Shein IPO: UK regulator decision slowed by NGO challenge, sources say
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An advocacy group for China’s Uighur population has challenged the listing, according to sources.
PHOTO: REUTERS
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LONDON - Britain’s financial regulator is taking longer than usual to approve fast-fashion retailer Shein’s IPO because it is checking its supply chain oversight and assessing legal risks after an advocacy group for China’s Uighur population challenged the listing, according to two sources close to the matter.
Britain’s Independent Anti-Slavery Commissioner, a monitoring body of the interior ministry, has also raised concerns within government over a Shein initial public offering because of allegations about labour practices at its suppliers.
Singapore-headquartered Shein, which sells US$5 (S$6.70) tops and US$10 dresses mostly made in China in 150 markets worldwide, filed confidentially with the Financial Conduct Authority (FCA) in early June for a London listing.
Shein is also awaiting approval from China’s securities regulator for its London IPO, two separate sources said, adding that the approval would likely come after the FCA’s decision.
The advocacy group, Stop Uighur Genocide (SUG), announced a legal challenge in June and sent the FCA a dossier in August alleging that Shein uses cotton from China’s Xinjiang region.
The United States and non-governmental organisations have long accused China of human rights abuses in the Xinjiang Uighur Autonomous Region, where they say Uighurs are forced to work producing cotton and other goods.
Beijing has denied any abuses.
Shein declined to reply to Reuters’ questions about the FCA process.
Shein has a zero-tolerance policy for forced labour and is committed to respecting human rights, a spokesperson for the company has said.
The company last week announced a global external environmental, social, and governance advisory board to bolster its governance.
In a sustainability report published in August, Shein said it found two cases of child labour in its supply chain in 2023, and no cases of forced labour.
Like Primark and other apparel retailers, Shein uses isotopic testing service Oritain to verify the origin of its cotton, which accounts for 9.9 per cent of the textiles in Shein-branded products.
The FCA declined to comment on the listing and any delays. A spokesperson for the FCA said timelines for IPO approval depend on each individual case. Market experts say it usually takes several months to reach a decision.
The FCA is under no obligation to assess evidence presented by civil society groups, and will generally let investors take their own position, said Ms Lorna Emson, partner at law firm Macfarlanes.
If it did find compliance concerns, it would tend to address these confidentially with the company itself.
But NGO pressure is unlikely to fade.
“Regulators are being given more to think about – and are required to do so under the watchful scrutiny of the increasingly well-funded and litigious NGO and activist community,” said Ms Lucy Blake, partner at law firm Jenner & Block.
NGOs are not alone in raising concern over Shein’s IPO.
The Independent Anti-Slavery Commissioner wrote to the Home Office and Department for Business in June about the IPO, according to previously unreported letters obtained by Reuters through a Freedom of Information request.
“Encouraging a company like Shein to float on the UK market inadvertently implies endorsement of poor labour practices and the prioritisation of attracting business to the UK over human rights abuses,” Commissioner Eleanor Lyons wrote.
The Home Office and Department for Business jointly replied that the FCA decides independently on listings and Britain has rules to guard against modern slavery.
Like other retailers, Shein must comply with incoming European Union regulations on forced labour and the Uighur Forced Labor Prevention Act in the US, both of which are considered stronger than Britain’s Modern Slavery Act.
For Shein, valued at US$66 billion in a fund-raising round in 2023, its IPO performance will partly hinge on what risks the FCA decides it must include in its prospectus, and how those are priced in.
Worker exploitation has been rife in supply chains of retailers and brands around the world, not just in low-cost fashion but also in luxury.
Shein’s revenues are expected to hit US$50 billion in 2024, up 55 per cent from 2023, according to Coresight Research. REUTERS
