Fashion powerhouse Shein is maneuvering through regulatory landscapes as it seeks approval from Chinese regulators for its upcoming U.S. initial public offering (IPO). This strategic move is in response to the new listing rules for local firms, adding complexity to Shein’s global aspirations.
In November, Shein confidentially filed for a U.S. IPO, targeting a 2024 launch, potentially positioning itself as one of the most valuable China-founded companies listing in New York. However, the journey faces hurdles, with anticipated scrutiny from U.S. regulators during an election year and an extended approval process involving various Chinese regulatory bodies.
What sets Shein apart is its dual filing strategy. While confidentially filing for a U.S. IPO, the company also submitted documents to the China Securities Regulatory Commission (CSRC). This filing, not previously reported, raises questions about Shein’s efforts to distance itself from China, despite relocating its headquarters to Singapore.
China’s new listing rules, effective since March last year, dictate that local firms eyeing offshore listings must file with the CSRC and secure clearance from domestic regulators. This intricate process, involving diverse agencies beyond securities regulators, introduces potential delays and uncertainties due to varying priorities such as national security and data protection.
According to the rules, if a company derives a significant portion of its revenue, profit, assets, or net assets from mainland China and conducts primary business activities there, it falls under the category of a Chinese company, subject to the new regulations.
Founded in China in 2012 by entrepreneur Chris Xu, Shein has grown into a global fashion marketplace, catering to customers in over 150 countries. Despite its evolution and efforts to position itself as a global entity, Shein’s IPO plans are navigating through a complex regulatory environment.
Shein, renowned for affordable mass-market fashion, operates without manufacturing facilities, collaborating with approximately 5,400 third-party contract manufacturers, predominantly in China. The majority of its products are shipped directly from China to customers worldwide.
