Fast-fashion retailer Shayne as UK financial regulator checks supply chain oversight and assesses legal risks after Chinese Uyghur rights group challenges its listing It is taking longer than usual to approve the company's listing on the stock market, two people familiar with the matter said. Case.
The UK's Independent Anti-Slavery Commission, a Home Office watchdog, has also raised concerns within the government about Shein's initial public offering, citing allegations about supplier labor practices.
Shine, which is headquartered in Singapore and sells $5 tops and $10 dresses, mostly made in China, in 150 markets around the world, secretly applied to the Financial Conduct Authority to list in London in early June.
Shain is also awaiting approval from Chinese securities regulators for its London IPO, two separate sources said, adding that approval would likely come after the FCA's decision.
Advocacy group Stop the Uyghur Genocide (SUG) announced a legal challenge in June, and in August sent a letter to the FCA alleging that Shein was using cotton from China's Xinjiang region.
The United States and NGOs have long accused China of human rights abuses in Xinjiang, where they say Uyghurs are forced to work in the production of cotton and other products. The Chinese government denies any abuses.
Schein declined to answer Reuters' questions about the FCA process. A company spokesperson said Shein has a zero-tolerance policy against forced labor and is committed to respecting human rights.
Last week, the company announced it would establish a global external ESG advisory board to strengthen governance.
In its sustainability report published in August, Shein said it had identified two cases of child labor in its supply chain in 2023, but no cases of forced labor. Like Primark and other clothing retailers, Shein uses isotopic testing service Oritain to verify the origin of the cotton, which makes up 9.9% of the fiber in Shein-branded products.
FCA declined to comment on the listing or the delay. An FCA spokesperson said the timeline for IPO approval varies on a case-by-case basis. Market experts say it typically takes several months to reach a decision.
Lorna Emson, a partner at law firm McFarlanes, said the FCA was under no obligation to assess evidence submitted by civil society groups and would normally let investors form their own positions. When they discover compliance concerns, they tend to address them privately with the companies themselves.
However, NGO pressure is unlikely to ease. Lucy Blake, partner at law firm Jenner & Block, said: “Regulators have more to consider, with increased scrutiny of NGOs and activist communities that are increasingly well-funded and litigious.'' It is requested that the matter be considered under the
NGOs are not the only ones raising concerns about Shein's IPO.
The Independent Anti-Slavery Commissioner wrote to the Home Office and the Department of Commerce about the IPO in June, according to an unreported letter obtained by Reuters through a Freedom of Information request.
“Encouraging companies like Shayne to enter the UK market means falsely endorsing poor labor practices and prioritizing attracting companies to the UK over human rights abuses,” said Commissioner Eleanor. Lyons wrote.
The Home Office and the Department of Business jointly responded that the FCA makes its own decisions about listings and that the UK has rules to prevent modern slavery.
Like other retailers, Shein must comply with the following European Union regulations on forced labor and the U.S. Uyghur Forced Labor Prevention Act. Both of these regulations are considered to be stronger than the UK's Modern Slavery Act.
The FCA recently simplified its listing rules but is under pressure from the five-month-old Labor government to end its IPO drought.
In a letter to the FCA in mid-November, Rachel Reeves said: “We want to ensure that we support innovative new companies to enter the market.'' The British Prime Minister also said regulation should be less risk-averse and more growth-focused.
A regulatory lawyer told Reuters on condition of anonymity that the FCA needs to assess Shein's governance and ensure its disclosures should the SUG apply for judicial review of its IPO approval. spoke.
The FCA declined to comment on SUG's legal challenge or potential judicial review application.
Rahima Mahmut, SUG's executive director, told Reuters she plans to meet with lawyers this week to discuss next steps.
Last year, NGO Client Earth applied for a judicial review of the FCA's decision to approve oil and gas producer Ithaca Energy's IPO, citing insufficient disclosure of climate risks in its prospectus, but the High Court rejected the application. did.
Again, some lawyers believe that the SUG's application for judicial review will fail.
The performance of Shein's IPO, which was valued at $66 billion in a funding round last year, will depend on what risks the FCA decides need to be included in the prospectus and how they are factored in. It will be partially influenced.
Labor exploitation is rampant in the supply chains of retailers and brands around the world, in both low-end and high-end fashion.
Shein's revenue is expected to reach $50 billion this year, up 55% from 2023, according to Coresight Research.
