Is it time to feel sorry for Gen Z favorite Shein? The fast-fashion online retail phenomenon must be baffled why with what on paper represents one of the hottest initial public offerings (IPO) in history, at a whopping $66 billion, no exchange wants them.

An IPO in Hong Kong would likely slash the valuation Shein can secure because there would be less demand, especially from U.S. funds which are growing wary of Hong Kong stocks over fears Washington may tighten investment restrictions.

Looking for a Home in All the Wrong Places

That kind of money should have international exchanges falling over themselves to host Shein’s listing but instead, the retailer appears to be meeting resistance wherever it lays its ­– ludicrously cheap and available in 17 colors -– hat. First, it was to be New York, then London, and now it emerges that the fast-fashion group is keeping alive a fallback option to list in Hong Kong.

So, what’s the backstory? All Shein really wanted to do was bring its IPO to the New York Stock Exchange. But after repeated attempts to list its shares in the U.S. were thwarted amid an increasingly frosty business relationship between North America and China, the company turned its attention to the U.K.

And that should – and might still – have turned out to be a huge and timely boost for London’s beleaguered stock exchange, which has fallen badly out of favor as a platform for major corporate listings. Despite filing for a London listing, Shein has once again elicited strong opposition from human rights groups in the U.K. over concerns about its labor practices.

Shein in the U.K. Political Crosshairs

Indeed, the Singapore-headquartered online fashion colossus has been catching flak ever since it filed paperwork on what would be London’s biggest-ever stock market flotation. That said, the IPO is not without its support, and certainly British political figures have been keen to encourage Shein to choose London as they seek to bolster the city as an important global hub for business and to try and assuage fears that the country’s Brexit departure from the European Union has dissuaded major companies from listing in the U.K. capital.

Both major British political parties have had discussions with Shein. Conservative party chancellor Jeremy Hunt met Shein’s executive chair Donald Tang earlier this year to try to persuade the company to list in the U.K. rather than New York. Hunt’s party was defeated in the July 4 election, so what is more significant is that Jonathan Reynolds, now Labour’s government business and trade secretary, Sarah Jones, the minister for business and trade, and Chris Bryant, the minister for science and the creative industries, also met Tang to discuss the listing before they came to power.

However, despite heavyweight backing, just as in the U.S., the IPO could prove to be a political hand grenade. Senior British lawmakers following their U.S. counterparts question Shein’s suitability for a London listing and call for greater scrutiny of the business, notably as Shein has been at the center of controversy over claims about its use of cotton from the Xinjiang region of China and other issues related to workers’ rights and its vast supply chain.

Powerful Activists

Shein, like many other fast fashion retailers, has come under considerable fire for the fundamentally unsustainable nature of the disposable apparel it retails and has been on an 18-month-and-counting charm offensive to tell its ESG story.

That doesn’t appear to have won over Amnesty International U.K., which said that any potential London IPO would be a “badge of shame” for the LSE. Meantime, U.K.-based human rights group Stop Uyghur Genocide has launched a legal campaign to block a listing. Human rights law firm Leigh Day has written to the Financial Conduct Authority (FCA) urging the regulator to refuse any attempt by Shein to list on the LSE.

Shein, in response, has said it is strengthening governance and compliance, while it responded in a statement insisting, “Shein has a zero-tolerance policy for forced labor and we are committed to respecting human rights. We take visibility across our entire supply chain seriously and we require our contract manufacturers to only source cotton from approved regions.”

Sales Records

While the arguments rage on, pragmatic Gen Z shoppers keep buying, and buying, and buying. Apparently, Shein can do little wrong on the business front. It posted more than $2 billion in profits in 2023, nearly double the $1.1 billion it racked up in 2021. That was off an estimated $32.5 billion in sales in 2023, a 43 percent increase on the $22.7 billion it made in 2022. It has an estimated 88.8 million active shoppers, 17.3 million of whom are based in the U.S., while Shein’s app was downloaded 238 million times in 2023, making it the most downloaded fashion app of last year.

While such stellar sales mean that investing in Shein should be a no-brainer, The Sunday Times recently reported that Shein may not qualify for inclusion on the FTSE 100 Index because the number of shares being offered will not meet the minimum requirement for inclusion on FTSE indexes. Companies incorporated outside the U.K. must have a minimum free float of 25 percent under stock exchange rules.

There have also been growing reports that institutional investors are wary of getting involved in the potential listing, with their appetite for risk dampened by reforms to accounting, governance, regulation and disclosure, notably new powers for the FCA and European lawmakers over greenwashing.

Furthermore, the Financial Times has reported that some fund managers with ESG mandates have been shunning the prospect of holdings in Shein for major institutional investors as they may prove reputationally problematic should they come under increasing scrutiny over the ethics and governance of the companies that they invest in.

To Big IPO or Not to Be

Ever since the early indications that Shein may be interested in launching an IPO, the company has broken from its traditional deep reluctance to go public and has been on a charm offensive to stress the measures it is taking to be more environmentally responsible. Whether any of those green punches are landing is another question.

Right now Shein’s management must surely be looking at the soaring sales and financial performance, plus the brand’s growth strategy, and be scratching their heads over why investors are not already lining up to bite their hands off for as much stock as they can get hold of, wherever the retailer lists.

But the fallback option, an IPO in Hong Kong, would likely slash the valuation Shein can secure because there would be less demand, especially from U.S. funds which are growing wary of Hong Kong stocks over fears Washington may tighten investment restrictions.

On top of that, a Hong Kong listing could leave Shein as an isolated stock in the city with inadequate equity research coverage, compounded by a number of global companies such as L’Occitane and Samsonite reportedly keen to leave the bourse, or planning backup listings elsewhere. Nor would Shein have any peers in Hong Kong against which to benchmark.

Finally, and perhaps most damagingly, opting to go public in Hong Kong may simply feed into the perception that Shein is a Chinese company ripe for Western scrutiny and perhaps even legislation. Unlike its merchandise, Shein’s stock is proving uncomfortably difficult to shift.