Hi there! 👋

Shein is considering the UK for its IPO listing after being met with resistance from the US. Some other potential locations include Singapore, with Hong Kong being ruled out due to the poor performance of its stock market. Shein filed for a US IPO last year, hoping to attract a valuation between $80 billion and $90 billion.

Why is there resistance from the US? 🇺🇸

Politicians in the US have probed the company’s ties to China, specifically its use of cotton from Xinjiang. There are alleged issues with collecting this cotton because of the use of forced labour and internment camps. In addition, the US views Shein as subject to the ‘whim’ of the Chinese government and, by extension, the Chinese Communist Party (CCP).

However, Shein has strongly rejected these speculations in the past and will likely continue to do so. This is why Shein is considering the UK for its listing, even though the New York Stock Exchange would be more preferable.

How will this impact the UK stock market? 📈

If Shein were to list in the UK, it would be a win for London. As of late, the city has struggled to attract major listings. However, this may change for the better as changes to IPO rules may soon be given effect by the Financial Conduct Authority (FCA).

The UK has recently lost out on big listings such as ARM, Rubix, CRH, and WE Soda. Having a large listing like this would boost the UK’s standing in the financial market. Around £790 million was raised through IPOs last year, one of the lowest levels in decades, according to Bloomberg. There is therefore no doubt that a listing like this would greatly improve the ‘damaged’ reputation of the London Stock Exchange as a listing venue. As a result, Jeremy Hunt has met with the executive chair of SHEIN, Donald Tang, in an attempt to persuade the company to list in the UK.

In addition, due to the strict scrutiny and regulation of IPOs in the US, more companies may choose to move to the UK to float. It appears as though the UK may be seen as a more hospitable market for companies, particularly those with ties to China, due to the potential challenges in the US.

However, this may raise concerns about the level of regulation in the UK compared to the US. The reputation of Shein as a company with a long history of lawsuits gives rise to ethical questions about allowing such companies to go public in the UK. Will it do more harm than good?

How does this affect law firms? 👩‍⚖️

IPOs are a large source of business for capital markets teams in corporate law firms. IPO activity has been down as of late, both in the UK and Europe, but also globally, with the exception of the Middle East, and has been impacted by high inflation, rising interest rates, and geopolitical pressures.

The UK listing regime has also slowed down IPO activity by not making it easy for companies to list here. Therefore, having a large listing such as this could attract more companies to list on the LSE and, in turn, generate more business for lawyers.

Practice areas involved: Capital Markets 💸

A capital market refers to a financial market where debt or equity-backed securities are bought and sold. Businesses do this to obtain funding for their companies. The role of a capital markets lawyer is to advise companies and investment banks on these complex transactions.

More specifically, equity capital market lawyers will be involved in IPO transactions. Their role includes advising on legal and regulatory matters, drafting documents, negotiating contracts, and working with bankers.