Image source, Getty Images
- Author, Oliver Smith
- Role, Business reporter, BBC News
As the BBC has learned, Chinese fast-fashion company Shein has filed its first documents, bringing it one step closer to being listed on the London Stock Exchange.
The online retail giant, which is based in Singapore but also has a strong presence in China, recently submitted the confidential documents to British regulators, according to sources familiar with the process.
Shein became one of the world’s largest fashion retailers during the pandemic, but has faced criticism for the environmental impact of its business model.
The company has also come under criticism for some of its labor practices, including allegations of forced labor in its supply chain – which the company denies.
Both Shein and the British financial regulator Financial Conduct Authority (FCA) declined to comment on a possible IPO in London, which could value the company at around 50 billion pounds.
US warning to Britain
A company wishing to sell its shares in the UK must first apply to the FCA for a prospectus containing detailed financial information, which must be approved.
Filing the documents is the first step in the process and brings the company one step closer to a UK IPO – through the sale of company shares on the London Stock Exchange – but it does not necessarily mean that it will ultimately be listed there.
In fact, a US IPO was initially thought to be the most likely path for Shein after the company filed its IPO documents there late last year. But the move was closely watched by both Republican and Democratic politicians amid concerns about the company’s close ties to China.
In early June, Marco Rubio, a leading Republican on the US Senate Intelligence Committee and ally of Donald Trump, warned British Finance Minister Jeremy Hunt in a letter about “serious ethical concerns” and Shein’s “close ties to the People’s Republic of China”.
“Slave labor, factory exploitation and trade tricks are the dirty secrets behind SHEIN’s success,” Mr. Rubio wrote in his letter to Mr. Hunt.
“The UK has a long tradition of abolishing slavery, from Wilberforce and Cowper to the Modern Slavery Act in our time. I trust that you will treat these allegations against SHEIN with the utmost seriousness, investigate them fully and take appropriate action to protect investors,” he added.
Image source, Getty Images
British lawmakers also expressed concern, but Labour’s shadow business minister Jonathan Reynolds indicated on Monday that he would welcome a listing of Shein’s shares in London as it would bring the company under greater scrutiny.
At an economic election debate hosted by Bloomberg, Mr. Reynolds said he had met with company officials.
“My view on companies of this type is that if they do business in the UK, ideally we should try to regulate them from the UK.
“The expectations we have, be it in terms of the labour market, regulatory compliance or tax, can best be met if the company is based in the UK.
“So if listing were to be considered, I would be in favour of it because I would know that this would enable us to enforce the high standards that we expect,” he added.
His opponent in the debate, Conservative Economic Affairs Minister Kemi Badenoch, expressed concerns about a possible listing, but added: “That does not mean we do not want it.”
Ms Badenoch admitted she had not yet met anyone from the company. One concern was Shein’s business model of sending smaller packages directly to customers in the UK. Under customs rules, no duty is levied on goods under £135 and she said this could mean “quite a significant tax loss” for the government.
Ms Badenoch also said she wanted to “look into” the allegations relating to forced labour.
“The City is regulated and we have regulators who do that. I’m talking specifically about this business and what we want to see.”
“We don’t want a situation where the Minister for Economic Affairs interferes in every single listing… but those are my specific problems with Shein,” Ms Badenoch said.
Parts of the British fashion industry also urged caution. The British Fashion Council (BFC), which represents companies such as Burberry and Mulberry, said a stock market listing of Shein would “cause significant concern for British fashion designers and retailers”.
“Fashion companies, including Shein, must exercise corporate due diligence in their supply chains. The BFC is calling on the UK government, the Financial Conduct Authority and the London Stock Exchange to ensure that every London-listed company takes an active, responsible leadership role in this regard and can demonstrate that it is addressing compliance and sustainability issues in all areas, from the treatment of workers to the sourcing of materials to citizen engagement on disposable fashion,” said Caroline Rush, the BFC’s chief executive.
Despite the criticism, many would see a possible listing on Shein as a major boost for London, after numerous well-known companies have already left the city for the USA.
In an interview with the BBC last month, London Stock Exchange chief Julia Hoggett said the move would increase transparency within the company.
“For any company that wants to undergo the scrutiny of going public, there is an opportunity to raise the bar in terms of corporate governance and how they deal with investors. And I think that’s where the value of the public markets lies,” she said.