This decision comes as a setback for London's ambition to revitalize its capital markets, which have seen a string of delistings and companies choosing other exchanges for their listings. The absence of what could have been one of the largest UK IPOs in the past decade risks delaying efforts to restore the City's appeal, especially amidst a volatile global economic climate.
Alasdair Steele, a corporate partner with law firm CMS, acknowledged the potential impact, stating, "Shein's listing would have been a boost to the market." However, he tempered expectations, adding, "there was never any guarantee that a single large listing would reignite the IPO market." Last summer, Britain introduced reforms to its listing rules in an effort to make its exchanges more attractive to companies. Yet, these changes have not yet translated into substantial deal-making. Data from Dealogic reveals that UK equity capital markets deal values have fallen by 16% to $9.2 billion year-to-date compared to the same period last year, and are down more than 70% from their 2021 peak. In contrast, Hong Kong has seen its equity capital markets deal values increase nearly fivefold.
In the broader context, UK-focused equity funds have experienced continuous outflows for many months, further complicating the investment landscape. Shein, whose largest market is the United States, faces its own set of challenges. Its low-price model is under potential threat after President Donald Trump ended a duty exemption for small packages shipped from China. Even before the possibility of a tariff war, Shein had already scaled back its valuation ambitions and faced opposition from some lawmakers.
Beyond economic considerations, Shein has also faced scrutiny over its supply chain. Allegations have surfaced that its clothes contain cotton from China's Xinjiang province, a region where the U.S. and various NGOs have accused the Chinese government of human rights abuses and forced labor. Beijing has consistently denied these allegations. Shein has previously stated that it maintains a zero-tolerance policy for forced labor and mandates its contract manufacturers to source cotton exclusively from approved regions. Earlier this year, a senior lawyer from Shein was questioned by a British parliamentary committee regarding its supply chain. The committee chair, Liam Byrne, subsequently raised concerns about the evidence from that hearing with both the London Stock Exchange and Britain's Financial Conduct Authority (FCA), the latter being responsible for approving IPOs.
In written responses to the parliamentary committee in January, Shein provided details of its supply chain in China, asserting that it does not permit Chinese cotton in clothes sold in the U.S., where a law prohibits products made with Uyghur forced labor. James Alexander, CEO of the UK Sustainable Investment and Finance Association, a body promoting sustainable finance, commented, "The prospect of Shein listing in the UK has long raised concerns with investors around the company's transparency, and the risks of being exposed to allegations of modern slavery and human rights abuses in its supply chains." Shein offered no immediate comment on the latest developments.
While some might view this as a blow to London, Lisa Gordon, chair of investment bank Cavendish and a member of the Capital Markets Industry Taskforce (CMIT) – a group dedicated to the revival of Britain's markets – suggests the issue is more related to China. "The Shein news is much more to do with China than London," Gordon stated, adding, "The London market is in a very good position."
This is not London's only significant IPO loss recently. In February, Unilever announced its decision to list its ice cream business primarily in Amsterdam. This follows a trend of other London-listed companies, such as Shell, considering or executing moves of their primary listings elsewhere, as seen with online betting company Flutter.
Britain's Treasury reiterated that listing decisions for firms in the UK are made by the independent regulator, emphasizing, "we continue to focus on making the UK the best place for businesses to raise capital.” The London Stock Exchange declined to comment on the matter.
Despite these high-profile defections, advisers and trade groups express optimism, reporting a recent resurgence in potential IPO candidates. Professional services firm MHA successfully raised 98 million pounds on London's junior market in April. Additionally, Cobalt Holdings and online trading platform iForex have publicly announced their intentions to list their shares on the London Stock Exchange in the coming months, indicating a potential glimmer of hope for a more active IPO market in the near future.