Fast fashion giant Shein’s mooted flotation on the London Stock Exchange (LSE) could be larger than any stock exchange listing seen in Europe in the last year. Coming at a time when the LSE is struggling to attract new listings, with some firms migrating to other exchanges, this could be a welcome boost. So it is perhaps unsurprising that the Chinese-founded company has been courted by the UK government, the LSE and those whose role it is to champion the City of London.
Yet there are ongoing concerns about the controversial business model and practices of Shein, whose founder Chris Xu relocated himself and the company’s headquarters to Singapore in 2022. These were exacerbated when Shein’s lawyer struggled to tell the UK’s business and trade parliamentary committee whether the company uses cotton from China.
Campaign group Stop Uyghur Genocide recently said it will seek a judicial review if the UK regulator, the Financial Conduct Authority (FCA), approves the LSE listing. And a “Say No to Shein” campaign has nearly 50,000 signatures on the activist website 38 Degrees. (Shein says it strictly prohibits forced labour in its supply chain globally.)
More idealistic observers might question whether it is really a good idea for the UK to be courting such a controversial listing. The UK, after all, is a second-choice destination after Shein’s ambition to list on the US market failed – amid concerns about forced labour, among other things.
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If less than 10% of Shein’s equity is floated, which is the what company is proposing, it will still be controlled by its founders and majority shareholders as if it had remained a fully private company. An LSE listing would normally compel Shein to either comply with the UK corporate governance code, or explain why it did not. But dispersed minority investors with a combined ownership of less than 10% would have little or no say in the governance of a business that remained more than 90% owned and controlled by a few founding investors.
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As a private company, Shein has kept details of its financial situation out of the public domain. If the LSE listing does go ahead (which is by no means certain), the company will be required to give detail on its legal and reputational risks, as well as its financial accounts.
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Shein’s apparent desire for secrecy, and its reluctance to publish detailed financial data, suggests that its founders and controlling investors may not be comfortable with the increased scrutiny that a listing will require. A 2023 report from the company, however, claimed Shein was committed to “continued progress and transparency” in terms of sustainability and its social impact.
If credible revelations about controversial business practices such as forced labour or illegal working conditions emerge, this is likely to damage the stock price. No doubt outside investors would have plenty of incentive to scrutinise Shein’s activities – at least, more than the consumer buying a £10 dress for a night out.
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Shein’s listing – if it goes ahead – will open its inner workings to public scrutiny in a way that it has never experienced before. Already, people who have never engaged with fast fashion are discussing the business practices of the company.
If awareness is the first stage of progress, such increased scrutiny can only be a good thing for those concerned about the darker side of the fast fashion industry.
God the UK is desperate if getting a shitty company like this on the books is something to be celebrated.