Shein files for London IPO

According to unnamed sources familiar with the business, Shein, the Chinese founded, online fast fashion retailer, filed confidential paperwork earlier this month for an initial public offering with the UK Financial Conduct Authority, commencing the first steps towards a potential flotation on the London Stock Exchange.

The potential listing, which aims to raise around £50 billion, could mark this year’s largest IPO globally, and would make it the largest listing on the exchange to date.

This is great news for some. Such a lofty listing in London could potentially act as a catalyst for reversing The City’s sustained misfortunes, which has seen the LSE shrink by around 25% over the past decade, with the remaining family jewels being picked off by foreign bidders and private equity.

One only needs to rear their head back as far as last week, when Hargreaves Lansdown backed a takeover bid presented by US PE house, CVC partners, which could see the popular investment platform shed its status as a listed business in the UK.

Shein’s potential listing represents a watershed moment for the City and its future direction of travel. Given the prominence of ESG and other ingrained hygiene factors that are now baked into the investment decision making process, UK managers may soon find themselves ensnared within a moral dilemma.

Shein has been accused of alleged human right abuses pertaining to forced labour within the Xinjiang region as well as a general lack of transparency when it comes to producing the huge quantity of cheaply manufactured garments it sells globally. 

A third party auditor, Oritan, was commissioned by Shein last year and found a 1.7% positive correlation rate for cotton from ‘unapproved regions’ within Shein’s supply chain which, according to Oritan, is better than the industry average.

But there are plenty of supportive voices challenging the naysayers. Barry Norris, fund manager at Argonaut Capital commented within the FT that “investors could make up their own mind” and that “not everyone was an ESG fanatic” in a nod to Britain’s home-grown fast fashion retailer, BooHoo.

Kathleen Brooks, Research Director at XTB remarked within Morningstar that “obviously it was good for the London market regardless of what you think about fast fashion, it is a giant company, and could be one of the largest stocks on the FTSE 100.”

These comments make more sense when viewed within the context of London losing out on IPOs in recent years to peers such as the New York Stock Exchange. The UK has unintentionally become an incubator economy; nurturing success stories like Cambridge based, microchip producer Arm, who then seek deeper pockets and higher valuations across the Atlantic once matured.

In Westminster, the incoming Labour government understands the gravity of a Shein flotation and what it could mean for attracting and encouraging future listings. Johnny Reynolds, the Shadow Business Sectary has already met with the retailer and has proclaimed that if a listing where to go ahead, it would be regulated within the legal parameters of UK standards.

So why does this matter to the rest of the country, outside London? A robust flow of IPOs is a vital component of the country’s economic engine-room. Across the UK, financial services on average employs around 1/5 people with a substantial proportion of the treasury’s tax haul originating from our financial ecosystem.

 After several shocks including Brexit and the Covid 19 pandemic, the UK needs to pull itself out of its current economic and spiritual malaise.

A return to form for the UK capital markets sector would be a start in reinvigorating the country’s financial prospects and, ultimately, help to stimulate the growth being promised in a variety of manifestos ahead of election day.