Budget-friendly clothing retailer Shein seeks a waiver for small-scale marketing practices
Fast-Fashion Retailer Shein Considers Scaled-Down IPO Amidst Challenges
The popular Chinese fast-fashion retailer Shein is reportedly considering a slightly scaled-down IPO in London due to financial constraints in the UK stock market. The company might have to apply for an exemption from regulators to sell less than the usual 10% of its capital, according to insiders.
Shein is yet to receive approval from the UK's Financial Conduct Authority (FCA) for its IPO, and a review of its supply chains is causing a delay. The company's initial plan to debut on the US market was abandoned due to political resistance, leading it to set its sights on London instead.
The IPO of this Asian giant has stirred controversy due to allegations of human rights abuses, particularly in China's Xinjiang province. However, it's unclear whether these accusations are hindering the approval process or not.
Shein, valued around €63 billion in a 2023 funding round, is aiming for a market capitalization worth around €60 billion, although the exact figure isn't disclosed. Known for its affordable and quick-changing collections, Shein sells its products online exclusively.
Production concerns and allegations of using forced labor continue to dog the company, similar to Chinese discount retailer Temu. Despite these allegations, analysts predict a tremendous 55% revenue growth for Shein, reaching around €48 billion in 2024. However, a recent report suggests a slowdown in growth, with profits dipping nearly 70% to around €380 million.
Shein's IPO journey faces numerous challenges, not solely regarding human rights issues. These issues include US-China trade tensions, leading to increased tariffs, and regulatory hurdles. To navigate these challenges, Shein might need to restructure its operations and reassure investors about its worth and operational sustainability.
Reuters London
While the human rights issues are a concern, they might not be the primary reason causing delays in Shein's IPO approval. The approval process is more affected by US-China trade tensions and regulatory hurdles. Shein's supply chain review and potential shift in production to countries such as Brazil or Turkey are significant factors affecting its IPO.
Investors remain skeptical about Shein's true worth and operational sustainability because of its asset-light business model. Addressing human rights concerns would be crucial for maintaining a positive brand image and investor confidence. The company would need to update its prospectus to reflect changes in its operations or market conditions and obtain required regulatory approvals from both the UK and potentially, China.
- Despite the controversy surrounding human rights abuses in China's Xinjiang province, alleging that Shein may use forced labor, the primary reasons for potential delays in Shein's IPO approval might not be these allegations.
- The approval process for Shein's IPO is more likely to be impeded by US-China trade tensions and regulatory hurdles, rather than human rights issues.
- Amidst these challenges, Shein is considering a scaled-down IPO in London, with plans to apply for an exemption from regulators to sell less than the usual 10% of its capital.
- To maintain a positive brand image, attract investors, and reassure them about its worth and operational sustainability, Shein would need to address human rights concerns and update its prospectus to reflect changes in its operations or market conditions.
