Shein’s Winding Path to an IPO

Shein’s street to preliminary public providing has been uncommon — and that’s earlier than the corporate has even formally introduced its intentions.

Final week, Reuters reported that the fast-fashion big had filed paperwork with the Securities and Trade Fee to listing shares on a US alternate, seemingly confirming years of rumours. As a substitute, Shein vehemently rebuked the claims, telling BoF and different media retailers “we at present don’t have any plans for an IPO.”

Reuters retracted the story, solely to publish a brand new one on Tuesday reporting that Goldman Sachs, Morgan Stanley and different banks had been serving to Shein prep for an IPO. It cited no less than six sources, and this time there was no retraction.

There are different indicators a Shein IPO is coming, and could also be imminent: the corporate moved its belongings from a holding firm in China to a different in Singapore final yr in an effort to avoid Chinese language legal guidelines that prohibit home firms from pursuing offshore listings. Chris Xu, who based Shein in 2008, has additionally grow to be a everlasting resident of Singapore, in response to Reuters.

In March, Shein raised $2 billion from buyers together with Basic Atlantic and Sequoia Capital China at a more-than $60 billion valuation. If the general public market agrees with that determine, it could make Shein the second-biggest Chinese language firm to listing within the US, after the ride-hailing service Didi World, and one of many 10 or 15 largest from any nation.

And but even at this late stage, there’s nonetheless scepticism amongst buyers and lots of throughout the trend business about whether or not Shein’s blockbuster exit will occur in any respect.

What’s behind the delay?

For Shein, the timing is rarely proper.

The corporate’s recognition exploded across the begin of the pandemic in 2020, and an IPO was rumoured to be within the works that yr, in response to a number of reviews on the time. Loads of different e-commerce firms did go public because the market boomed in 2021, together with Warby Parker, Poshmark and Hire the Runway.

Had Shein joined them, its shares may need been snapped up by retail and institutional buyers desirous to personal a chunk of the world’s hottest trend firm. Nevertheless it may additionally have discovered itself caught up within the deteriorating relationship between the US and China, which was at a low ebb following the crackdown on Hong Kong protesters and the mass detention of Uyghurs in Xinjiang, together with allegations of pressured labour within the area’s cotton and textile industries.

Shein may need tried once more final yr. However by then the IPO market had dried up, as Russia’s invasion of Ukraine and excessive inflation despatched inventory markets tumbling. Whereas there was a gentle trickle of listings (together with Lanvin in December), there hasn’t been a significant tech IPO in 18 months and counting.

Shein has the size and the potential to interrupt that logjam. However market situations are the least of its issues.

May geopolitical tensions stop an IPO from taking place?

Shein denies it makes use of labour from the Xinjiang area and has stated that it has zero tolerance for pressured labour in its provide chain. It has struggled to persuade activists and US lawmakers.

In Could, a bipartisan group of US representatives penned a letter to the SEC asking the company to halt Shein’s potential IPO till it could show that it doesn’t use pressured Uyghur labour, which is prohibited underneath the Uyghur Compelled Labor Prevention Act that went into impact final yr.

Critics have additionally pointed to Shein’s use of the “de minimis” tariff loophole, which permits e-commerce operators to ship particular person packages underneath $800 in worth into the US with out paying duties or charges. That provides the corporate an edge over many opponents, which deliver clothes into the nation in bulk shipments which can be totally taxed.

Shein isn’t the one firm with ties to China that’s underneath such shut scrutiny. The state of Montana is attempting to ban its residents from utilizing TikTok, and fellow e-commerce platform Temu faces the identical questions over pressured labour and customs duties.

In the end it’s as much as the SEC, not Congress, to approve an IPO. Shein also can proceed towards an IPO even underneath these clouds; at any given second, there are prone to be publicly traded firms underneath investigation for labour practices or grappling with modifications to their tax constructions.

The larger risk would come if lawmakers or regulators go additional than they’ve to this point. Contemporary rounds of hearings and investigations might delay a list. Makes an attempt to close Shein down might nonetheless finish the corporate’s IPO dream.

“It’s attainable that Congress might act to successfully delay an IPO, however the course of would doubtless be an oblique one,” Susan Scafidi, the founder and director of the Style Regulation Institute, instructed BoF in an emailed assertion. “Geopolitical tensions usually tend to delay than derail an IPO until the corporate is positioned on a banned listing for causes corresponding to army sensitivity or prison connections.”

What’s subsequent for Shein?

It’s clear that an IPO is on the horizon in some unspecified time in the future.

With a gargantuan $66 billion valuation, Shein’s present buyers — which embrace Sequoia Capital and Basic Atlantic — doubtless gained’t have the ability to money out with one other set of consumers. Their solely viable exit is a inventory providing on a public market.

For now, they will afford to be affected person. Regardless of slowing development final yr, Shein tasks world income to extend 40 % this yr.

If the Nasdaq or New York Inventory Trade is a bust, Shein might at all times go public by way of the Hong Kong or Shanghai Trade — or elsewhere too. However Chinese language tech firms favor the US exchanges as a result of the market is considerably bigger in comparison with its worldwide counterparts, creating extra profitable alternatives for personal buyers.



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Compiled by Diana Pearl.