London's stock market could potentially experience a fresh influx with Shein's Initial Public Offering (IPO).
Shein's potential Initial Public Offering (IPO) in the UK has received approval from the Financial Conduct Authority (FCA), making it possible for the controversial Chinese retailer to list shares in London. If successful, the listing could value Shein at around $50 billion, offering a much-needed boost to the UK's struggling stock market, which has faced chronic undervaluation and a dearth of fresh listings.
According to Lale Akoner, a global market analyst at eToro, London's IPO pipeline has been sluggish compared to pre-2020 levels. Global investors still view London as less dynamic for tech listings compared to Nasdaq or HKEX, despite UK regulators' efforts to attract fast-growing firms. An exodus from the London Stock Exchange (LSE) is currently underway, suggesting a preference for overseas markets among high-growth tech issuers.
The approval received from the FCA is contingent on Shein's obtaining clearance from Chinese regulators. The listing would also be subject to challenges related to tariffs and the current market situation, making it more difficult for companies to raise capital on public markets. Should the IPO proceed, it could face criticism due to concerns over labor practices in Shein's supply chains, especially since US regulators have previously rejected Shein's bid to list in New York due to similar issues.
Reuters reported on 11 April that the FCA had approved Shein's UK listing, but the retailer was still awaiting approval from the China Securities Regulatory Commission (CSRC). Many anticipate that a successful London listing for Shein could increase the UK market's profile and potentially attract additional high-profile companies. However, the unstable market conditions and ongoing geopolitical tensions between the US and China could complicate the process. As a result, the listing may be delayed until late 2025.
In terms of ethical concerns, Shein has faced accusations of forced labor, intellectual property violations, poor supply chain transparency, and a lack of sustainability efforts. While the company denies these allegations, critics expect it to address these issues to reassure investors and regulators prior to the IPO. The fast fashion model itself is often criticized for environmental harm and exploitative labor practices, adding to Shein's pressure to demonstrate meaningful progress in these areas. An NGO reportedly plans to mount a legal challenge in London against Shein, which may further complicate the IPO process.
Investors might monitor the interest rates and potential returns from investing in Shein, given the retailer's potential IPO in London, as it could attract more high-profile companies to the UK's finance market. The listing, if successful, could signal a shift in business trends for tech companies, especially those facing an exodus from the London Stock Exchange, to list shares in overseas markets due to perceived dynamism and attractiveness for investors.
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