Shein's U.S. IPO Dreams Hit China's Data Security Wall - TipRanks.com

Fast-fashion giant Shein’s IPO dreams seem to be hitting some speed bumps. According to the Wall Street Journal, Chinese authorities are reviewing the company’s data management and sharing policies as it seeks Beijing’s nod for its U.S. IPO.

Reportedly, the country’s Cyberspace Administration is scrutinizing Shein’s data practices for potential national security risks. Regulators will also examine the type of data Shein may divulge to U.S. regulators for its planned New York listing.

The probe could potentially delay Shein’s U.S. listing dreams at a time when global equity markets are already showing signs of weakness. Chinese regulators, known for taking months to conclude probes, have impacted the listing plans of companies like Didi Global, Full Truck Alliance, and ByteDance in the past.

Shein, catering to customers in over 150 countries, counts the U.S. as its largest market. The company has grabbed about 18% of the global fast-fashion market pie so far. In another hiccup, Japan’s Uniqlo has accused Shein of copying its Round Mini Shoulder bag. The Japanese fashion giant has asked Shein to cease selling the imitation bags and is seeking compensation for damages. The bag in question was last year’s top bag, according to Lyst.

Earlier, another eCommerce rival, PDD Holdings’ (NASDAQ:PDD) Temu, accused Shein of resorting to intimidation tactics against suppliers that work with both companies. Temu has also accused Shein of poaching talent.

Fueled by cheap sourcing from China, both Temu and Shein have seen rapid gains in the U.S. market. In less than two years of entry, Temu has cornered a 17% market share in the discount stores category in the U.S. These market share gains have come at the expense of established brick-and-mortar discount retailers such as Five Below (NASDAQ:FIVE) and Dollar General (NYSE:DG).

Why are Chinese Stocks Falling?

Meanwhile, the rising trade and military tensions between the U.S. and China have heavily weighed on Chinese stocks. After tanking by over 10% in the past five sessions, Baidu (NASDAQ:BIDU) shares are down a further 5% today as concerns surrounding a military tie-up and its Ernie bot continue to weigh on the stock.

These concerns have heavily impacted U.S. listed Chinese majors for a while, with shares of Alibaba (NYSE:BABA), JD (NASDAQ:JD), and Bilibili (NASDAQ:BILI) declining by nearly 68%, 71%, and 90%, respectively, over the past three years. Following this sharp selloff, the TipRanks Comparison Tool indicates the highest upside potential of 76.8% in Li Auto (NASDAQ:LI), with an average price target of $53.58.

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