Complicated deal: People at the Shein pop-up shop in Times Square’s Forever 21 in New York City. In a sign of the likely fraught nature of the application process, the SEC has yet to respond to Shein’s IPO filing. — Reuters
HONG KONG: Shein is seeking Beijing’s nod to go public in the United States, highlighting the limits of the fashion company’s efforts to present itself as global rather than a Chinese company, according to sources.
The move could further complicate Shein’s listing plans, which have run into political opposition in the United States.
A bipartisan group of US lawmakers has called on the Securities and Exchange Commission (SEC) to block Shein’s initial public offering (IPO) until it verifies it does not use forced labour.
Shein, which was valued at US$66bil in a fundraising in May, filed its planned US IPO with the Chinese regulator in November, the sources said. This is despite Shein having moved its headquarters from Nanjing to Singapore in 2022.
Shein, which sells cheap fashion in over 150 countries, also confidentially filed with the SEC for the IPO in November.
In a sign of the likely fraught nature of the application process, the SEC has yet to respond to Shein’s IPO filing.
Shein did not reply to a request for comment last Friday, and neither did the China Securities Regulatory Commission (CSRC) nor the SEC.
Shein’s filing with the CSRC for the US float makes it subject to Beijing’s new listing rules for Chinese firms going public offshore, said the sources.
Before the new listing rules were adopted, ride-sharing giant Didi Global ran afoul of Chinese authorities by pushing ahead with its US$4.4bil US IPO in 2021, while a review of its data practices was being conducted.
It was delisted from the New York Stock Exchange and was fined US$1.2bil by China over data-security breaches.
Under the CSRC rules, a host of authorities such as the National Development and Reform Commission, which supervises foreign holdings in local firms, the cybersecurity regulator and others may get involved in approving offshore IPO applications.
That is likely to lead to more uncertainty, as some agencies have divergent priorities, such as national security or data protection, bankers have said.
A company is subject to the Chinese listing rules, even if it is headquartered offshore, if 50% or more of its operating revenue, profit, total assets or net assets are generated in mainland China and it also meets one of these two criteria: the main parts of its business activities are conducted in the country or senior managers are mostly Chinese citizens or domiciled on the mainland.Shein does not own or operate any manufacturing facilities, and instead relies for its supply chain on around 5,400 third-party contract manufacturers, mainly in China, subjecting it to the CSRC listing rules, one of the sources said.
The rules are applied on “a substance over form” basis, giving the CSRC discretion on when and how to implement them, the source added. Shein ships the majority of its products directly to shoppers by air in individually addressed packages.
A 2022 Bloomberg report found that Shein’s garments contained cotton linked to China’s Xinjiang region. Rights groups and governments have accused China of forced labour and internment of Uyghurs, a mainly Muslim ethnic minority, in Xinjiang. Beijing denies any rights abuses.
Shein has said the company has “zero tolerance” for forced labour, and that suppliers are required to adhere to “a strict code of conduct that is aligned to the International Labour Organisation’s core conventions.” — Reuters
