Shein IPO Faces Multiple Hurdles as Tax and Ethical Concerns Mount in London

The once-unstoppable fast-fashion giant Shein finds its London flotation plans increasingly threatened by regulatory challenges and ethical scrutiny. The Singapore-based retailer, which revolutionised online fashion with its ultra-low-cost business model, now confronts significant obstacles that could derail its anticipated stock market debut.

Originally targeting a valuation of $100 billion, Shein faces mounting pressure from investors to slash this figure to approximately $30 billion. The dramatic reduction reflects growing concerns about the sustainability of its business model, particularly as former US President Trump moves to eliminate the crucial ‘de minimis’ tax loophole that has been fundamental to the company’s success.

The tax provision currently allows Shein to export small-value packages tariff-free to US consumers, with similar arrangements in the UK for parcels under £135. The potential removal of this advantage in its largest market could force significant price increases, potentially alienating its core demographic of cost-conscious young shoppers.

Adding to the company’s challenges, campaign group Stop Uyghur Genocide has threatened legal action if UK regulators approve the listing, citing serious concerns about Shein’s supply chain practices. The retailer’s inability to verify its cotton sources has raised red flags, particularly regarding potential links to China’s Xinjiang province.

Despite executive chairman Donald Tang’s attempts to reassure investors through a recent letter defending the company’s business model, market analysts remain sceptical. Nicholas Found of Retail Economics suggests the timing is particularly unfortunate, with political complications and supply chain controversies creating an increasingly hostile environment for the proposed flotation.

The stakes are particularly high for London’s financial markets, which have struggled to attract major listings in recent years. While Shein’s flotation could provide a much-needed boost to the City, regulators must balance this potential benefit against concerns about regulatory credibility and ethical standards. The company’s ability to navigate these challenges in the coming months will likely determine whether its London listing ambitions can be realised.