(Bloomberg) -- A multi-billion dollar listing by fast fashion label Shein could become London’s biggest ever IPO, although analysts are wary that the plan, revealed by Bloomberg News, may never come to fruition.

The company, founded in China and popular with young shoppers around the world, is applying to list in New York yet faces political and regulatory hurdles in the US as well as scrutiny from Chinese authorities. The Securities and Exchange Commission has been urged to block the listing by US politicians such as Marco Rubio, partly due to accusations that cotton from forced labor in the Xinjiang region was used in Shein’s clothing.

Amid the uncertainty, Britain’s Chancellor of the Exchequer Jeremy Hunt has already held talks with Shein’s executive chairman Donald Tang, who expressed an interest in a London listing, according to a person familiar with the situation.

However, the plans could face similar political opposition in the UK to that seen in the US.

“It’s sad to see how far the UK has sunk in such a short time — from a world leading nation on modern slavery to a haven for companies rejected by our allies for ethical reasons,” said Luke de Pulford of the Inter-Parliamentary Alliance on China. “This makes a mockery of our commitments to end slavery, and exposes the UK’s incoherent China strategy for the mess that it is.”

In response to a US house representative’s scrutiny of Shein’s supply chain in November, the company said it has a zero-tolerance policy for forced labor and requires its contract manufacturers to only source cotton from approved regions. Only 2.1% of Shein’s cotton tested positive for unapproved cotton, it added.

Tensions between Washington and Beijing have disrupted the once-healthy flow of Chinese listings in New York. A deal was struck in late 2022 to give US authorities access to Chinese audit documents, removing the threat of about 200 companies being delisted. However, the agreement has done little to revive the small number of Chinese companies going to market in the US since.

Read More: Shein’s Cotton Tied to Chinese Region Accused of Forced Labor

Meanwhile, London’s market has been rocked by the departure of several listed companies and a lack of new flotations, and Shein would provide a major boost. The fashion brand, now headquartered in Singapore, filed for an initial public offering in New York last year and private trades subsequently valued the company at about $50 billion.

If it listed a typical 20% to 25% of its capital at that valuation in the UK, it would surpass the listings of Russian oil company Rosneft in 2005 and mining giant Glencore Plc in 2011. It would be double the size of Arm Holdings Plc’s flotation in New York. Arm’s decision to choose the US last year embarrassed Britain after senior politicians lobbied for the UK chip-maker to return to its home market.

“The potential listing of Shein in London would be a huge gain for the stock market,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. “We have seen many UK businesses move to the US recently, but attracting a fast-growing business in the intersection between technology and retail would be a major win.”

The City of London has suffered an exodus of companies, with CRH Plc and Ferguson Plc switching their primary listings to New York while bookmaker Flutter and pharma company Indivior look set to follow in their footsteps.

Still, Shein may not provide the shot in the arm that London needs. 

“I would be stunned if Shein goes public in London over Hong Kong or NYC,” said Ben Harburg, managing partner at Magic Stone Alternative Investment Ltd. in Beijing, adding that the company may be seeking leverage in its battle to overcome political barriers in the US. 

Pressure on the UK government to boost London’s equities market could result in Shein facing less regulatory push-back than in the US, some analysts said. However, Danni Hewson, financial analyst at AJ Bell, said concerns around Shein’s supply chain, alongside the ethics and sustainability of fast fashion, will still attract scrutiny in the UK, making the blockbuster listing a potential “poison chalice.”

Shein’s consideration of London “is largely down to regulatory issues with its New York IPO rather than the LSE becoming a destination for multi-billion dollar companies,” added Kathleen Brooks, research director at XTB. “Any euphoria at Shein potentially listing in London is likely to fade quickly, and is unlikely to lead to a surge in Chinese firms listing in the capital.”

The International Corporate Governance Network is “concerned by the ‘race to the bottom’ that is taking place in many markets,” said Séverine Neervoort, its global policy director, while declining to comment on Shein specifically. The ICGN has warned the UK against diluting its listing rules too much in a bid to attract new business.

Chancellor Hunt is considering various measures to attract more companies to list in London, including a so-called British ISA, a tax-free savings account for investing in British stocks, which could be announced at the next UK budget on March 6. His talks with Shein were reported by Sky News earlier on Tuesday.

--With assistance from Filipe Pacheco, Joe Easton, Lisa Pham, Kit Rees and Joe Mayes.

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