Online fast-fashion group Shein has a back-up plan to pursue a listing in Hong Kong, as its ambition for an initial public offering (IPO) in London faces increasing scrutiny in both the UK and China.
Despite filing confidential paperwork with the UK’s financial regulator earlier this month as a precursor to a London IPO, Shein, headquartered in Singapore, is considering Hong Kong as a fallback option, according to five sources familiar with the situation.
A London listing could potentially value the China-founded e-commerce group at £50 billion, representing a significant success for the UK’s capital markets. However, Shein is encountering opposition from various quarters, including activists launching legal challenges and fund managers who doubt that a UK listing will attract sufficient investor support.
The option of a Hong Kong listing highlights the complex geopolitical landscape Shein is navigating, balancing between a more assertive Beijing and Western corporate governance standards.
Sources familiar with the matter caution that Shein’s plans are still in flux, and there is no guarantee that it will ultimately list in London, even though that remains its current focus. The company’s Chinese connections have previously disrupted plans to go public in New York, an ambition abandoned amid criticism over issues such as its supply chain and alleged ties to forced labour in China’s Xinjiang region, which Shein denies.
Shein’s founder, Sky Xu, is pushing for an IPO by the end of the year, driven by investor pressure and concerns that the company’s rapid growth might slow in key markets, according to sources close to the company. They added that listing on foreign exchange would help Shein distance itself from China, where it was founded in 2008 and still has the majority of its staff and manufacturing.
However, Shein has yet to receive approval from the Chinese Securities Regulatory Commission (CSRC) for a London listing and would also need prior approval from other Chinese authorities scrutinizing its offshore business model, according to a source. It is unclear if this approval has been granted.
“If the CSRC disapproved of a London listing, they likely would have communicated that to Shein. The fact that Shein is proceeding with London suggests the CSRC does not prefer Hong Kong over London,” said Ming Liao, founder of Prospect Avenue Capital, a Beijing-based venture capital fund. “Shein relies heavily on China’s agile supply chain, and IPO due diligence might reveal related information, which is one of Beijing’s concerns.”
Typically, Chinese regulators would wait for the UK regulator to approve such a listing, said an adviser who assists Chinese companies abroad, though not currently working with Shein. The UK Financial Conduct Authority has not made any public statements about Shein.
