is
a
giant
company,
and
it
could
be
one
of
the
largest
stocks
if
it’s
on
the
FTSE
100,”
Kathleen
Brooks,
research
director
at
XTB
UK
says.
 

“We
have
had
some
other
delistings,
so
it
is
always
good
to
get
somebody
on
and
to
have
that
flow
coming
in.
But
we
cannot
forget
that
they
are
having
quite
some
outflow.”
 

For
Chris
Beauchamp,
chief
market
analyst
UK
and
head
of
market
analysis
at
IG
Group,
the
news
shows
that
Britain
is
still
open
to
business,
and
that
companies
can
get
liquidity
outside
of
the
island
of
Manhattan.
 

“It
certainly
helps
to
diversify
the
index.
We
talk
about
the
FTSE
100
as
being
banks
and
miners.
So,
it
would
just
help
to
diversify
the
index
a
bit
more
and
to
get
something
of
what
I
might
call
the
new
economy
into
it
rather
than
an
index
mostly
dominated
by
old
fashioned
stocks.”
 

“It
adds
a
bit
more
and
certainly
a
bit
more
glamour
to
the
London
stock
market.”
 

Shein
Leadership
Keeping
a
Low
Profile

XTB’s
Brooks
points
out
that
Shein
is
following
a
trend
of
larger
Chinese
companies
listing
outside
of
China,
due
to
uncertainty
over
the
Asian
giant’s
political
and
economic
direction.  

She
also
notes
that
the
fast
fashion
brand’s
leadership
are
taking
a
more
reserved
approach,
moving
away
from
becoming
larger-than-life
figures
like
Jack
Ma,
cofounder
of
the
Alibaba
Group,
who
was
subsequently
caught
up
in
China’s
regulatory
crackdown
on
technology
giants
in
2020
and
2021
and
disappeared
for
a
month.

The
flotation
of
Ant
Group,
spun
out
of
Alibaba,
was
pulled
after
the
Chinese
government
intervened in
2020.

“They
are
not
commenting,
we
have
not
seen
any
big
interviews.
There
does
not
seem
to
be
any
one
person
behind
it,
and
I
think
that
is
to
avoid
scrutiny
from
Beijing.” 

Although
tensions
between
the
US
and
China
have
impacted
Shein’s
plans
to
list
in
New
York,
Brooks
believes
it
will
not
be
affected
by
President
Joe
Biden’s
recent
tariffs
package
against
China.

“US
officials
now
seem
very
focused
on
technology
and
EVs
not
clothing.
Now
is
probably
a
good
time
for
them
to
list
before
they
could
be
targeted,”
she
says. 

¹
PitchBook
valuation
for
Shein
is
at
May
2023
when
two
large
firms
last
invented;
one
was
Abu
Dhabi’s
sovereign
wealth
fund
and
the
other
was
famed
VC
firm
Sequoia
Capital.
PitchBook
rates
the
chance
of
Shein’s
IPO
success
as
98%.

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