Chinese fast fashion giant Shein appears to be moving to London, rather than New York, for its planned stock market listing.
On the face of it, this would be a big fillip for London, especially given last year’s soul-searching over its attractiveness after a group of big UK and Irish companies. moved their primary listing to the stock market in New York.
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There will undoubtedly be some cynicism Shein’s decision to list in London and not in New York. It will be suggested, for example, that British regulators – and politicians – are less tough on China than their American counterparts and less likely to ask hard questions about the company’s supply chain.
that Jeremy Huntchancellor, has met Donald Tang, Shein’s chief executive, to push the case for London will only add to that sense.
Some might compare it to how the Financial Conduct Authority launched a consultation on a possible change to UK listing rules in 2017, when it was hoped that state-controlled oil giant Saudi Aramco could be persuaded to chose London as a destination. his secondary ranking.
In that case, however, the FCA faced heavy criticism by UK asset managers and there is little doubt that the same would happen if there was any sense that Shein was getting special treatment.
Harsh look ahead
Shein’s activities, including its supply chain, would also come under intense scrutiny if it were to list in the UK.
A group of leading fund managers are said to have gotten cold feet on backing a flotation as the UK Society for Sustainable Investment and Finance (UKSIF), the membership organization for sustainable and responsible finance in the UK, told Mail on Sunday last month that he did not want. London will become a “listing venue of last resort for companies with poor human rights records”.
For her part, Shein is taking the concerns of UK politicians and regulators seriously. As Sky’s Mark Kleinman has reported, as well as the chancellor, Mr Tang has met with a large number of leaders. LABOR politicians including Jonathan Reynolds, the shadow business secretary, in recent months.
Tough on Chinese business?
And anyone who thinks the UK is a soft touch for Chinese businesses should ask Huawei, the telecom equipment maker banned from rolling out 5G in the UKwhat do you think about this.
However, there is little doubt that London would be a more welcoming environment for Shea than New York.
This is largely a reflection of the fact that the US is now a positively hostile environment for Chinese companies.
As of May 2020, the US Congress passed a law – written by both Republican and Democratic senators – that gave the Securities and Exchange Commission (SEC), the US’s top financial regulator, the power to remove Chinese companies from US stock markets if US regulators were not allowed to review the audits of these companies for three consecutive years.
China eventually, two years later, asked for a shelter with the law.
By then, however, there had been another painful episode that poisoned the minds of American investors toward Chinese businesses.
In July 2021, Wall Street had opened the red carpet for Didi Global, a ride-hailing app often described as a Chinese version of Uber, in the largest initial public offering of a Chinese company in the US since Alibaba seven years ago.
Just days later, China launched one blow to its technology sectorcausing a decline in shares of Chinese technology companies.
Most of the damage was inflicted on the Shanghai and Hong Kong stock markets, but in New York, Didi Global shares fell 42% below the company’s IPO price. Didi Global was delisted from the New York Stock Exchange the following June.
Wary of New York
With that history, it’s understandable why Shein — whose 2023 annual earnings are set to double to more than $2 billion — should be wary of listing in New York.
The Biden administration has been no less tough on China than the Trump administration before it — as shown by the president’s recent threat to ban TikTok in the US if its Chinese parent, ByteDance, doesn’t sell the business within a year.
Mr. Tang, an American citizen who last year moved from Los Angeles to Washington in order to lobby more effectively for Shei, will also know that listing in New York could anger the authorities in Beijing.
The US has banned imports from Xinjiang province, where authorities have been accused of suppressing Uighur ethnic group and the use of forced labor, which China denies.
More transparency?
But a US listing could force Shea to provide details of its supply chain and, in particular, provide evidence that it is not using cotton from Xinjiang – something that, if revealed publicly, would not find favor with Beijing.
Not that London would necessarily be any less demanding in terms of Shein’s required disclosures. The company already publishes, in accordance with the UK Modern Slavery Act, a modern slavery statement on its UK website that sets out its expectations of labor practices among its suppliers and manufacturers.
But British politicians want more than that.
Three select committee chairs – Liam Byrne of the business committee, Alicia Kearns of the foreign affairs committee and Sarah Champion of the international development committee – have said the IPO should not go ahead until parliament is dissolved.
Why London is more attractive
However, there are some very positive reasons why a London listing would be more attractive to Shea than New York.
Europe is already home to the world’s two biggest listed fashion retailers – Zara’s Madrid-listed parent Inditex, which is valued at €135bn (£115bn), and Stockholm-listed H&M, which which has a market valuation of SKr 263bn (£20bn). ), both of which are the types of companies Shein would consider a colleague.
As Europe’s largest stock market, the UK would in these circumstances be an obvious listing destination for Shein. London is also home to two online fashion retailers – Asos, worth £445m and Boohoo, worth £444m – whose business models are similar to Shein’s. Therefore, the Chinese company can list in London knowing that the analyst community has a reasonable understanding of businesses like its own.
Is it worth the risk?
Perhaps the biggest question, given the questions that refuse to go away about Shein’s business practices, is whether it’s worth risking London to play the company.
Other European countries would also like to see Shein list in their market.
Paris, despite France recently unveiling legislation to punish purveyors of discarded fashion, has lobbied for Shein to list there.
That’s another reason why Mr. Hunt clearly thinks a Shein IPO here is a price worth pursuing.
However, at the end of the day, it will be UK asset managers who will make that judgement.