Shein Group Ltd. has considered moving its base back to China in the hopes that it would help sway Beijing authorities to sign off on the fast-fashion retailer’s plans to go public in Hong Kong, according to people familiar with the matter.
Shein, which is currently domiciled in Singapore, has consulted lawyers about setting up a parent company in mainland China, the people said, asking not to be identified discussing a private matter. The discussions were preliminary and there’s no guarantee that Shein would go ahead with the move, they said.
The company declined to comment. Shein has said little about its initial public offering plans over the years other than saying that it was committed to go public — with Shein executive chairman Donald Tang reiterating this as recently as March.
After failing to clinch the regulatory approvals to go public in New York and London, Shein is running out of places to carry out its long-awaited IPO. That’s raising the stakes for its current plan to list in Hong Kong — where it has applied through the confidential route — making it even more crucial for the company to finally win over Chinese authorities, who need to sign off on the deal for it to go ahead.
Kengic Intelligent Technology Co., which provides smart warehousing systems for Shein, rose as much as 17.2 percent during Tuesday morning trading session after the news. Shares of Guangzhou Jiacheng International Logistics Co., one of Shein’s quality inspection service providers, narrowed their losses.
Though Shein is based in Singapore, the company is still subject to Chinese regulatory oversight because the China Securities Regulatory Commission requires all firms with substantial links to the country, even those that aren’t incorporated in China, to clear the regulator’s review prior to listing shares anywhere in the world.
The failure to get the CSRC’s approval for a London listing was key to why Shein, which relies on China’s massive garment manufacturing supply chain for production, turned its IPO focus to Hong Kong, Bloomberg News reported earlier this year.
According to lawyers who have handled IPO deals, changing a company’s domicile in the midst of a listing application is possible, though unusual.
“The commercial reality is that business needs and considerations continue to evolve after the submission of the A1 form,” said Ryan Tou, a partner at the White & Case law firm. “While the expectation is that the application should be ‘substantially complete’ by the time of A1 submission, it is generally acceptable for a listing applicant to undertake corporate restructuring after A1 submission, provided it is supported by a legitimate rationale and can be completed by the time of listing.”
The A1 form is a critical document that applicants need to submit before a listing in Hong Kong. Tou was speaking in general terms and not about any specific company.
A move to mainland China could be helpful in securing Chinese regulators’ approval, partly because it would allow Shein’s income to be taxable by authorities there, according to the people familiar with the matter.
The CSRC didn’t reply to requests for comment on this story.
After the formation of the Chinese parent entity, Shein’s current Singapore headquarters and all its overseas operations would become subsidiaries, according to the people.
And aside from taxes, a relocation would allow for the Chinese government to apply greater oversight into Shein’s large trove of data, which is also a key condition for the company to get Beijing’s greenlight for its Hong Kong IPO, the people said. China has been requiring companies since 2023 to undergo a data security review by local authorities before pursuing an IPO overseas.
For Shein, which was founded in the eastern Chinese city of Nanjing, moving its domicile back to the mainland would mark a reversal of 2021, when it moved its headquarters to Singapore. For years, the company has marketed itself as a global company and played down its Chinese roots.
Since being valued at $100 billion three years ago, Shein and its backers — including IDG Capital, Mubadala Investment Co., Tiger Global Management and HSG — have watched the firm’s value tumble by tens of billions of dollars. The company faced pressure from its investors to cut its valuation to about $30 billion, Bloomberg News reported in February.
Shein’s valuation has also come under pressure and fallen in private trades as it faced intense competition from rival Temu in key markets such as US and Europe. The US’s move earlier this year to close the so-called “de-minimis” loophole that allows Shein’s products to be shipped in small parcels from Chinese factories to American customers duty free also weighed on demand there.
Meanwhile, Shein’s pursuit of its elusive IPO has been riddled with obstacles. In 2023, US lawmakers campaigned to scrutinize the company’s alleged use of forced labor in Xinjiang, something with regard to Shein’s Tang has said the company had a “zero-tolerance” approach for. But the backlash ultimately led to the company giving up trying to list in New York.
The company then went for a London IPO but the process was dragged down by Shein’s difficulties in getting Beijing’s go-ahead. The company then pivoted to Hong Kong, where it has submitted a confidential filing, Bloomberg has reported. This is a method of applying for a listing that’s become increasingly common in the city after the local regulator relaxed rules for doing so.
If the listing goes ahead in Hong Kong, it would be the latest trophy listing for a city that’s been one of the world’s hottest IPO markets this year.
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Fast-Fashion Retailer Shein’s UK Sales Surged to $2.8 Billion in 2024
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