Shein, the ultrafast fashion giant founded in China, originally set its sights on a New York IPO. However, as diplomatic tensions between Washington and Beijing intensified, the company began exploring alternatives, with the London Stock Exchange emerging as a favorable option.
The decision to consider London, although not Shein’s initial choice, represents a significant potential win for Britain. The nation has been striving to maintain London’s status as a premier global financial hub amidst stiff competition from cities like New York, Hong Kong, Dubai, and Singapore.
Britain’s Chancellor of the Exchequer, Jeremy Hunt, has actively courted Shein, recognizing that a major IPO could significantly enhance London’s financial standing. This strategic move aligns with the broader efforts by British officials to revitalize the city’s financial sector, particularly by attracting tech companies and modern industries rather than relying solely on traditional sectors like banking.
Despite its historical significance, London’s financial market has faced challenges post-Brexit. Concerns about banks relocating to the continent led to a decline in trading volumes, impacting London’s market influence. Notably, Amsterdam surpassed London as Europe’s largest share-trading center three years ago, highlighting the competitive pressures the city faces.
A successful Shein IPO in London could set a positive precedent, encouraging other companies to follow suit. British officials are actively working to reform the financial sector to make the London market more attractive. This includes adjusting regulations to favor tech start-ups and modern industries, with changes like reducing the public shareholding requirement from 25% to 10% and allowing dual-class listings on the premium market segment.
The financial ecosystem in London remains robust, with significant daily transactions in precious metals, foreign currencies, and global insurance contracts. However, the city’s appeal for public listings has waned as several high-profile companies, including CRH and Flutter Entertainment, shifted their primary listings to New York. The recent listing of Arm, a major British tech company, in New York instead of London was a notable blow.
New York has long been a preferred destination for IPOs, offering greater trading volumes and potentially higher valuations. However, listing in New York is most beneficial for companies with significant ties to the U.S. market. For instance, Flutter generates over a third of its revenue in the United States, justifying its choice of New York over London.
The slowdown in IPOs is a global trend, exacerbated by high interest rates, geopolitical tensions, and economic uncertainties. Last year, New York saw a significant decline in IPOs, with only 16 companies going public, compared to 10 in London. However, the capital raised in New York far exceeded that in London, reflecting the disparity in market dynamics.
British officials remain optimistic about reversing this trend. Recent reforms aim to attract more companies to the London market, with promises of easier regulations for significant transactions and acquisitions. There is cautious optimism that these changes will bear fruit, potentially attracting a wave of new listings in the near future.
For Shein, going public is also a step towards greater transparency amid scrutiny over labor and environmental practices. London’s stringent reporting and sustainability standards could serve as a positive framework for the company.
Beyond Shein, other promising developments include Raspberry Pi’s plans to list on the London Stock Exchange, signaling potential growth in tech listings. Additionally, private equity firms are expected to bring more businesses public, contributing to a healthier pipeline of listings.
In this competitive landscape, London’s efforts to attract IPOs and modernize its financial market are crucial. With strategic reforms and active promotion by officials like Hunt, there is hope that London can reclaim its stature as a leading global financial center.