Chinese fast fashion giant Shein is preparing to join the London Stock Exchange in a £50bn deal that would be the largest share debut for over a decade.
The online retailer, known for its rapid product launches at ultra-low prices, is preparing to file registration documents with the Financial Conduct Authority ahead of a possible listing later this year, Sky News reported.
The filing does not mean a float is imminent and sources close to the company sought to dampen speculation that Shein will shortly join the market.
However, it marks the first step in the initial public offering (IPO) process and signals Shein is seriously considering London.
A float of Shein would be the largest IPO in London since Glencore joined the market in 2011 in a £38bn deal, giving the moribund stock market a much-needed short in the arm.
London has been struggling to shake its image as a backwater market in decline following an exodus of companies and a drought of new listings.
Attracting Shein “could hopefully bring more inflows into the UK, it would hopefully see more interest in UK PLC on the back of it”, says Liberum analyst Wayne Brown.
In a sign of the interest the company has generated in Westminster, senior figures from both Labour and the Tories have met with Shein’s representatives in recent weeks.
Shadow business secretary Jonathan Reynolds recently met the group, while Shein’s executive chairman Donald Tang met with Chancellor Jeremy Hunt earlier in the year.
A Labour spokesman confirmed the party had met Shein as part of its usual meet and greet with companies looking to invest or list in Britain.
Yet luring Shein to London could yield less upside than hoped.
The company’s interest in the market is less a vote of confidence in London and more reflective of its struggles to plot a US stock market listing.
Shein has been planning to list in New York since last year but has faced opposition from authorities and politicians amid ongoing US-China tensions.
Senator Marco Rubio, a former Republican presidential candidate, has been leading a campaign against Shein’s plans after the company confidentially filed for an IPO last November.
Concerns centre on its cotton supply: most Chinese cotton comes from Xinjiang, where there is alleged forced labour of Uyghurs.
Shein offers t-shirts for as little as £4, a price that many see as unfeasibly low. Rubio said in April there was a “high probability these companies have facilitated the importation of goods made with forced labour”.
Earlier this month a group of around two dozen US lawmakers called on the Securities and Exchange Commission (SEC) to halt the float until Shein had confirmed it did not use Uyghur forced labour.
A spokesman said: “Shein has a zero-tolerance policy for forced labour 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.”
As things stand, the decision about whether to investigate Shein’s supply chain claims looks likely to fall to Labour.
The party could choose to vet the deal for national security concerns, although it is understood Labour does not currently believe the IPO represents a threat.
A party spokesman said: “We expect the highest regulatory standards and business practices from any company operating in the UK. We believe the best way to ensure this is to have more companies operating from and regulated by UK law.”
A bigger concern, for the London market at least, may be whether City investors will embrace Shein.
“I am hyper-sceptical about it,” said one fund manager.
The fund manager also highlights misgivings about the reported structure of the deal. Shein is looking to raise £1bn by selling just a 5pc stake of the company, leaving investors at the mercy of majority shareholders.
“It’s a sign of how desperate London is to get a listing,” said the fund manager, who invests in FTSE 100 stocks. “It’s a sign of weakness for London.”
Many fund managers say they would also prefer to see a steady stream of smaller companies coming to market, rather than behemoths like Shein. Tech start-up Raspberry Pi is often touted as the type of company fund managers would like to invest in.
The group said on Monday that it was expecting a valuation of up to £540m when it goes public later this month – a considerable boost on the £400m it had previously expected to target.
Shein also risks putting noses out of joint among London’s other listed companies. The Telegraph recently reported UK high street leaders were concerned about tax loopholes that meant Shein could sell products cheaper than UK rivals.
By shipping individual orders directly from factories in China, the company avoids the tax charged on bulk imports that other retailers face when they ship in orders to their UK factories.
“It raises the question: is Shein on a level playing field with UK growth companies?,” says Liberum’s Brown.
Rivals also allege that Shein engages in industrial-scale copyright infringement. The company is said to have computer algorithms that scan the internet to see what products are selling well. It marries this data with China’s vast textile manufacturing might, enabling it to quickly launch competitor products.
H&M has sued Shein in Hong Kong alleging it copied its designs, while a rival lawsuit filed in the US last year claimed the company had “grown rich by committing individual infringements over and over again”.
Shein has said it “takes all claims of infringement seriously, and we take swift action when complaints are raised by valid IP rights holders”.
Brown suggests the lawsuits are simply sour grapes.
“Its business model is phenomenal. You’ve got a business which is centred on an innovative, real time retail approach that enables rapid production and delivery of trendy fashion items at affordable prices. By eliminating those intermediaries through a direct consumer model, you’re able to leverage low cost manufacturing.
“It’s a proper disruptive digital retailer that happens to be very good at technology.”
Still, the risk that issues such as these might derail any float is a serious concern. And if a £50bn float goes awry, it would only deepen the chill running through the London market.
As Brown cautions: “Any good story which brings liquidity and fosters people to view the London stock market as a good place to raise capital and the sound place to raise capital has to be looked upon favourably.
“But I do think you need to answer some of those more difficult questions that are raised.”
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