Fast fashion giant Shein faces increasing challenges as its planned initial public offering (IPO) in London encounters regulatory setbacks. The Chinese e-commerce powerhouse is now reportedly targeting a listing in Hong Kong after Chinese regulators denied approval for the London IPO, according to Reuters.
For Shein, a London listing had symbolized international credibility and offered access to a mature Western investor base. Despite this, analysts remarked that the company’s shift to Hong Kong was anticipated given the continued regulatory scrutiny it has encountered globally.
"We’ve always viewed Hong Kong as a safer IPO venue for Shein," noted Samuel Kerr, head of global equity capital markets at Mergermarket, during an interview on CNBC’s Squawk Box Europe. Kerr added that the IPO appears better suited for domestic investors due to its complexities.
Neither Shein nor China’s Securities Regulatory Commission (CSRC) commented on the IPO relocation, while Hong Kong Exchanges and Clearing Limited declined to discuss individual listings.
Shein’s IPO ambitions have been hampered by ongoing controversies regarding labor practices, including allegations of forced labor—which the company strongly denies—and intensified scrutiny over its commercial conduct. The firm had initially planned a New York listing but shifted focus to London amid pushback from US lawmakers. Additionally, the European Union recently found Shein in breach of consumer protection laws, citing misleading discount practices and questionable sustainability claims.
Changes to import regulations, such as the US closure of the de minimis loophole for low-value goods and similar measures anticipated in the EU and UK, further complicate Shein’s international operations.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, highlighted that the intense criticism ahead of the London IPO likely influenced Chinese regulators' decision to withhold approval.
Implications for the London Market
Shein’s pullback from London also represents a setback for the UK’s IPO market, which has struggled with a scarcity of headline-grabbing listings amid competition from other global financial centers. Streeter commented that the loss will disappoint London's ambitions but is not unexpected considering the mounting obstacles.
Some market observers expressed caution regarding positioning Shein as a flagship for London’s IPO revival, concerned it might send misleading signals to investors. Kerr remarked that hinging London’s market resurgence on such a controversial company could have been problematic.
In the UK, increased scrutiny has also weighed on Shein’s valuation compared to other listed retail companies. Reports suggest Shein was pressured to reduce its valuation estimate for London from around $50 billion to closer to $30 billion.
Kerr noted that shifting the listing to Hong Kong might allow Shein to attain a higher valuation, away from the more critical UK peer comparisons.
Opportunity for Hong Kong
Despite losing out on London or New York, Shein’s potential Hong Kong IPO could bolster the city’s market, which is seeing robust activity from domestic and international investors this year.
Rui Ma, founder and analyst at Tech Buzz China, stated, "While listing in established markets like London or New York would have been significant given their depth and valuation potential, market quality hinges on strong listings. Shein’s move is a gain for Hong Kong though not yet a transformative event."
Shein’s investors contacted by CNBC declined to comment on the reported shift of the IPO plans.
