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Shein could boost falling expected valuation with London listing

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TikTok users’ obsession with viral outfits helped Shein to a private valuation of $66bn in its last fundraising. But replicating that figure in the public markets is proving tougher than expected. The fast-fashion group is reportedly considering switching its listing from New York to London. Politically, that makes a lot of sense. 

The popularity of Shein’s ultra-cheap fashion on social media platforms has been behind its phenomenal growth. It filed confidential paperwork for its initial public offering with the US Securities and Exchange Commission in November.

Getting approval is looking complicated. Chinese companies wanting to list in the US are facing greater scrutiny amid rising geopolitical tensions between the two countries. Shein, founded in China, is no exception.

US regulators are stepping up oversight and subjecting Chinese companies to additional disclosure requirements. Some US lawmakers have gone as far as asking the SEC to block Shein’s listing, saying more information is needed about its operations in China. One lawmaker has called for a probe into Shein’s cotton supply from Xinjiang, where human rights groups claim ethnic minorities are being subjected to forced labour. Shein has denied the claims, saying it has no suppliers in the region.

A US listing carries risks for Shein too. As the dramatic delisting of Chinese ride-hailing giant DiDi Global from the New York Stock Exchange in 2022 shows, crackdowns from Beijing remain a risk. Chinese officials have long been wary of its companies listing in the US but their scepticism has risen since 2021.

Market conditions are also not easy. Shares of New York-listed Chinese retailer JD.com are down almost 50 per cent in the past year and trade at just 7.5 times forward earnings, a significant discount to global peers. That reflects growing concerns about growth and geopolitical risks.

A large, high-profile listing would, of course, be a welcome boost for London’s beaten-down market, still reeling from the success that UK chip designer Arm Holdings has had after choosing New York over London last year.

Despite London’s dearth of tech names, the City’s analysts understand fast fashion. And Shein would be likely to get an effusive welcome from policymakers and City reformers eager to reestablish the market’s place in the global pecking order.

Valued at an industry multiple, Shein would be worth about $70bn. But that is already subject to downward pressure. Some Shein investors have been reported to be trying to sell their shares in the private market at a 30 per cent discount in recent months.

The longer the delay, the more the investors possibly tempted to sell out at a lower price. Shein has an interest in making a quick decision on where it sees its future.

The Lex team produces timely commentary on capital trends and big businesses. We’d like to hear more from readers. Please tell us what you think in the comments section below or email lexfeedback@ft.com

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