Shein, the Chinese ecommerce fast-fashion powerhouse, has become the world’s largest retailer of affordable fashion (with an estimated one-fifth share of the global market) in less than a decade. Shein, like many digitally enabled fast movers, has been aggressively pursuing an initial public offering (IPO) to capitalize on market demand for its speed and scale with a valuation calculated at $66 billion. The update on Shein IPO news has a post-election twist.
Shein’s Chinese origins (despite the gossamer veil of a Singapore headquarters) may have derailed its NASDAQ goal. U.S. lawmakers, fond of demonizing Chinese companies and their intentions on U.S. soil, have questioned Shein’s business practices, and have recently accused Shein of planning to defraud American retailers when it begins to peddle its software in addition to T-shirts and jeans.
To IPO or Not To
Over the past year, however, Shein’s straight-line dash to a listing has turned into a meandering stroll. In June, it withdrew its listing intentions from New York in favor of a London Stock Exchange (LSE) listing, As The Robin Report has analyzed in the past, the reasons for the switch are a subject of much scrutiny … the market has been profoundly less interested in why Shein wants to list in the first place; more on that later. Shein’s globe-trotting likely has its roots in its concerns that U.S. anti-Chinese sentiment would deflate its listing value, if not derail it altogether. This could be an issue in the UK as well, which is why Shein has been hinting that Hong Kong could serve as a backup IPO launchpad. Ironically, however, the time may be right for Shein to pull up stakes once more and head back to New York.
Shein IPO Listing Flip Flops
Shein’s success has largely come on the back of powerful analytics technology, which allows the brand to harness social media platforms and data to simultaneously amplify its brand, shorten delivery time to market and quickly distill customer insight into new products and designs. A NASDAQ listing would allow Shein to, well, shine, and likely provide the cash to fuel its transformation from a retailer to a supply chain solutions service provider to other retailers.
Traditional wisdom leads us to believe that the depth of New York’s capital markets and its familiarity with both the fashion and technology industries would mean that Shein’s listing would fare best on the NASDAQ. A successful offering there would create a virtuous cycle: “Any significant listing of a $60 billion company on the NASDAQ would probably mean it would make it to the S&P 500 the next day,” according to a Hong Kong-based corporate finance lawyer. The listing would likely mean a further positive knock-on effect on its share price.
And yet, Shein abandoned its New York IPO bid, which may suggest there are things it does not want to disclose to SEC regulators. Yes but, knowledgeable IPO hands say this is unlikely given that London’s regulations and disclosure requirements are indistinguishable from New York’s. “Both NASDAQ and LSE have similar regulatory postures—and everyone talks to each other,” noted one Asia-focused IPO auditor, suggesting that there would be nothing that Shein could hide from regulators.
It is more plausible that Shein’s Chinese origins (despite the gossamer veil of a Singapore headquarters) derailed its NASDAQ goal. U.S. lawmakers, fond of demonizing Chinese companies and their intentions on U.S. soil, have questioned Shein’s business practices, and have recently accused Shein of planning to defraud American retailers when it begins to peddle its software in addition to T-shirts and jeans. Foreign companies involved in “TID” businesses (Technology, Infrastructure or Data) may be required to submit to a review from the Committee on Foreign Investment in the U.S. (CFIUS) before being approved, and doubtless Shein would have had to submit to this process. Even if it cleared the CFIUS bar, Shein would likely face further reputational damage during the review.
Across the Pond
It’s reasonable to question whether Shein will find a warmer reception at the LSE. The UK has been increasingly led by America’s anti-China technology agenda since 2020 when it banned Huawei from supplying British telcos with 5G technology following U.S. warnings of security risks. The UK plans to rip out all Chinese technology from its networks by 2027, even though Britain’s own national cybersecurity commission had been engaged in a decade-long joint venture program with Huawei to identify and eradicate such threats.
