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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Shock, horror! The media is reporting that fast-fashion giant Shein is likely to ditch London for Hong Kong for its IPO. Time to rend some garments out of despair (ideally, cheap polyester blends).
But, really, nobody should be shocked. If anything, the real surprises are that the UK lobbied so hard for the listing and that Shein had even entertained London in the first place.
For months, the Singapore-headquartered ecommerce juggernaut has been stuck in limbo, awaiting sign-off from the China Securities Regulatory Commission (CSRC) for its overseas listing. Whether a Hong Kong listing will fare better with the regulator remains unclear. But it was always clear that a London debut was an awkward fit.
That’s what made the UK hype around this IPO so odd. The notion that a single high-profile jumbo flotation could rescue London’s struggling stock exchange was always far-fetched, especially when the company in question carries as much baggage as Shein does.
Keen to boost the UK equity markets, some British politicians had actively courted Shein, raising questions about their judgment. This is, after all, a company that had initially targeted a New York flotation, only to run into strong regulatory and political resistance. When that fell apart, London stepped in as the fallback option, offering post-Brexit Britain a chance to showcase its openness and global reach.
But actively pursuing a company as controversial as Shein is quite a gamble. There’s a big difference between approving a listing that meets regulatory standards and actively wooing a company dogged by serious allegations.
If the IPO had gone ahead in London, Shein would have faced super-stringent scrutiny over its labour practices and environmental footprint, as well as the broader impact of fast fashion. The company has been accused — which it consistently denies — of sourcing garments from regions tied to forced labour. NGOs had already urged the UK regulators to block the flotation. Even though the Financial Conduct Authority approved Shein for listing, the IPO was never going to be a walk in the public opinion park.
From Shein’s perspective, a pivot to Hong Kong makes sense for three reasons.
First, despite its Singapore headquarters, Shein remains fundamentally a Chinese enterprise. Its operations and supplier network are concentrated in China, and Hong Kong has long been the go-to venue for Chinese companies seeking international capital, especially when access to US equity markets is constrained. By contrast, London has never been the natural choice for Asian issuers, even in its pre-Brexit heyday.
Second, Hong Kong offers a more controlled environment. Recent national security legislation has snuffed out protest activity, meaning Shein is less likely to face the kind of public backlash that it has encountered in the UK.
Shein may have hoped a London flotation would provide a platform to defend its business practices, but January’s disastrous grilling before a cross-party parliamentary committee and the later firing of its PR advisers suggest that strategy was backfiring spectacularly.
Third, investors care about returns, not stock exchange location. Shein’s supposed “need” for a Western listing was always a misconception. Just last month, Chinese battery giant CATL raised $5bn in Hong Kong through a Regulation S-only equity offering, excluding even US “qualified institutional buyers”. Yet the transaction was a smash success, attracting robust demand from global fund managers. Ultimately, Shein’s success will hinge on how investors assess its equity story — not which exchange hosts its IPO.
That said, Hong Kong won’t be a free pass. Global investors remain attentive to environmental, social, and governance (ESG) issues, and Hong Kong’s rules are, if anything, stricter and more prescriptive than London’s. Wherever it lists, Shein will face probing questions about supply chains, labour conditions, and its use of the de minimis exception in customs law — a loophole which the Trump Administration closed in early April before partially reopening it last month. Investors will demand transparency, regardless of venue.
For London, Shein’s likely decision to list elsewhere isn’t a disaster, but it is a reality check. The UK has recently reformed its listing regime to make it “match fit”, but no single IPO can address the deeper, structural issues afflicting its capital markets. Brexit has damaged the City’s standing as a global financial centre, while a plethora of government policies — including stamp duty tax, pensions regulation, and insurance rules — continue to stifle equity investment. A stagnant economy hasn’t helped, either. These aren’t problems a single trophy flotation can solve, let alone one as contentious as Shein’s.
The cancelled IPO of Turkish soda ash producer WE Soda in 2023 offers a useful parallel. When the intention to float on London was announced, the listing was hailed as a “ray of light” and a “much needed boost” for the UK market. Its failure a few weeks later was variously cast as a “big blow”, “a fresh blow”, and “another blow” to the City. Yet as FT Alphaville noted at the time, the valuation range was wildly unrealistic, and the company’s later poor performance has vindicated investors’ caution. London didn’t blow it!
Shein’s apparent shift to Hong Kong carries similar lessons. Sustainable growth in Britain’s capital markets will come from continued, systemic reforms, not a one-off PR coup. While Shein’s flotation might have generated chunky transaction fees and splashy media coverage, it also carried a real risk of reputational fallout for the City.
London would be better off tackling the root causes of its decline. The City needs to build a market that stands on its own strengths, not one grasping desperately after deals that promise more trouble than they’re worth.
