Shein files file with Chinese regulator for planned US flotation, sources say

Fashion company Shein is seeking approval from Beijing to go public in the United States to comply with new listing rules for local companies, two sources with knowledge of the matter said, a decision it has made despite efforts for boosting its global credentials.

The move could delay the fast fashion giant's plans for its initial public offering (IPO), which will likely not only face tougher-than-expected scrutiny from U.S. regulators in an election year, but will also have to pass through a lengthy approval process with numerous Chinese regulators.

Shein confidentially filed to go public in the United States in November and could launch its new share sale in 2024, in what will likely be one of the most valuable Chinese-founded companies listed in New York, Reuters reported, citing sources.

However, in the same month, Shein also filed with the China Securities Regulatory Commission (CSRC) to go public in the US, making it subject to Beijing's new listing rules for listed Chinese companies. on the stock market abroad, the sources said.

That move, which had not been reported before, calls into question Shein's efforts over the years to distance itself from China and position itself as a global company that included moving its headquarters to Singapore from Nanjing, capital of the eastern province. Jiangsu China.

Shein did not immediately respond to a request for comment on Friday, and neither did the CSRC.
China's new listing rules that came into force in March last year stipulate that local companies seeking to list on offshore markets must apply to the CSRC and receive clearance from domestic regulators before proceeding.

One of the two sources warned that tensions between Beijing and Washington in a US election year would also likely dash Shein's hopes of listing in New York in the near future.

The sources declined to be identified because they were not authorized to speak to the media.

Under CSRC rules, a number of authorities such as the National Development and Reform Commission, which oversees foreign stakes in local companies, the cybersecurity regulator and other industry regulators can be involved in approving IPO applications in the foreign.

Involving more regulators beyond the securities regulator could create more uncertainty as some agencies have different priorities, such as national security or data protection, bankers have said.

Under the new rules, if an issuer has 50% or more of its operating income, profits, total assets or net assets generated in mainland China and meanwhile the majority of its business activities are carried out in the country or high managers in charge of If its business operation and management are mostly Chinese citizens or domiciled on the mainland, it would be recognized as a Chinese company and subject to the new rules.

The rules also say that the determination of whether the company is Chinese and listed overseas must be made “on the basis of substance and not form,” which lawyers and bankers say gives discretion to the CSRC.

Founded by Chinese entrepreneur Chris Xu in China in 2012, Shein has since grown to become a global fashion marketplace, serving customers in more than 150 countries and employing more than 11,000 people, according to its website.

The company, known for its cheap, mass-market fashion, produces clothing in China to sell online in the United States, Europe and Asia, excluding China.

It does not own or operate any manufacturing plants and instead works with around 5,400 third-party manufacturers, primarily in China. It ships most of its products directly from China to buyers by air in individually addressed packages.