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Shein voluntarily seeks China's nod for U.S. IPO

Photo: Yuki Iwamura/Bloomberg via Getty Images

Shein is asking for China's permission to go public in the U.S., a source close to the company's thinking confirms to Axios.

Driving the news: The Singapore-based fast fashion and digital commerce company has been ramping up for an IPO in the U.S. since last year.

Catch up fast: Last week, Reuters reported that Shein was seeking Beijing's nod for an IPO.

  • Earlier this week, the Wall Street Journal also wrote that the company sought a greenlight from its former home country.

Yes, but: The source refuted WSJ's report that Shein is being investigated by China's Cyberspace Administration.

Details: Up to this point, the Chinese government has made inquiries about the company's supply chain, the source said.

  • So far, nothing has materialized during the process that could delay a public offering, the source adds.
  • The IPO process for Chinese companies typically takes six to 12 months, Coresight research analyst Sunny Zheng tells Axios.

Zoom in: Despite being based in Singapore and selling no products in China, Shein chose to seek China's approval because what constitutes a Chinese company is not clearly defined, a source familiar with the situation says.

  • If it succeeds, it would eliminate having to outline that risk in an SEC filing, the source says.

Be smart: There's a chance the government would consider it a Chinese company because its board and executive management team are comprised of Chinese citizens, says Drew Bernstein, co-chairman of Marcum Asia CPAs.

  • In the world of accounting, that factors heavily in designating a home country for a company, he tells Axios.
  • Shein was founded and based out of Nanjing before moving its headquarters, and a bulk of its supply chain is based there.

Reality check: The hurdle for the company may be here in the U.S. due to election-year politics. Skepticism of China is bipartisan, Bernstein says.

  • Given that reality, the SEC may not rush to review Shein's registration statement, the source familiar says.
  • The company must also win over investors and neutralize negative news coverage, sources have previously acknowledged to Axios.
  • Public market conditions must be optimal, and that means a handful of successful IPOs to reopen it, the source familiar says.

The big picture: Shein's IPO quest is a bellwether being watched by other Chinese companies that also want to go public in the U.S., Bernstein says.

The bottom line: Shein doesn't want to become the next Didi, which had its business kneecapped by China after pushing forward with its U.S. IPO before receiving Chinese regulatory approvals. So it will wait. For as long as that takes, per Axios' Dan Primack.

Shein and the SEC declined to comment.

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