The Shein logo can be seen on a smartphone and the Chinese online retailer’s website is open on a laptop.
Monika Skolimowska | Picture Alliance | Getty Images
China-founded e-commerce firm Shein’s hopes of going public in the US are growing dimmer by the day as rising tensions between Beijing and the US shake up business and trade, experts said.
The company, most recently valued at $66 billion, confidentially filed for an IPO in the US in November. Since then, the company has faced resistance in its attempt to join American retail, including numerous rejected attempts to become a member of the National Retail Federation, the industry’s largest trade association, CNBC previously reported.
The e-commerce newcomer filed for an IPO and became a household name in the U.S. by offering low prices and the ability to quickly offer new models. The company is poised to take large market shares, especially from US retailers gap, TJX Company And Macy’saccording to UBS data from last year, and continues to pose a challenge Goal, Walmart And Amazon.
But as political opposition to its US IPO mounts, Shein appears to be switching gears and is reportedly preparing to privately file for a £50bn offer in London in the coming weeks. The company likely would have preferred to list in the U.S. because the offering could bring a higher valuation than in the U.K., said Angelo Bochanis, IPO analyst at Renaissance Capital, which covers pre-IPO research and IPO-focused ETFs offers.
But the road hasn’t been easy, with federal and state officials urging the Securities and Exchange Commission to review or even block the U.S. IPO
“Verifying high-profile companies with roots in China is very politically hot in the United States right now,” Bochanis said.
According to Bochanis, an IPO in London could theoretically be easier than a U.S. offering. With Britain’s Parliament dissolved and the London Stock Exchange “desperate for big gains” as it suffers from an IPO drought, Shein could avoid some of the hurdles it might have otherwise faced, he said.
If Shein’s London IPO succeeds, it’s unlikely the company will continue to pursue a U.S. offering, said Jay Ritter, a finance professor at the University of Florida who studies IPOs.
Not all companies linked to China are becoming entangled in the web of increasing political tensions. Chinese electric vehicle manufacturer Zeekr went public in the US last month. It was one of the first significant Chinese companies to do so in the U.S., despite the Biden administration’s increasing crackdown on Chinese-made electric vehicles.
China relations and data protection
Shein is “one of the few” China-related companies that has achieved high brand recognition among U.S. consumers, Bochanis said.
The size of the potential offer and the long, high-profile process involved have helped make Shein an attractive target for politicians from both parties seeking to crack down on Beijing-linked companies.
Shein was founded in China and has since moved its headquarters to Singapore. But a large part of the company’s supply chain is still based in the country.
In December, the House Energy and Commerce Committee sent a letter to Shein requesting information about the company’s collection of user data and its relationship with the Chinese government, calling a possible connection to Beijing a “serious risk to the electronic trade, consumer and human safety”. Privacy and security.”
The panel sent a similar letter to TikTok, the popular social media platform owned by China-based parent company ByteDance.
According to Susan Ariel Aaronson, a professor at George Washington University, the Chinese Communist Party can legally demand any Chinese company to share information about its customers. Although Shein is headquartered overseas, its manufacturing ties in China and reports that the company had sought permission from Beijing to go public in the U.S. raised concerns among U.S. officials about the data the company might share with the Chinese government .
This relationship helped trigger a planned US ban on TikTok. The law, which Congress passed last month, aims to force the platform to sell its US assets by January 19 or cease all operations in the country.
ByteDance and several developers on the platform have filed lawsuits to block the bill.
While Shein doesn’t have access to the amount of data that a social media giant like TikTok has, the proposed ban has raised further doubts about a U.S. IPO for the company.
“[Congress] “We have just been shown that when a particular Chinese company is perceived as a threat, they can come to an agreement and pass a law, and that is much stronger than an order from an executive branch or a president,” said Antonia Tzinova, a lawyer for National Security in Holland & Ritter.
Shein shipping concerns
Political oversight that goes beyond data protection could prove more difficult for Shein.
The retailer has long been criticized for the alleged use of forced labor in its supply chain and poor working conditions for its employees.
In 2021, the United States passed the Uyghur Forced Labor Prevention Act, which bans companies that produce goods in the Xinjiang region of China, notorious for its Uyghur internment camps, from selling in the United States, despite U.S. government authorities claiming that the supply chain of Shein has ties to Xinjiang. The company does not produce its own goods in the region and instead uses small manufacturers based in China, making it difficult to trace materials.
Shein has repeatedly denied allegations of forced labor and said the company is implementing a system to support compliance with U.S. law within the company.
The company is also criticized for exploiting loopholes in US customs law.
Because the company does not import its products in bulk to sell from a U.S. warehouse, but instead ships them on an order-by-order basis, it is exempt from some of the highest U.S. import taxes. Competitors have criticized this practice as giving Shein an unfair competitive advantage.
—CNBC’s Gabrielle Fonrouge and Reuters contributed to this report.
Don’t miss this one from CNBC PRO
Source link
2024-06-21 13:00:01
www.cnbc.com
