Shein’s IPO could be set to go ahead in the UK, with the controversial Chinese retailer having been given the all-clear for a UK listing by the Financial Conduct Authority (FCA).
The listing – which could see Shein valued at around $50 billion – would be a huge coup for the beleaguered UK stock market, which is suffering from seemingly chronic undervaluation and a dearth of fresh listings.
“London’s IPO pipeline has been slower than pre-2020 levels, with many high-growth tech issuers opting for US or Asian markets,” Lale Akoner, global market analyst at eToro, tells MoneyWeek.
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“Post-Brexit, the UK government and regulators have proposed reforms to attract fast-growing firms, however many global investors still view London as less dynamic for tech listings than Nasdaq or HKEX,” she adds.
In fact, the degree of pessimism is such that an exodus from the London Stock Exchange (LSE) is underway.
If Shein’s IPO went ahead in London, it could change the picture, but there are challenges to overcome. Shein still requires the approval of Chinese regulators for an overseas listing, and the tariff situation, even if it increases the UK’s relative appeal as an IPO destination, makes it a harder time for debutants to raise capital on the public markets.
Additionally, the listing would be likely to draw criticism if it went ahead, as Shein’s IPO has prompted outcry from legal and activist groups.
Shein IPO gains FCA approval
On 11 April, Reuters reported that the FCA had approved Shein to list on the London Stock Exchange (LSE). Citing two sources familiar with the matter, the report stated that while Shein’s request to list in London had been green-lit by the UK regulator, it was still awaiting approval from the China Securities Regulatory Commission (CSRC).
“London is crying out for new listings of scale and Shein getting its IPO off the ground and shares listed could help raise the profile of the UK market and potentially draw in more big names,” said Russ Mould, investment director at AJ Bell.
Last time it raised funds, Shein was valued at $66 billion. Reuters has previously reported that the discount retailer could be willing to cut that valuation in order to IPO in London, to around $50 billion.
The current turmoil, however, makes even that valuation a challenge.
“Global markets have been volatile and consumer spending is under pressure as inflationary pressures remain,” says Akoner. “High interest rates and trade tensions make pricing an IPO challenging, and these conditions could delay the listing into late 2025.”
Mould adds that “getting [Shein’s] IPO away at all could prove tricky” in the light of Donald Trump’s trade policy. “This is only exacerbated by the fact Washington continues to pursue a tit-for-tat trade war with Beijing.
“Shein will have to stress to prospective investors that its growth is not reliant on the US and that expansion across a wide range of countries is key to its future,” Mould adds.
Why is Shein’s IPO controversial?
Shein’s potential IPO in London has drawn widespread criticism, largely due to concerns over the ethics of its supply chains.
Law firm Leigh Day previously told MoneyWeek that there is “a likelihood of forced labour” in Shein’s supply chains. If true, that would constitute an offence under the Modern Slavery Act. Amnesty International slammed the prospect of Shein IPOing in London when it first emerged for similar reasons.
Shein has denied the allegations, and says that it strictly prohibits forced labour. “But more transparency is needed,” says Akoner.
It is thought that these concerns are why US regulators rejected Shein’s initial bid to list in New York.
However, the FCA appears less concerned, and despite the potential reputational damage the listing could cause the exchange, appears ready to sign off the listing.