Shein could revive the decline in expected valuations with the listing in London

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TikTok users’ obsession with viral outfits helped Shein reach a private valuation of $66 billion in its latest fundraising. But replicating that figure in public markets is proving more difficult than expected. The fast fashion group is reportedly considering moving its listing from New York to London. Politically it makes a lot of sense.

The popularity of Shein’s ultra-affordable fashion on social media platforms has been behind its phenomenal growth. In November she filed confidential documents for her initial public offering with the U.S. Securities and Exchange Commission.

Getting approved seems complicated. Chinese companies wanting to list in the United States are facing increased scrutiny due to growing geopolitical tensions between the two countries. Shein, founded in China, is no exception.

U.S. regulators are stepping up oversight and subjecting Chinese companies to additional disclosure requirements. Some US lawmakers have gone so far as to ask the SEC to block Shein’s listing, saying more information is needed about its operations in China. One lawmaker has called for an investigation into Shein’s supply of cotton from Xinjiang, where human rights groups say ethnic minorities are subjected to forced labor. Shein denied the claims, saying it has no suppliers in the region.

A listing in the United States also poses risks for Shein. As demonstrated by the dramatic delisting of Chinese ride-hailing giant DiDi Global from the New York Stock Exchange in 2022, Beijing’s crackdown remains a risk. Chinese officials have long been wary of listing its companies in the United States, but their skepticism has increased since 2021.

Market conditions are also not easy. Shares of New York-listed Chinese retailer JD.com have fallen nearly 50% over the past year and trade at just 7.5 times forward earnings, a significant discount to global peers. This reflects growing concerns about growth and geopolitical risks.

A large, high-profile listing would, of course, be a welcome boost for London’s weakened market, still reeling from the success British chip designer Arm Holdings has had after choosing New York over London last year.

Despite the paucity of tech names in London, City analysts understand fast fashion. And Shein would likely receive a warm welcome from City politicians and reformers eager to re-establish the market’s place in the global hierarchy.

Valued at an industry multiple, Shein would be worth around $70 billion. But this is already subject to downward pressure. Some Shein investors have been reported to have attempted to sell their shares on the private market at a 30% discount in recent months.

The longer the delay, the more investors may be tempted to sell off at a lower price. Shein is interested in making a quick decision about where she sees her future.