Shein itself has become a frequent target of protest in Britain for its sustainability and human rights records. More recently, Paul Mandelson, a former Labour Party MP and a potential pick for ambassador to the U.S. was advising Shein on its IPO until early this year. While not a completely damning revelation, the cumulative effect of these events on Shein’s public relations standing means its reputation is at the same risk in the UK market as it is in the U.S.
Asian Haven
This leaves Hong Kong, where at least Shein’s Chinese roots would not present a problem to prospective buyers. “Hong Kong remains a great market for Asian firms to access globally minded capital.” observes a former member of the Stock Exchange of Hong Kong’s listing committee. It’s possible that Hong Kong’s relatively smaller capital depth and lack of momentum over the last two years would not generate the return Shein needs, but this is likely to change. “It is true that Hong Kong—like most other markets—has taken a tumble, but there is a lot of IPO work going on, and a strong pipeline of firms with their listing applications in.” Most of those applicants are likely mainland Chinese firms, which might be a concern for Shein, which wants to create some psychological distance from the homeland as it positions itself as a global retailer.
When, Where…and Why?
So, the time does not seem right for a Shein listing anywhere and none of the exchanges seem optimal. But a more fundamental challenge faces Shein’s management. “You need a hot market, good comps, liquidity and research coverage” to enjoy a listing with an optimal return, says a Hong Kong-based corporate finance lawyer, “But first you need a compelling reason to list and a strategy for the dispersal of capital.” How much cash does Shein need, and what does it need it for? Market analysis seems focused on Shein’s need to maximize the value of the IPO, but little is known about how much it actually requires (figures between $1 to $2 billion have been floated) and how it plans to use the raise. The market’s working assumption is that Shein plans to grow into a retail and supply chain software-as-a-service giant. That might require Shein’s shareholders and investors to meet a more urgent timetable.
If Shein is in fact in desperate need of cash for scale or technology development, industry finance executives in Asia believe there are many options other than a public listing—and in fact, the malaise in Asia’s capital markets could actually work in Shein’s favor. “A lot of Chinese private equity firms have a lot of dry powder,” says the corporate finance lawyer. Many firms, particularly technology-focused ones, have been forced to unload positions as the tech cold war continues to deepen, and China’s weakened economy means very few new prospects have emerged. He adds, “Getting a PE firm to put in a few billion now could help kick the can down the road until Trumpworld comes into clearer focus.”
New Global Disruptions
A clearer focus for Shein and the rest of the retail industry is based on two specific line items on the Trump global agenda that need clarity. One is punitive tariffs: Trump has made levying huge import duties on America’s trading partners (with, naturally, a focus on China) a central plank of his 2024 presidential run. The speed and severity with which he makes good on his campaign promises will be a concern for Shein—although the majority of its sales are currently duty-exempt, thanks to the $800 de minimis exemption threshold for ecommerce customers. This loophole continues to drive up demand for international air cargo and further cement Hong Kong’s role as its global hub. There are some indications that this loophole will be closed as well. Trump knows how essential ecommerce is to average American consumers, and how rising prices make them angry (it is in large part why he’s back). Slow-walking reform on B2C de minimis exemptions, while going full speed ahead on wholesale tariffs, could be a good way to split the difference.
The second item is Trump’s overall stance towards China, once staunch but increasingly showing signs of flexibility. The President-Elect initiated the move to ban TikTok from U.S. soil during his first administration, culminating in a Congressional ruling requiring the Chinese TikTok (like Shein, Singapore-based) social media app to sell off its U.S. operations to an American buyer by January 19th—the day before Trump takes office.
The bill has been profoundly unpopular with U.S. consumers. At the same time, Trump’s popularity on TikTok has recently soared and as a result, he has struck a more conciliatory tone with promises to reverse the ban. Always seeking the ‘deal,’ it is conceivable that saving TikTok could be the Trump administration’s harbinger of a larger plan to overall the U.S. government’s trade relations with China—or at least tone down the rhetoric around specific firms like Shein.
Shein’s IPO goals remain murky and Trump’s policies will always be mercurial. Barring a desperate need for cash, or shareholders demanding that Shein stick to a timetable, waiting and seeing is its best option.
