US Markets
Friday, June 21st, 2024 3:02 pm EDT
Key Points
- Political Tensions and IPO Challenges: Shein’s plans to go public in the U.S. face significant hurdles due to rising political tensions between Beijing and Washington, leading to scrutiny from federal and state officials. This scrutiny has forced Shein to consider a £50 billion IPO in London as an alternative.
- Data Privacy and China Ties: Concerns over data privacy and Shein’s ties to China have raised alarms among U.S. lawmakers, similar to those surrounding TikTok. The U.S. House Committee on Energy and Commerce has sought information about Shein’s user data collection practices and potential links to the Chinese government, amplifying doubts about a U.S. IPO.
- Labor and Trade Practices: Shein faces criticism over alleged forced labor in its supply chain and poor working conditions. The company’s practice of using U.S. customs law loopholes to avoid heavy import taxes has also drawn criticism, with competitors arguing it gives Shein an unfair advantage.
China-founded e-commerce company Shein is facing increasing difficulties in its attempt to go public in the United States, primarily due to rising political tensions between Beijing and Washington. The company, valued at $66 billion, confidentially filed for a U.S. IPO in November but has encountered resistance, including multiple failed attempts to join the National Retail Federation. This resistance stems from growing political scrutiny of Chinese companies, particularly those with significant market influence in the U.S. like Shein, which offers low prices and fast fashion, posing a competitive threat to major U.S. retailers such as Gap, TJX Companies, Macy’s, Target, Walmart, and Amazon.
As obstacles to a U.S. IPO increase, Shein is reportedly considering a £50 billion IPO in London. While a U.S. listing could have offered a higher valuation, the political climate has made this route more challenging. Federal and state officials have urged the Securities and Exchange Commission to closely examine or block Shein’s U.S. IPO due to its Chinese origins, a stance that has become politically fashionable in the U.S.
A London IPO might be less cumbersome. The British parliament is currently dissolved, and the London Stock Exchange is eager for successful IPOs amidst a drought, potentially easing Shein’s path. If successful, Shein is unlikely to continue pursuing a U.S. IPO. However, not all Chinese companies face such hurdles; for instance, Chinese electric vehicle company Zeekr recently went public in the U.S., despite the Biden administration’s tough stance on Chinese-made electric vehicles.
Shein’s significant brand recognition in the U.S. makes it a prominent target for political figures aiming to appear tough on China-related businesses. Despite moving its headquarters to Singapore, Shein’s substantial supply chain ties to China have raised concerns. The U.S. House Committee on Energy and Commerce has requested information from Shein regarding its data practices and potential ties to the Chinese government, highlighting worries about consumer safety and data privacy. The legal requirement for Chinese companies to share customer data with the government exacerbates these concerns.
This scrutiny has parallels with the legislative efforts to ban TikTok, a platform owned by China-based ByteDance, due to similar data privacy fears. Although Shein does not gather as much user data as TikTok, the political climate suggests that if perceived as a threat, Chinese-owned companies could face unified legislative actions against them.
Beyond data privacy issues, Shein faces criticism over alleged forced labor in its supply chain and poor working conditions. The Uyghur Forced Labor Prevention Act, enacted by the U.S. in 2021, bans products manufactured in Xinjiang from being sold in the U.S. Due to its reliance on micro-manufacturers in China, Shein’s supply chain remains under scrutiny despite its denials of forced labor allegations. Moreover, Shein’s practice of shipping products on an order-by-order basis to avoid heavy import taxes has drawn criticism from competitors, who argue it gives Shein an unfair advantage.
Overall, while Shein continues to expand its market presence, its IPO ambitions are heavily influenced by geopolitical dynamics and regulatory challenges, making its path to going public increasingly complex.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/06/21/shein-us-ipo-is-dead-experts-say.html
