The Chinese ultra-fast fashion giant Shein faces the final stretch to make its stock market dream a reality. If plans do not change, it will be the London Stock Exchange that will finally host the Singapore-based textile firm. With the blessing of the City authorities, Shein would hit the stock market as one of the largest public offerings in the history of the London Stock Exchange, with the aspiration of capitalizing nearly 66 billion dollars (about 61 billion euros). However, the fact that he ended up opting for a European stock market is no coincidence. The company has not been able to overcome the bureaucratic walls that were raised in the United States after presenting the documentation to land on the New York Stock Exchange, and although it has not yet closed the door to listing on American soil, the stock market debut in London seems, moment, the most probable.
Shein has become famous worldwide for offering an immense number of presses at extremely competitive prices. Its catalog offers everything from summer dresses for eight euros to bracelets for 48 cents, thus imitating Inditex’s distribution model, but with rock-bottom prices, designs and qualities. Its manufacturing chain is mainly based in China, where a network of factories and warehouses produce and ship garments to all corners of the world. The alleged opacity in this production chain is what has raised the concern of the authorities in the United States.
When the textile company submitted its first application to list on the New York Stock Exchange at the end of November last year, it was immediately denied by the Securities and Exchange Commission (known as the SEC). Regulators argued that the cotton to make the garments would come from Xinjiang, a province in the crosshairs for alleged cases of forced labor by members of the Uyghur ethnic group, of the Muslim religion.
The textile firm immediately rejected the claims, claiming that it does not source cotton from Xianjiang and arguing that it has “zero tolerance” for forced labor, as it shared at the time with the Wall Street Journal. US authorities warned, however, that the request would not be accepted unless the company made a public statement. The demand put the Chinese group between a rock and a hard place, which also does not want to provoke the distrust of the Beijing government. In the past, H&M has declared that it would stop sourcing materials from Xinjiang, which led to its removal from the Chinese Internet.
Since then, negotiations to land on the American Stock Exchange have remained frozen. The United States does not want to take a step forward, and even less so in the current scenario of trade tension with the Asian giant. What began with the imposition of tariffs on a handful of Chinese products during the Donald Trump administration has led to an open trade war that fully involves the electric vehicle, microchip and digital platform sectors – with TikTok as the protagonist – and which now affects the fast fashion segment, where Shein has become an undisputed protagonist. In 2021, it managed to overtake Amazon as the most visited online shopping platform in the United States, its main market globally.
The dilemma has pushed the firm to opt for the London Stock Exchange, which in recent years has lost appeal compared to the rest of the world’s stock exchanges. Since 2008, quotes in the British market have fallen by 40%, according to the Financial Conduct Authority (FCA) of the United Kingdom. The British chip manufacturer Arm Holdings decided to operate on Wall Street instead of the City due to the performance of the North American stock market, and the pharmaceutical company Indivior announced that it planned to change its main listing to the United States.
In contrast, Shein was confidentially filing paperwork to prepare for its London debut, people familiar with the deal told Bloomberg. The arrival of the fashion giant would be a major boost to the City Stock Exchange, as it would be the second-largest IPO in its history, after the debut of mining group Glencore International in 2011.
A private placement in May last year valued the textile firm at $66 billion. Although some time ago, the SEC reported that Shein was aiming for a valuation of around 90,000. A figure higher than the market capitalization of rival firms such as H&M (24,000 million euros) and more than half of what Inditex is currently worth (144,800 million euros). Shein does not publish the results, but the Financial Timesensures that the Chinese ultra-fast fashion giant broke a new record in 2023, with a profit of more than $2 billion, surpassing H&M, which last year recorded a net profit of $759 million.
However, the path to ringing the City bell is not completely paved. Business Secretary Kemi Bandenoch shared with Bloomberg that she was still concerned about the “tax loophole” Shein used to ship products directly to customers, as well as labor practices in China. And human rights groups have launched a campaign to prevent the firm from ending up being listed on the FTSE, the London Stock Exchange’s benchmark index.
France also announced a legislative proposal to curb the fast fashion, with which it seeks to prohibit advertising and regulate the activity of platforms of Asian origin due to their environmental impact. The most conservative figures estimate that the Chinese firm manufactures around 35,000 garments a day, within an industry that is responsible for more than 10% of the total CO² emissions on the planet, according to Greepeace.
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