Shane’s IPO should be a natural investment, but caution is advised

The founder of Gen Z superbrand SHEIN must be wondering whether his company will ever succeed in the drawn-out soap opera that is the fashion retailer’s much-vaunted IPO.

At first glance, investing in Shein seems like a no-brainer. But…

Shein is expected to generate an estimated $32.5 billion in revenue in 2023, up 43% from $22.7 billion in 2022. It has approximately 88.8 million active shoppers, of which 17.3 million are in the U.S. The Shein app was downloaded 238 million times in 2023, making it the most downloaded fashion app of the year.

These are astronomical figures, and the potential value of the IPO, whether in London or New York, could exceed $65 billion.

However, the IPO has been dogged by questions about Shine’s sustainability and governance practices, which has led the company to lean towards an IPO on the London Stock Exchange (LSE) in recent weeks after initial plans for a New York listing were repeatedly thwarted.

Britain’s two main political parties, Labour and the Conservatives, are locked in a fierce battle ahead of a general election that culminates on July 4, but with both parties courting Shayne, there are few visible political hurdles for now for British markets desperate for good news for the beleaguered LSE.

Shane’s FTSE 100 Question

Shain is preparing a confidential application for an IPO in London, which is neither definitive nor binding but signals a move to use the platform in the U.K., although a listing is unlikely to take place until after the European summer holiday in August.

But last weekend The Sunday Times It reported that Shein may not qualify for inclusion in the FTSE 100 index because the number of shares it sells will not meet the minimum requirement for inclusion in the index. Companies incorporated outside the UK are required by stock exchange rules to have a minimum free float of 25%.

There are also growing reports that a series of accounting, governance, regulatory and disclosure reforms, particularly new powers given to the Financial Conduct Authority (FCA) and the European Parliament regarding greenwashing, have reduced risk tolerance and made institutional investors wary of the prospect of going public.

Organized Vigilance Against Shane

The Financial Times has reported that some fund managers with ESG mandates are shying away from listing plans, and for large institutional investors, holding Shein could pose reputational problems amid increasing scrutiny over the ethics and governance of the companies in which they invest.

Adding to the pressure, Senator Marco Rubio, Republican of Florida, wrote to UK Finance Minister Jeremy Hunt expressing his concerns: “Shain previously sought to list in New York City but was unsuccessful due to concerns about unethical and irresponsible business practices. At the time, I warned US securities regulators about Shain’s alleged exploitation of slave labour and trading loopholes.”

“We feel it is a duty of friendship to reiterate these warnings and urge caution before the UK allows Shain to list in London,” he said.

And the British Fashion Council (BFC) recently became the latest trade body to speak out about the London listing plans, believing they are of “significant concern” for the fashion industry.

Meanwhile, since early indications that it might be interested in going public, Shein has been on a promotional offensive highlighting the steps it’s taking to become more environmentally responsible. Whether those green measures are working is another matter.

The company also values ​​its role as a technology-driven company, putting it ahead of many of its apparel rivals through innovation.

Shain’s executives must be looking at soaring sales and financial performance, and the brand’s growth trajectory, and wondering why the mood music is playing at a different tune than usual.