Fast fashion brand must clear hurdles before going public

It’s no secret that Shein has ambitions to go public, but the fast-fashion juggernaut will have to overcome a slew of hurdles before it can win over Wall Street.

The digitally native retailer skyrocketed to prominence during the Covid-19 pandemic after shoppers across the globe fell in love with its fashion-forward designs, endless assortment and dirt-cheap prices. 

The company has a reported valuation of $66 billion and has tapped former Bear Stearns investment banker Donald Tang to be its executive chair and public face.

As Shein looks to transform itself from a $5 T-shirt company into a global powerhouse equipped to compete with legacy retail giants, a public offering has long been rumored to be its end goal.

But as it tries to cap off its meteoric rise with a U.S. market debut, those ambitions have been mired by its ties to China, along with mounting allegations that it uses forced labor in its supply chain, violates labor laws, harms the environment and steals designs from independent artists.

Shein is taking steps to address those issues and show U.S. regulators and Congress it can be trusted to go public in the U.S., where scrutiny of businesses founded in China has intensified in recent years. The company is facing increasing pressure from lawmakers, including an investigation from the newly formed House Select Committee on the Chinese Communist Party, and has found itself caught in the geopolitical rivalry between the U.S. and Beijing.

“IPO investors right now want to see a straightforward story,” Matt Kennedy, a senior IPO market strategist for Renaissance Capital, told CNBC. “I could certainly see some prospective investors just wanting to avoid the deal entirely, at least until some of those things are resolved.”

If Shein can overcome these hurdles while maintaining the strategy that has fueled its success, it could become a winner on Wall Street, said one longtime retail advisor who spoke anonymously because they’re not authorized to speak publicly about specific companies.

“For all the bad press and publicity and news, they’ve been incredibly innovative in how they’re producing product … so that to me says they’ve got something really good there that other retailers can learn from,” said the advisor. “They have to deploy their innovation in a way that’s going to address these issues and then if they can do that in a way that they still have the same kind of compelling business on top then wow, are they winning.”

Shein told CNBC it has not filed to go public and doesn’t have plans for a public offering. Still, reports have suggested an initial public offering could come as soon as 2024.

Here’s what the company will need to overcome before it can turn that dream into a reality, and what it’s doing to get there.

The House panel has been investigating Shein since May, after it heard expert testimony that the company was sourcing cotton and a range of other materials from…