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Politicians to Shein: Not so fast on US expansion

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Politicians to Shein: Not so fast on US expansion

Shein, the ultra-fast fashion retailer hugely popular with Generation Z and millennial shoppers, is facing lawsuits from more than a dozen state attorneys general to answer questions about its business practices as the company’s expansion into the United States continues.

Republican attorneys general from 16 states sent a letter to Gary Gensler, chairman of the Securities and Exchange Commission, expressing concern about the company’s plans to file for an initial public offering in the United States, which many investors hope will happen. soon. They urged the agency to order Shein, which was founded in China in 2012 and is now based in Singapore, to undergo an independent process, as a filing requirement, to prove it does not use forced labor.

The US public stock market has recently shown some signs of life, after more than a year of subdued activity in which companies shunned volatile markets and slowing economic growth. Companies such as chipmaker Arm Holdings and food delivery company Instacart have recently filed to go public, signaling that the market could become more favorable for going public. Shein has not commented on possible IPO plans.

“It is apparent that Shein is attempting to launch an initial public offering (IPO) before the end of this calendar year,” the letter from the attorneys general said. “An initial public offering of this magnitude, involving a foreign-owned company facing credible concerns about its core business practices, cannot proceed on self-certification alone.”

A Shein spokeswoman said the company would “continue to engage with US federal and state officials to answer their questions.”

The letter was sent the same day Shein announced it was taking a financial stake in Forever 21’s parent company and would be able to sell its low-priced clothing, including $5 tops and $10 dresses, in Forever stores. 21 in malls across the United States. State.

For nearly a year, Shein has been hounded by accusations that she uses forced labor in China’s Xinjiang region. The US government has banned imports from the area because of human rights abuses committed against the Uyghurs, a predominantly Muslim group. Bloomberg reported last year that some Shein garments were made with cotton sourced from Xinjiang. Shein has denied that she uses forced labor.

Shein, which has historically been secretive about its business model, has become more open about it this year, opening up to more scrutiny around its operations.

In April, the company held a summit to celebrate its independent designer program, which was formed after creators accused the company of ripping off their work. Around the same time, a group called Shut Down Shein emerged. In June, the company invited influencers to tour one of its factories in China, sparking a backlash on social media from people who viewed the trip as a means to hide real concerns about the conditions of factory workers. the factories.

Then there are the geopolitical issues. The relationship between the US government and some Chinese-owned companies, such as Shein and TikTok, has become more contentious. Commerce Secretary Gina Raimondo, who is in China this week, said the United States was not seeking to break economic ties with China, but she stressed concerns over national security issues, intellectual property theft and other issues.

The group of state officials that sent the letter to the SEC was led by Austin Knudsen, Montana’s attorney general, who also led the task of pressing the US government to take a closer look at TikTok’s expansion.

This is not the first time that politicians have pressured the SEC over Shein. In May, two members of Congress wrote to the securities regulator requesting that, as a stipulation of an initial public offering, the company must first provide proof through a third party that it does not use Uyghur forced labor.

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