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TikTok users' obsession with trending fashion helped Shein secure a $66 billion private valuation in its latest fundraising. But replicating this number in public markets has proven more difficult than expected. The fast fashion group is said to be considering moving its listing from New York to London. Politically, this makes a lot of sense.
The popularity of Shein's ultra-cheap fashion on social media platforms has been the reason behind her explosive growth. It filed confidential paperwork for its initial public offering with the U.S. Securities and Exchange Commission in November.
Getting approval seems complicated. Chinese companies wishing to list in the United States face greater scrutiny amid escalating geopolitical tensions between the two countries. Shen, founded in China, is no exception.
US regulators are stepping up oversight and subjecting Chinese companies to additional disclosure requirements. Some US lawmakers went so far as to ask the Securities and Exchange Commission to block Shen's listing, saying more information was needed about its operations in China. One lawmaker called for an investigation into Chen's cotton supplies from Xinjiang, where human rights groups claim ethnic minorities are subjected to forced labor. Shin denied the allegations, saying it had no suppliers in the region.
Listing in the US carries risks for Shein as well. As the dramatic delisting of Chinese ride-hailing giant DiDi Global from the New York Stock Exchange in 2022 shows, crackdowns by Beijing remain a risk. Chinese officials have long been wary of listing its companies in the United States, but their doubts have increased since 2021.
Market conditions are not easy either. Shares of New York-listed Chinese retailer JD.com have fallen nearly 50 percent in the past year and are trading at just 7.5 times forward earnings, a significant discount to their global peers. This reflects growing concerns about growth and geopolitical risks.
Of course, a big, high-profile listing would be a welcome boost to the battered London market, which is still reeling from the success enjoyed by British chip designer Arm Holdings after choosing New York over London last year.
Although tech names are scarce in London, analysts in the City understand fast fashion. Sheen is likely to be welcomed by City policymakers and reformers keen to re-establish the market's place in the global hierarchy.
When valued at industry multiples, Shen's company is worth about $70 billion. But this is already subject to downward pressure. Some Shein investors have reportedly been trying to sell their shares on the private market at a 30 percent discount in recent months.
The longer the delay, the more investors are tempted to sell at a lower price. Shein has an interest in making a quick decision on where she sees her future.
The Lex team produces timely commentary on capital trends and major companies. We'd love to hear from more readers. Please let us know what you think in the comments section below or email lexfeedback@ft.com
