Experts say Shein US IPO is dead | Wilnesh News

The Shein logo can be seen on smartphones, while the Chinese online retailer’s website can be opened on laptops.

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Hopes of a U.S. listing for Chinese-founded e-commerce company Shein are increasingly fading as rising tensions between Beijing and the United States disrupt commerce and trade, experts say.

The company, last valued at $66 billion, confidentially filed to list in the United States in November. It has since encountered resistance in its attempts to join the U.S. retail sector, including multiple attempts to become a member of the National Retail Federation, the industry’s largest trade association, but was rejected, CNBC previously reported.

The e-commerce upstart filed to go public while becoming a household name in the United States by offering low prices and the ability to quickly deliver new styles. The company is poised to capture major market share from U.S. retailers, especially gap, TJX Corporation and macy’s department storeaccording to UBS data last year, and continues to challenge Target, Walmart and Amazon.

But as political resistance to its US IPO mounts, Shein appears to be changing tack, with the company reportedly preparing to confidentially file for a £50bn offering in London in the coming weeks. Angelo Bochanis, an IPO analyst at Renaissance Capital, said the company may prefer to list in the United States because the offering could bring a higher valuation than in the UK.

But its road has been rocky, with federal and state officials calling on the Securities and Exchange Commission to review or even block IPOs in the U.S.

“Censorship of companies with high visibility and roots in China is very politically popular in the United States right now,” Bochanis said.

Beauchanis said that in theory, a London IPO could be easier than a U.S. IPO. With the UK Parliament dissolved and the London Stock Exchange “hungry for a big win” amid an IPO drought, Shein could circumvent some obstacle Otherwise it might face such a situation, he said.

Jay Ritter, a finance professor at the University of Florida who studies initial public offerings, said that if Shein’s IPO in London is successful, it is unlikely that it will continue to list in the United States.

Not all China-related companies are caught up in the growing political tensions. China Electric Vehicle Company Zekel It went on sale in the United States last month. It became one of the first high-profile Chinese companies to do so in the United States, even as the Biden administration intensifies its crackdown on Chinese-made electric vehicles.

China relations and data privacy

Bochanis said Shein is one of “a handful” of Chinese companies that has achieved deep brand recognition among U.S. consumers.

The scale of the potential issuance and the lengthy and high-profile process that would follow make Shein an attractive target for politicians from both parties who want to appear tough on companies with ties to Beijing.

Founded in China, Shein has moved its headquarters to Singapore. But a large part of the company’s supply chain is still located in the country.

In December, the House Energy and Commerce Committee sent a letter to Shein seeking information about the company’s user data collection and its ties to the Chinese government, saying potential ties to Beijing “pose serious risks to e-commerce, consumer safety, and the privacy and security of people’s data.”

The group sent a similar letter to TikTok, the popular social media platform owned by Chinese parent company ByteDance.

Susan Ariel Aronson, a professor at George Washington University, said the Chinese Communist Party can legally require any Chinese company to share information about its customers. While Shein is based overseas, its manufacturing ties to China and reports that the company is seeking permission from Beijing to list its products in the United States have raised concerns among U.S. officials about what data it might share with the Chinese government.

This relationship prompted the United States to propose a ban on TikTok. Legislation passed by Congress last month seeks to force the platform to sell its U.S. assets or cease all activities in the country by January 19.

ByteDance and several creators on the platform have filed lawsuits to block the bill.

While Shein won’t have access to the troves of data held by social media giants like TikTok, the proposed ban raises more doubts about the company’s U.S. IPO.

“(Congress) has just shown us that if a specific Chinese company is deemed to pose a threat, they can unify and pass a law that is much more powerful than an executive order or a presidential order,” said National Rep. Antonia Zeno Antonia Tzinova said.

Shein shipping issues

For Sheein, political scrutiny beyond data privacy may be more difficult to overcome.

The retailer has long been accused of using Forced labor exists in the supply chain and employees work in poor conditions.

In 2021, the United States passed the Uyghur Forced Labor Prevention Act, which bans companies producing goods in China’s Xinjiang region, notorious for Uyghur internment camps, from selling in the United States, despite claims by U.S. government agencies that Shein’s supply chain has ties to Xinjiang In the region, the company does not make its own products but instead uses micro-manufacturers in China, which makes the materials harder to trace.

Shein has repeatedly denied forced labor accusations, saying it has a system in place within the company that supports compliance with U.S. law.

The company has also been criticized for exploiting loopholes in U.S. customs laws.

Because the company doesn’t import products in bulk and sell them from U.S. warehouses, but instead ships them to order, it’s exempt from some of the heaviest U.S. import taxes. Rivals criticized the practice as giving Schein an unfair competitive advantage.