Exclusive: SEC should halt Shein's IPO unless China operating risk is disclosed, according to Rubio.

 

Exclusive: SEC should halt Shein's IPO unless China operating risk is disclosed, according to Rubio.

NEW YORK: Senator Marco Rubio, a Republican, requested that the U.S. Securities and Exchange Commission halt Shein's attempt to go public in New York until the online retailer provides more information about its business practices and "the serious risks of doing business" in China. output 

Rubio stated that Shein's recent decision to seek Beijing's clearance for a potential U.S. initial public offering (IPO) "raises serious doubts" about the veracity of the company's disclosures in a letter addressed on Thursday to SEC Chair Gary Gensler, which was viewed exclusively by Reuters. The China Securities Regulatory Commission is empowered under new regulations established by China's securities watchdog in 2023 to scrutinize overseas listings and halt offerings that would jeopardize the nation's interests.

An inquiry for comment from Shein was not answered. According to an SEC representative, Gensler "will respond to members of Congress directly."

According to Rubio, Shein's attempts to portray itself as an independent worldwide retailer are made more difficult by the possibility that investors may be misled by the company about the risks associated with its operations caused by those regulations. Shein was created in China, but its headquarters are in Singapore. The company's $10 dresses and $5 T-shirts are made by thousands of third-party contract suppliers in China, many of whom are located in the textile hub of Guangdong province.

Rubio's opposition is the most recent political roadblock Shein faces as it tries to go public. As vice-chair of the Senate Intelligence Committee, Rubio has also sponsored legislation to outlaw TikTok, a popular social media app in China. Bipartisan US legislators petitioned the SEC to halt Shein's IPO in May of last year unless the company confirmed it does not use forced labor.

Rubio told Reuters in a separate statement that "Shein needs to play by our rules if they want to have access to U.S. stock markets."

He urged Gensler to demand further, detailed disclosures from Shein about its business practices in his letter. Shein acknowledged that it "has sold apparel made with cotton fibers from the Xinjiang Uyghur Autonomous Region," a far-western area of China where nations and rights organizations have accused Beijing of interning the Uyghur minority community, which is predominately Muslim.

Shein has refuted the claim that its clothing used cotton from Xinjiang, citing its "zero tolerance" policy for forced labor, as revealed by a 2022 Bloomberg story.

Rubio also wanted additional disclosures, such as an admission that Shein's operations "relies on exploiting de minimis entry," a U.S. trade loophole that permits the online retailer to send little goods valued at $800 or less to customers directly without incurring duties. Shein has previously told Reuters that it "is just not true" to attribute the company's success to de minimis.

Legislation that would prevent Chinese manufacturers from utilizing the exemption is being sponsored by Rubio. output