Exclusive-Shein working towards Hong Kong listing after London IPO stalls, say sources

By Julie Zhu, Hadeel Al Sayegh and Helen Reid

HONG KONG/DUBAI/LONDON (Reuters) -Shein is working towards a listing in Hong Kong after the online fast-fashion retailer's proposed initial public offering (IPO) in London failed to secure the green light from Chinese regulators, said three sources with knowledge of the matter.

The China-founded company aims to file a draft prospectus with Hong Kong's stock exchange in the coming weeks, one of the sources said. Shein plans to go public in the Asian financial hub within the year, two of the sources said.

Shein plans to change the listing venue as it had not yet received approval for its London IPO from Chinese regulators, notably the China Securities Regulatory Commission (CSRC), the two sources said.

The company, which sells products including $5 bike shorts and $18 sundresses, in March secured approval from Britain's Financial Conduct Authority (FCA) for its IPO in London, and soon informed the CSRC, one of the sources said.

The company initially expected the green light from Chinese regulators to follow swiftly after the FCA but has since experienced an unexpected delay and limited communication from the CSRC, said the source.

Details about Shein's Hong Kong listing plan have not been reported previously. All the sources spoke to Reuters on the condition of anonymity as they were not authorised to speak to the media.

Shein and CSRC did not immediately respond to Reuters request for comment. A spokesperson for Hong Kong Exchanges and Clearing Ltd (HKEX) declined to comment on individual companies.

Before its attempt to list in London, Shein had pursued a listing in New York, as part of its efforts to gain legitimacy as a global, rather than a Chinese company, and access to a wide pool of large Western investors.

A listing in Hong Kong would go against that strategy and could hurt its global credentials.

Allegations that Shein's products contain cotton from China's Xinjiang region and a planned legal challenge to the London IPO by a non-governmental organisation campaigning against forced labour in China have complicated the London listing and risk embarrassment for the Chinese government, a separate source with direct knowledge of the matter said.

Tensions with the U.S. over trade only exacerbate the wariness of Beijing and the CSRC, the source said.

The United States and NGOs accuse China of human rights abuses in the Xinjiang Uyghur Autonomous Region, where they say Uyghur people are forced to work producing cotton and other goods. Beijing has denied any abuses.

Shein says it has a zero tolerance policy for forced labour and child labour in its supply chain.

As it awaited a response from the CSRC, Shein dropped the communications firms Brunswick and FGS it had hired to help with public relations ahead of the London listing, Reuters reported earlier this month.

IPO VALUATION

Reuters could not determine if Shein had sought or received a nod from the CSRC for the Hong Kong listing. The company had sought Chinese regulatory approval for going ahead with processes to list in New York and later in London.

Shein's filings with the CSRC makes it subject to Beijing's listing rules for Chinese firms going public offshore, two sources have said.

The rules are applied on "a substance over form" basis, giving the CSRC discretion on when and how to implement them, the sources added.

Shein does not own or operate any factories, and instead sources its products from 7,000 third-party suppliers in China as well as some factories in other countries like Brazil and Turkey.

Shein's aim was to go public in London in the first half of this year.

But its business model of sending products straight from factories to shoppers around the world has been disrupted by the Trump administration ending duty-free access and slapping steep tariffs on e-commerce packages from China.

The "de minimis" exemption allowed e-commerce packages from China worth less than $800 to enter the U.S. duty-free and helped Shein, Temu, and Amazon Haul sell clothes, gadgets and accessories extremely cheaply.

Now, those parcels are subject to a minimum tariff of 30%.

Regardless of where Shein lists, its eventual IPO valuation will hinge on the impact of the removal of the de minimis exemption, the sources have said. The U.S. exemption is still in place for goods that are not from China or Hong Kong.

The European Union has also proposed changes to its duty exemption on parcels under 150 euros, adding to pressure on the business model.

Reuters reported in February that Shein was set to cut its valuation in a potential London listing to around $50 billion, nearly a quarter less than the $66 billion valuation it achieved in a $2 billion private fundraising in 2023.

(Reporting by Julie Zhu in Hong Kong, Hadeel Al Sayegh in Dubai, and Helen Reid in London; additional reporting by Kane Wu in Hong Kong; Editing by Sumeet Chatterjee and Stephen Coates)