Shein, an online retail giant founded in China, had big ambitions to go public in New York. But as relations between Washington and Beijing soured, the ultra-fast fashion company began to look more closely at a back-up plan across the Atlantic.
The company is now more focused on the London Stock Exchange for its initial public offering, according to two people with knowledge of the matter. That might not have been the company’s first choice – but it would be a big win for Britain, which was worried its capital would lose its status as a global financial centre.
Jeremy Hunt, Britain’s top finance official, reportedly courted Shein, expecting a major IPO to boost London’s status as one of the world’s leading financial centers. A spokeswoman for Sheina declined to comment; Britain’s Treasury also declined to comment.
By many measures, London is still a key financial center where precious metal prices are fixed every day, trillions of dollars in foreign currency are traded and global insurance contracts are written. But global competition for investors – between cities like New York, Hong Kong, Dubai and Singapore – is intense. Stock listings are a prominent business, and a large IPO like Shein’s could be seen as a price that boosts the local financial market and paves the way for more companies to follow.
In an effort to strengthen London’s position, British officials are trying to overhaul the financial sector to make the city’s stock market more attractive to modern industries, especially technology companies, rather than relying on sectors such as banking that have historically built London’s financial sector.
London’s reputation for financial services also took a hit after Britain left the European Union amid fears that banks would move money and workers to the continent. Some of these fears were exaggerated, but Brexit has taken its toll. Amsterdam, for example, overtook London as Europe’s largest center for stock trading three years ago, according to Cboe Capital Markets.
The emphasis on attracting IPOs to London is partly driven by pride, said Gbenga Ibikunle, professor of finance at the University of Edinburgh Business School.
“London used to be recognized as the center of the financial world,” he said. “We know that’s no longer the case, and that’s been exacerbated by us leaving the EU, so there’s limited business in London in terms of volumes. And that also reduces some of the influence that the market has.”
Analysts say that aside from pride, there are good economic reasons for having a healthy bid list. For one thing, they support a range of jobs in financial and professional services, from bankers to lawyers. Public companies are also open to more scrutiny, which can provide better insight into the health of the economy.
Concerns that London is losing its appeal to publicly traded businesses have grown over the years as several companies, including building materials company CRH and betting operator Flutter Entertainment, have moved their primary offerings from London to New York. Others, such as oil giant Shell, have acknowledged studying the idea.
Even those who left were not replaced by a wave of companies that entered the stock exchange. Last year brought a significant blow when Arm, a British computer chip company, listed its shares in New York. That offering, the largest in 2023, raised nearly $5 billion.
New York is a long-term destination for IPOs Many in the financial industry point to concerns that the London market, with less trading volume, leads to lower valuations than New York exchanges can provide.
Being listed alongside similar companies on the same exchange is an advantage as the rising tide attracts more analysts and investors focused on these stocks, said Scott McCubbin, who leads EY’s UK and Ireland IPO team.
Part of the problem, analysts say, is that the London Stock Exchange is dominated by companies from older industries such as banking, mining and oil and gas. Britain has struggled to attract tech company listings, and high-profile losers have exacerbated the problem. Deliveroo, a London-based food delivery company, went public in 2021 and was labeled as “the worst IPO in London’s history”. (Its stock is down 63 percent from its peak.)
“The rule change that’s going on right now says we need to become much more attractive to technology businesses, especially startups, especially businesses that don’t have a long history of profitability,” Mr McCubbin said. It’s about companies building on “what the next 10 years will look like, not what the last 10 years looked like.”
But advisers warn that companies considering an IPO in New York must have some natural connection to the US market to benefit from trading there. Flutter, for example, generates more than a third of its revenue in the United States. Otherwise, investment fund managers would have little incentive to focus on smaller British companies over larger ones that are more important to Americans.
The slowdown in supply in London is part of an industry-wide shortage that has dragged on for more than a year amid high interest rates, conflict and geopolitical uncertainty. Just 16 companies went public in New York last year, down 84 percent from 2022, according to the London Stock Exchange Group; by comparison, 10 companies went public in London, down 88 percent.
Companies that went public in New York last year raised a combined $9.5 billion, while London companies raised $442.7 million, according to data from the London Stock Exchange Group. Yet, even as London tries to compete with New York, it is a far more popular destination than its European neighbors such as Paris and Amsterdam.
The UK government has announced a series of reforms over the past few years to encourage companies, particularly technology start-ups, to raise capital through IPOs in London. Britain, for example, reduced the number of shares a company must hold in public hands to 10 percent from 25 percent and allowed certain dual listings in the premium segment of the market, changes intended to encourage tech founders who might want to retain more control of their company after EVEN AFTER
Other planned changes are expected to make it easier for companies to make large acquisitions or other transactions without obtaining shareholder approval.
“We’ve already seen some reforms, but a lot of it is either currently in place or planned but still to come,” said Julie Shacklady, UK Finance’s trade group director. “So we’re not really seeing the benefit of the overall reforms yet.”
But she said she was “cautiously optimistic” about a market recovery later this year and did not expect the election, even if it resulted in a new government, to derail changes.
In Shein’s case, the company said one reason for going public is to be more transparent in the face of allegations of poor labor and environmental practices. London is considered to have high standards for companies with strict reporting requirements and new sustainability rules.
In addition to Shein, deal makers and boosters in the London market point to other promising news for the UK stock market. Raspberry Pi, a maker of low-cost computers, has said it plans to list on the London Stock Exchange.
A number of companies owned by private equity firms – which regularly take the businesses they own public and provide a regular source of listings – could hit the London Stock Exchange from next year, one company adviser said.
As the companies debate whether to list in New York or London, Mr Hunt and Bim Afolami, the finance minister, met tech companies this month to promote Britain as a place to raise money.
“We’ve been beaten for a number of years, but we’re actually very optimistic this year that we’ve really turned the corner,” Mr Afolami said at an event in London this month.