Introduction: Online fashion giant Shein to file prospectus for London float
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Online fashion giant Shein is heading closer towards floating on the London stock market – a boost for the City, after the company’s efforts to list in New York hit a snag.
Shein, which was recently valued at $66bn (£52bn), is planning to file a confidential prospectus with the City regulator this month, according to several reports this morning.
This would take it a step closer to a London listing, and let it list more quickly if it decides to take the plunge – perhaps this summer, or in the autumn.
Sky News reported last night that the confidential filing could take place as soon as the coming week, although it could yet take place later this month.
Shein had initially aimed for a Wall Street float, but those ambitions have been rocked by political opposition as tensions between Washington and Beijing have escalated.
Shein, which launched as SheInside in 2011 in Nanjing, China, has taken the fashion world by storm, offering a very wide range of very affordable clothing.
As my colleague Nicole Lipman explained in April:
On today’s “New In” page, there are 8,640 items (yesterday there were 8,760). The most expensive dress of the nearly 9,000 new arrivals – a floor-length, long-sleeved, fully sequinned plus-size gown, available in five sparkly colours – is $67. The cheapest – a short, tight piece of polyester with spaghetti straps, a cowl neckline and an all-over print of Renaissance-style flowers and cherubs – is $7.
I can buy casual dresses, going-out tops, workout leggings, winter parkas, pink terry-cloth hooded rompers, purple double-breasted suit jackets with matching trousers, red pleather straight-leg pants, cropped cardigans with mushroom embroidery, black sheer lace thongs and rhinestone-trimmed hijabs. I can buy a wedding dress for $37. I can buy clothes for school, work, basketball games, proms, funerals, nightclubs, sex clubs. I see patchwork-printed overalls and black bikinis with rhinestones in the shape of a skull over each nipple designated as “punk”. I can buy Christian-girl modesty clothing and borderline fetish wear.
In the grid of product listings, a yellow rectangle indicates if a product is trending: “Trending-Plazacore”, “Trending-Western”, “Trending-Mermaidcore”, and “Trending-Y2K” tags all appear in the new arrivals….
But, Shein’s high-octane ‘test and repeat’ model – in which it churns out thousands of new products a day – is also controversial, and seen the company dubbed “the unacceptable face of throwaway fast fashion”.
Shein has also been accused of using forced labour to produce its low-cost garments. In 2022, Bloomberg discovered that garments shipped to the US by Shein were made with cotton from the Xinjiang region, where China is accused of “serious human rights violations” against the Uyghur Muslim people.
But that probably won’t deter the City from embracing Shein, given the well-documented concerns that the London market is in crisis as some firms shift their listings across the Atlantic.
Also coming up today
It’s a busy day for economic news, with new surveys of factory bosses across the world giving a healthcheck on global manufacturing.
Traders are digesting yesterday’s Opec+ meeting, where oil producers agreed to extend their production cuts into 2025.
Tensions are rising in South Wales, where union leaders are preparing to ramp up industrial action at two steelworks, in a further escalation of a row over almost 3,000 job losses that threatens to become a big general election issue.
And in France, the government has been stung by a credit rating downgrade by S&P Global on Friday night, from AA to AA- with a stable outlook.
S&P Global cited France’s rising debts and lower-than-expected growth – a blow to Emmanuel Macron’s stewardship of the economy…
The agenda
-
7am BST: Russia’s manufacturing PMI for May
-
9am BST: Eurozone manufacturing PMI for May
-
9.30am BST: UK manufacturing PMI for May
-
3pm BST: US manufacturing PMI for May
Key events
Virgin Atlantic confirms September return to Israel
Virgin Atlantic has confirmed it will restart flights between London Heathrow and Tel Aviv on 5 September, almost a year after putting them on hold, PA Media reports.
The airline suspended the route in October last year after the start of the war in Gaza.
It had originally hoped to restart in March, but decided to push the date back to September.
Virgin Atlantic has also signed a codeshare and club sharing deal with Israel’s flag carrier, El Al Israel Airlines, uncer which customers of both airlines will be able to fly on the Tel Aviv-London Heathrow route.
Several other airlines, including Wizz Air, easyJet and British Airways, have already begun flying to Tel Aviv again earlier this year.
The UK general election hasn’t moved the markets, yet anyway, but it’s a different story elsewhere today.
