Proactive Investors - A Shein initial public offering on the London Stock Exchange (LON:LSEG) could be next year’s answer to Deliveroo PLC (LSE:LON:ROO)’s disastrous 2021 flotation, AJ Bell’s investment director Russ Mould has warned.
Food-delivery group Deliveroo famously fumbled its market debut that year, lending it the unfavourable title of worst IPO in London’s history.
A combination of bad timing, an inflated valuation and concerns over workers’ rights caused the stock to collapse by a third in the opening minutes of trading.
Deliveroo’s usage of the controversial ‘gig economy’ employment model in particular caused many investors to shun the company.
This, according to Mould, should give Shein pause for thought.
“One can only imagine the number of questions from prospective investors, given uncertainties around business practices, supply chains, corporate governance, alleged intellectual property infringement, costs, margins and tariffs.
“All these need to be answered before Shein has a chance of getting its IPO away,” Mould stated.
He continued: “Under normal circumstances, Shein’s position as a fast-growing retailer expanding across multiple geographies and taking market share from established players would have made it a no-brainer for investors.
“However, there is an element of ‘it’s too good to be true’ with Shein that makes it a harder investment decision.
“Many people think there is a catch with how it is able to sell goods so cheaply – namely that it is using a supply chain that relies on workers that are poorly paid and poorly treated.
“Shein will need to rigorously prove this is not the case if it is to win over investors for the IPO.”
Although Shein has not confirmed a London IPO, the rumour mill has gone into overdrive.
A report from The Times published on Monday indicated that the fast-fashion giant will carry out investor roadshows in the coming weeks to test the waters ahead of its planned £50 billion listing in the first quarter of 2025.