(Bloomberg) -- Fast-fashion company Shein is considering the possibility of switching its initial public offering to London from New York because of hurdles to the listing in the US, according to people with knowledge of the matter.

Shein, which was founded in China but is now headquartered in Singapore, is in the early stages of exploring the London option as it has judged it unlikely that the US Securities and Exchange Commission will approve its IPO, the people said, asking not to be identified discussing confidential information. 

Shein is still working on its application to list in the US — its preferred location, the people said. It would need to file a new overseas listing application with Chinese regulators if it decided to switch to London or elsewhere, they added. Other venues including Hong Kong or Singapore may also be considered, two of the people said.

A representative for Shein declined to comment.

Read More: Shein Backers Offer to Sell at 30% Discount as IPO Prospects Dim

London Calling

A listing in London would be a potential boon to the beleaguered market, after one of the worst years for IPOs in its modern history. About $1 billion was raised in the UK via IPOs last year, the lowest level in decades, according to data compiled by Bloomberg. 

The UK is also struggling to stem an exodus of firms to the US and elsewhere. Chip designer Arm Holdings Plc spurned London for a New York IPO last year, even after the UK government lobbied for a domestic listing by the Cambridge, England-based company. Already-listed companies are migrating abroad, with TUI AG shareholders voting earlier this month to delist from the London Stock Exchange and move trading primarily to Germany.

“Listing on the LSE is a short-term compromise taken by Shein to prioritize certainty over valuation and liquidity,” said Ke Yan, head of research at DZT Research in Singapore. Asked if Shein’s possible shift might encourage Chinese firms to list in London, he said: “Short answer is ‘No’,” given the market is much smaller than the US, as well as exchanges in Hong Kong and China.  

Small and Rare

US IPOs by Chinese companies have mostly been small and rare in the years since Didi Global Inc. was forced off the boards in New York, part of a crackdown that essentially closed the market to first-time share sales by Chinese firms. Amer Sports Inc.’s $1.6 billion offering in February was the biggest China-backed IPO to tap the US market since Didi raised $4.4 billion in 2021, and the first to raise more than $200 million in that time.

Read More: Largest Chinese US IPO Since Didi Comes Below Range

Shein has been subject to scrutiny from the US, with Senator Marco Rubio among those asking the SEC to block its listing, saying the company needs to disclose more about its operations in China. Last year, a member of US Congress asked for a probe into Shein’s cotton supply from Xinjiang. US-China trade tensions have also been simmering for years.

“Firms closely linked to China will find it more challenging to comply with US requirements regarding transparency and how to satisfy Chinese regulators simultaneously,” said Gary Ng, a senior economist for Natixis in Hong Kong. “There will be more trials to find alternatives, and the Shein case can serve as a case to test water,” he said. “If Hong Kong’s sentiment improves eventually, it may still be the best and easiest choice.”

Read More: China Scrutiny of Shein IPO Plan Shows Regulator Reach Widening

A pioneer of ultra-fast fashion with items such as shirts and swimsuits for as little as $2, Shein filed last year for a US IPO aiming for a valuation of $80 billion to $90 billion, people familiar with the matter said at the time. Private trades in late 2023 valued the company much lower, at about $50 billion. 

--With assistance from Daniela Wei and Filipe Pacheco.

(Updates with comments from analysts in seventh and penultimate paragraphs.)

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