Will the London stock market be revitalized by Shein's IPO?

Shein, a Chinese retailer, may have a successful initial public offering (IPO) on the London Stock Exchange

Although it might cause controversy, the listing would be beneficial to the exchange.

The Financial Conduct Authority (FCA) has given the controversial Chinese retailer permission to list in the UK, so Sheins' IPO may proceed in the UK.

The listing, which could see Shein valued at about £50 billion, would be a huge victory for the struggling UK stock market, which is plagued by a lack of new listings and what appears to be persistent undervaluation.

Lale Akoner, global market analyst at eToro, tells BFIA that "London's IPO pipeline has been slower than pre-2020 levels, with many high-growth tech issuers opting for US or Asian markets."

"The UK government and regulators have proposed reforms to attract fast-growing firms since Brexit, but many international investors still see London as less dynamic for tech listings than Nasdaq or HKEX," she continues.

In actuality, there is an exodus from the London Stock Exchange (LSE) due to the extreme pessimism.

Sheins' IPO could alter the situation if it proceeds in London, but there are obstacles to overcome. Shein still needs Chinese regulators' approval to list abroad, and the tariff situation makes it more difficult for newcomers to raise money on the public markets, even though it makes the UK a more desirable location for initial public offerings.

Additionally, since Sheins' IPO has sparked outrage from legal and activist groups, the listing would probably face criticism if it were to proceed.

Shein IPO is approved by the FCA.

Reuters revealed on April 11 that Shein's listing on the London Stock Exchange (LSE) had been authorized by the FCA. Sheins' request to list in London had been approved by the UK regulator, but it was still awaiting approval from the China Securities Regulatory Commission (CSRC), according to the report, which cited two people with knowledge of the situation.

Russ Mould, investment director at AJ Bell, stated that "London is crying out for new listings of scale and Shein getting its IPO off the ground and shares listed could help raise the profile of the UK market and potentially draw in more big names."

Shein was valued at £66 billion the last time it raised money. According to earlier reports from Reuters, the discount retailer may be prepared to lower its valuation to about £50 billion in order to go public in London.

But even that valuation is difficult given the current unrest.

"Global markets have been volatile and consumer spending is under pressure as inflationary pressures remain," Akoner says. Pricing an IPO is difficult due to high interest rates and trade tensions, which may cause the listing to be delayed until late 2025.".

Mould continues, "getting Sheins IPO away at all could prove tricky" given Donald Trump's trade policies. The fact that Washington and Beijing are still engaged in a tit-for-tat trade war only makes this worse.

Mould continues, "Shein will have to emphasize to potential investors that its growth is not dependent on the US and that expansion across a wide range of countries is critical to its future."

Why is Sheins' IPO a contentious matter?

Due in large part to worries about the morality of its supply chains, Shein's prospective London IPO has drawn a lot of criticism.

There is "a likelihood of forced labor" in Sheins' supply chains, the law firm Leigh Day previously informed BFIA. According to the Modern Slavery Act, that would be illegal if it were true. For similar reasons, Amnesty International denounced the idea of Shein going public in London when it first surfaced.

Shein claims that it strictly forbids forced labor and has refuted the accusations. According to Akoner, "more transparency is needed."

These worries are believed to be the reason US regulators turned down Sheins' first attempt to list in New York.

Despite the possibility that the listing could harm the exchange's reputation, the FCA seems less concerned and is prepared to approve the listing.