Shein, a China-founded e-commerce company, is facing increasing challenges in its plans to go public in the United States due to rising tensions between Beijing and the U.S. The company, which was last valued at $66 billion, filed for an IPO in the U.S. in November but has since faced resistance, including being rejected by the National Retail Federation. Despite its popularity in the U.S. for offering low prices and new styles quickly, Shein’s path to a U.S. IPO has become more difficult.
As a result, Shein is reportedly shifting gears and preparing to file for a £50 billion offering in London. However, going public in the U.K. may not be as ideal for the company, as it could potentially receive a lower valuation compared to listing in the U.S. Political resistance to Chinese companies with high profiles is currently strong in the U.S., leading experts to believe that if Shein’s London IPO is successful, it is unlikely to continue pursuing a U.S. offering.
Not all China-linked companies are facing the same challenges. Zeekr, a Chinese electric vehicle company, recently went public in the U.S., becoming one of the first prominent Chinese companies to do so despite increased scrutiny from the Biden administration. Shein, however, stands out as one of the few China-tied companies that has gained deep brand awareness among U.S. consumers.
The size of Shein’s potential IPO and its ties to China have made it an attractive target for politicians who want to appear tough on Beijing-linked companies. Concerns have been raised about Shein’s user data collection and its relationship with the Chinese government, as well as the potential risk to e-commerce, consumer safety, data privacy, and security. While Shein is headquartered in Singapore, its manufacturing ties in China and reports that it sought Beijing’s permission to go public in the U.S. have raised concerns about data sharing with the Chinese government.
The proposed ban on TikTok, another China-based company, due to national security concerns has further raised doubts about a U.S. IPO for Shein. The recent legislation passed by Congress demonstrates that if a Chinese-owned company is perceived to be a threat, the U.S. government can take strong action, which could impact Shein’s plans.
Aside from data privacy concerns, Shein is also facing scrutiny over its supply chain practices. The company has been criticized for alleged use of forced labor and poor working conditions in its supply chain. The U.S. government has passed a law prohibiting companies that manufacture goods in the Xinjiang region of China, known for its Uyghur detention camps, from selling in the U.S. Although Shein’s supply chain has been linked to the Xinjiang region, the company denies the forced labor allegations and claims to implement systems to comply with U.S. law.
Additionally, Shein has been accused of exploiting U.S. customs law loopholes, as it ships products on an order-by-order basis rather than importing in bulk from a U.S. warehouse. This allows the company to avoid some import taxes, giving it an unfair competitive advantage.
In conclusion, Shein’s hopes of going public in the U.S. are diminishing due to rising tensions between Beijing and Washington. The company is now considering a London IPO as an alternative. However, it faces challenges related to data privacy, supply chain practices, and political resistance. The outcome of Shein’s IPO plans will depend on how it navigates these obstacles and whether it can address concerns raised by U.S. officials and lawmakers.
