Shein’s IPO: Value Creation or Reputation Risk?

Shein’s awaited IPO has turned into more than just a business move. It now shows how global expansion is affected by ESG concerns, regulatory barriers and changing investor expectations. What started a s a planned New York listing has now been pushed towards London, and most recently Hong Kong. This back and forth shows more than market strategy. It shows the increasing challenges around trust, transparency and long-term value (Levingston et al., 2025).

On the surface, Shein’s performance looks impressive. Shein reported $38 billion in annual revenue and was previously valued at $66 billion (Onita et al., 2025). However, valuation does not always mean value. Despite getting FCA approval, the London IPO stalled due to concerns about Shein’s China based supply chains, ESG record, and recent tariffs. With the US now reimposing duties of up to 120% on fast fashion imports, Shein’s American business, which makes up around a third of its revenue, faces a major hit to its margins (Wu & Onita, 2025). Furthermore, the company’s recent profit dip has raised more questions about whether the growth model is actually sustainable (Olcott et al., 2025).

This links to agency theory. Sometimes management pushes for high profile IPOs to meet internal targets or increase company reputation, but if decisions are not aligned with stakeholder interests, they can cause more harm than good. Ab Aziz et al. (2025) found that ESG issues negatively affect firm performance, and having gender-diverse boards and sustainability committees can help reduce this risk. Shein has been criticised for labour conditions in its supply chain, especially in Xinjiang (Levingston et al., 2025). While the FCA noted that Shein disclosed these risks in its IPO filing, just being transparent is not always enough. If governance structures are not in place to fix the issues, investors will not be convinced, therefore affecting valuation just as much as financials.

Stakeholder theory helps to explain why this IPO has not gone smoothly. Getting listed in a new market does not just require approval from regulators, it also means winning over the public, customers, advocacy groups and investors. Shein’s environmental record and supply chain ethics have both been questioned, which makes investors nervous. According to Abate et al. (2024), integrating ESG properly can reduce portfolio risk and improve long-term returns, but only if the company shows real commitment. If ESG policies are shallow or performative, they create more uncertainty, especially when global trade rules keep shifting (Aagaard & Nielson, 2021). According to this, Shein’s leadership has been vague when asked about its valuation goals, which only fuels doubts about transparency (Onita, 2025).

Younger retail investors make this even more complicated. Aamodt (2022) found that Gen Z and millennials are more likely to support companies they feel have the same values, even without formal ESG ratings. Platforms like Robinhood have made it easier for this group to invest based on beliefs, not just profit. If Shein cannot convince this generation that it is serious about ethics and sustainability, it could struggle to attract interest during the IPO. The numbers support this as ESG related funds have seen billions in inflows while those with poor ESG scores have experienced outflows (Aamodt, 2022).

To keep access to the US market, Shein has started shifting production to places like Brazil and Turkey. But these newer sites do not match the scale of the 7,000 suppliers Shein relies on in China (Wu & Onita, 2025). Changing production at this level will raise costs and may upset Chinese regulators. This adds another layer of agency risk, as Shein are trying to meet international investor demand while also managing political and operational pressure at home. Without strong governance, the company risks stalling its own progress.

Shein’s focus on tech and low-cost model has helped to decrease expenses, but capital structure is more than saving money. When value depends on reputation and ESG, being transparent accountable is essential.

If Shein wants to build long-term value, the IPO needs to be more than a funding event. It must reflect a shift in governance, ESG accountability and alignment with stakeholder expectations, anything less puts its future growth at risk.

References

Aamodt, S. K. B. (2022). Retail Investors- Preference on ESG Funds: Evidence from Robinhood Users (Order No. 31009553). Available from ProQuest Dissertations & Theses Global. (3059430298). https://www.proquest.com/dissertations-theses/retail-investors-preference-on-esg-funds-evidence/docview/3059430298/se-2

Ab Aziz, N. H., Alshdaifat, S. M., & Al Amosh, H. (2025). ESG Controversies and Firm Performance in ASEAN: Do Board Gender Diversity and Sustainability Committee Matter? Business Strategy & Development, 8(1), 1–14. https://doi.org/10.1002/bsd2.70094

Abate, G., Ignazio Giorgio Basile, & Ferrari, P. (2024). The integration of environmental, social and governance criteria in portfolio optimization: An empirical analysis. Corporate Social Responsibility and Environmental Management, 31(3). https://doi.org/10.1002/csr.2682

Levingston, I., Wu, Z., Onita, L., & Arnold, M. (2025, May 28). Shein shifts focus from London to Hong Kong for listing. @FinancialTimes; Financial Times. https://www.ft.com/content/54de1512-2252-4766-89e4-5f3c625794e8

Olcott, E., Wu, Z., Onita, L., & Leng, C. (2025, February 23). Shein profits slump in fresh challenge to long-planned London IPO. @FinancialTimes; Financial Times. https://www.ft.com/content/021b5460-76e1-408d-83f6-91b9e05180d7

Onita, L. (2025, March 14). “Zero conversations” about London IPO valuation, says Shein boss. @FinancialTimes; Financial Times. https://www.ft.com/content/b0f841c8-2944-4ea6-88dc-651e46cda336

Onita, L., Arnold, M., & Ring, S. (2025, April 11). Shein wins nod from UK regulators for London IPO. @FinancialTimes; Financial Times. https://www.ft.com/content/72cb3219-b0a0-40a2-9008-97050bb184f6

Wu, Z., & Onita, L. (2025, April 30). Shein explores US restructuring as tariffs threaten to derail London IPO. @FinancialTimes; Financial Times. https://www.ft.com/content/37b30f64-f9e8-4c1a-ad50-23e7c61880a7

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