Key Takeaways:

• Shein’s reported plan to list in London as soon as April could face a new hurdle after British regulators grilled the company about its cotton sourcing
• Controversy about its business practices and rivalry with PDD’s Temu may force the fast fashion sensation to eventually consider listing in Hong Kong

By Xia Fei

It’s known for its slick business model that delivers low-cost dresses from factories in Guangdong to teenagers in the West within days. But Chinese fast-fashion retailer Shein’s own path to going public has been anything but smooth.

News of the London plan’s death was probably premature. Still, it’s far from clear that Shein will ultimately find a home in London, which has managed to attract few, if any, major Chinese stocks despite its status as one of Europe’s largest stock exchanges.

Despite that positive signal, Shein’s date with destiny in London is far from set in stone.

At a hearing in front of the British Parliament last week, Shein’s general counsel Zhu Yinan refused to directly say whether the company’s products contain cotton from China’s Xinjiang region, where the West alleges that labor violations have been common in recent years.  

“You have given us almost zero confidence in the integrity of your supply chains,” said Liam Byrne, chair of the Business and Trade Committee. He added that Zhu’s evasiveness “bordered on contempt of the Committee” and urged the LSE and Financial Conduct Authority to check Shein’s disclosures.

Losing its shine

Founded in Nanjing and now based in Singapore, Shein’s meteoric rise is a textbook case of China’s ability to harness supply chains and the huge troves of data they generate with laser-like precision. Drawing on such data, Shein has brought new meaning to the “fast” in fast fashion by churning out new garments at lightning speed by working closely with a network of manufacturers in China.

But outside its huge fanbase of young consumers who love its cheap clothes, Shein has an equally large and more influential base of detractors who criticize the company for more than just its questionable cotton sourcing.

Last September, Italian authorities investigated the firm over alleged “greenwashing” due to its “generic, vague and misleading” claims about its environmental practices on its website. In Vietnam, Shein, along with rival Temu, have been forced to halt operations as they work to register their businesses with the government. The company, founded by 40-year old Chris Xu in 2008, has also become mired in multiple lawsuits over alleged copyright infringement.

The jury is still out as to how much damage Shein’s business model will suffer following the recent U.S. decision to end its “de minimis” exemption, which allows the import of items worth less than $800 to the country duty free. Some analysts believe Shein can weather that storm, partly by shipping its products in bulk to the U.S. and storing them in local warehouses, so that sales are for goods already in the country.

Some investors are already expressing a lack of confidence in the company with their feet. Private market exchanges of Shein’s shares valued the firm at $45 billion to $55 billion in late 2023, according to Bloomberg. That could fall further as investors worry about the company’s shrinking profitability.

Homecoming?

Reports of Shein’s IPO plan first emerged as early as in 2022, but the company may have had second thoughts after Russia’s invasion of Ukraine led to high market volatility. As the London plan advances in fits and starts, there are good reasons to believe that Shein may ultimately be forced to go to its Plan C and list in Hong Kong.

While the company tried to strip away its Chinese identity by relocating to Singapore, its listing outside Mainland China, where most of its supply network is based, may still require a green light from China’s securities regulator. Yet the company’s name has yet to appear on lists of companies that have applied for offshore listings with the China Securities Regulatory Commission.

The company’s biggest obstacle to such a listing still seems to come from overseas lawmakers. The imminent ban by U.S. politicians of TikTok, a video app sensation owned by Chinese firm ByteDance, serves as a chilling reminder that close ties to China can easily draw national security concerns. Shein, which controls troves of personal data on American teenagers, has already been in the crosshairs of the U.S. Congress concerned about similar data risks.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.