China-founded online retail giant SHEIN had big ambitions of going public in New York, but as relations between Washington and Beijing have deteriorated, the ultra-fast fashion company has begun taking a closer look at transatlantic alternatives.
The company is now focusing on the London Stock Exchange for its IPO, according to two people familiar with the matter, which may not have been its original choice but would be a big win for a Britain worried about losing London's status as a global financial center.
British Treasury Secretary Jeremy Hunt is reportedly courting Shane in the hopes that a big IPO would bolster London's position as a leading global financial center. A Shane spokesman declined to comment. The U.K. Treasury also declined to comment.
By many standards, London remains a major financial hub, where the price of precious metals is set daily, trillions of dollars of foreign currency trade and global insurance policies are written. But competition for investors is fierce between cities like New York, Hong Kong, Dubai and Singapore. Going public is serious business, and big IPOs like Shein's can be seen as a prize that bolsters local financial markets and sets the stage for others to follow.
To strengthen London's position, British authorities are working to reform its financial sector, seeking to make the city's stock market more attractive to modern industry, particularly tech companies, rather than relying on banks and other sectors that have historically built London's financial sector.
London's reputation for financial services has also taken a hit from worries that banks would relocate money and workers to continental Europe after Britain leaves the European Union. While some of those fears were overblown, Brexit did deal a blow. Amsterdam, for example, overtook London as Europe's largest stock trading center about three years ago, according to CBOE Capital Markets.
Gbenga Ibikunle, professor of finance at the University of Edinburgh Business School, said the focus on attracting listings to London was partly driven by pride.
“London used to be perceived as the financial capital of the world,” he said. “We know that's no longer the case. Brexit has made things worse, trading volumes have fallen in London and so the market's clout has declined somewhat.”
Beyond pride, analysts say there are economic reasons for maintaining a healthy job market. First, public companies support a wide range of financial and professional-services jobs, from bankers to lawyers, and they are subject to greater scrutiny and can provide greater insight into the state of the economy.
Concerns that London is losing its attractiveness for listed companies have grown over the years after several companies, including construction materials company CRH and gambling operator Flutter Entertainment, have moved their primary listings from London to New York. Others, including oil giant Shell, have acknowledged they are considering the idea.
Nor has a flurry of public companies popped up to replace those who left: Last year, British computer-chip maker Arm Inc. suffered a major blow when it listed shares in New York, raising nearly $5 billion in the biggest IPO of 2023.
New York has been a long-time venue for IPOs, and many in the financial industry have expressed concern that valuations may be lower in the London market, where trading volume is lower, than on New York exchanges.
Scott McCubbin, head of EY's UK and Ireland IPO team, said there are advantages to listing alongside similar companies on the same exchange because rising share prices will attract more analysts and investors to focus on those stocks.
Part of the problem, analysts say, is that the London Stock Exchange is dominated by companies in older industries like banking, mining, and oil and gas. Britain has struggled to attract tech companies to list, and high-profile failures have exacerbated the problem. London-based food delivery company Deliveroo went public in 2021 in what was called “London's worst IPO ever.” (The company's shares are down 63% from their peak.)
“The rule changes that are happening now are saying we need to become more attractive to technology companies, particularly startups, particularly those that don't have a long track record of revenue,” McCubbin said. This is about companies building on “what the next 10 years are going to be, not what the last 10 years were.”
But advisers warn that companies considering a New York IPO must have a natural connection to the U.S. market to benefit from trading there. Flutter, for example, generates more than a third of its revenue in the U.S. Otherwise investment fund managers would have little incentive to focus on smaller British companies rather than larger ones with American connections.
The slowdown in London listings is part of an industry-wide equity shortage that has been ongoing for more than a year amid high interest rates, conflict and geopolitical uncertainty. Just 16 companies listed in New York last year, an 84% drop from 2022, according to the London Stock Exchange Group, while 10 companies listed in London, an 88% drop.
But companies that listed in New York last year raised a total of $9.5 billion, compared with $442.7 million in London, according to data from the London Stock Exchange Group.Still, while London struggles to compete with New York, it remains a much more popular destination than neighboring European cities such as Paris and Amsterdam.
The UK government has announced a series of reforms in recent years to encourage companies, particularly technology startups, to raise capital through IPOs in London. For example, the UK has reduced the public offering percentage that companies must hold from 25% to 10% and allowed certain dual listings in a premium segment of the market, changes intended to encourage technology founders who want to retain more control over their companies after their IPO.
Other planned changes are expected to make it easier for companies to make large acquisitions and other transactions without shareholder approval.
“Some reforms have already been implemented, but the majority are either underway or planned but not yet implemented,” said Julie Shackradi, director of industry body UKFinance, “so the full benefits of the reforms are yet to be felt.”
But she said she was “cautiously optimistic” about a market recovery later this year and did not expect reforms to be derailed even if elections brought about a new government.
In Shine's case, the company said one of the reasons it was going public was to increase transparency after facing accusations over poor labor practices and environmental stewardship, and London is seen as having high standards for companies, including strict reporting requirements and new sustainability rules.
Beyond Shane, dealmakers and London market advocates point to other encouraging news for the UK stock exchange: Low-cost computer maker Raspberry Pi has announced plans to list on the London Stock Exchange.
A series of companies owned by private equity firms could be listed on the London Stock Exchange from next year, one corporate adviser said. Private equity firms regularly take the companies they own public, providing them with a regular venue for listing.
As companies debate whether to list in New York or London, Hunt and Finance Minister Bim Afolami met with tech companies this month to promote Britain as a place to raise capital.
“We've been kicking ourselves in the past few years, but I'm very optimistic that this year things have really turned around,” Afolami said at an event in London this month.