In India, the Nifty 50 share index has hit a record high after exit polls showed Narendra Modi’s BJP party has won the largest election in the country’s history.
The Nifty 50 is up over 3% today, and has now almost doubled in value in the last five years.
News of Modi’s likely victory also pushed up the rupee against the dollar, and helped India’s sovereign bonds strengthen.
But it’s a different story in Mexico, where the currency weakened after official projections showed the ruling party wining power again.
The peso has fallen over 2% today, to 17.37 against the US dollar, following forecasts that Claudia Sheinbaum, the protege of President Andres Manuel Lopez Obrador, is on track for a major win in elections there.
Sheinbaum’s left-wing Morena party could also secure a supermajority in both houses of congress, which will allow it to implement sweeping constitutional reforms.
The latest drop in overseas orders at UK factories was due to reduced inflows of new work from several trading partners, including the US, the EU (with specific mentions of Germany and Poland) and the Middle East, S&P Global reports.
UK manufacturing could have turned the corner last month, suggests Caroline Litchfield, partner and head of manufacturing and supply chain at independent law firm Brabners:
“May could well prove to be a turning point for UK manufacturing after almost two years of weak output.
“While we are by no means out of the woods yet, manufacturers will be cautiously optimistic for the future given growth in the wider economy, inflation falling to manageable levels and the potential for interest rates to be cut in the coming weeks.
“A confirmed election date is also likely to boost business and consumer confidence, and firms will be hopeful of order books benefiting as a result.
“Longer term though, UK makers will want to see any incoming government setting out how it will help address the skills gap within the industry and support a shift to the modern, sustainable methods of manufacturing which will be the pillars of future growth.”
Retail analyst Nick Bubb points out that Shein would dwarf the retailers currently listed in London, were it to float here:…
Well, it may seem odd that the London stockmarket is courting a big Chinese business, quite apart from the ethical concerns about fast fashion, but if the IPO of Shein does go ahead, its mooted market cap of over £50bn would be bigger than Tesco, Sainsbury, Next, M&S and JD Sports combined…
Here’s Rob Dobson, director at S&P Global Market Intelligence, with analysis of tday’s UK factory PMI report (see 9.43am):
“May saw a solid revival of activity in the UK manufacturing sector, with levels of production and new business both rising at the quickest rates since early-2022. The breadth of the recovery was also a positive, with concurrent output and new order growth registered for all of the main subindustries (consumer, intermediate and investment goods) and all company size categories for the first time in over two years.
While the latest upturn was dependent on a strengthening domestic market, there were signs of overseas demand also moving closer to stabilisation. Business optimism rose in tandem with the improvement in current conditions, with 63% of manufacturers forecasting their output to be higher one year from now.
The latest PMI survey data provided a mixed picture for price pressures at manufacturers, however. At the factory gate, output charge inflation strengthened for the fifth successive month and to its highest level in a year. That said, a solid easing in the rate of increase in input costs should help prevent price pressures from becoming embedded.”
UK factories return to growth, but price rises accelerate
Just in: UK factories have returned to growth, with the most rapid expansion in output in over two years.
The latest poll of purchasing managers across UK manufacturing found that activity grew across the sector in May.
S&P Global Insight, which compiles the PMI report, says:
All three product categories covered by the survey (consumer, intermediate and investment goods) and all three size definitions (small, medium and large) registered concurrent expansions for the first time in over two years.
In another boost, business optimism rose to a 27-month high.
But, while domestic demand was strong, new export orders fell for the twenty-eighth month in a row.
This lifted the manufacturing PMI back into positive territory, as it rose to 51.2 in May, up from 49.1 in April, its highest reading since July 2022. Any reading over 50 = growth, and today’s final reading is only slightly below the ‘flash’ number released during May.
There are also signs that inflation pressures are building up; output price inflation, which tracks what factories charge for their wares, hit its highest level in a year.
The PMI report explains:
Rates of [price] increase accelerated in the consumer and intermediate goods sectors, but eased at investment goods producers.
Blackstone to sweeten offer for Beyoncé song fund Hipgnosis
Jack Simpson
A private equity company attempting to take over Hipgnosis has sweetened its offer to value the troubled music rights owner at nearly $1.6bn (£1.26bn) as it attempts to end a protracted sale process.
Blackstone has said it that it will switch the offer for the Hipgnosis Songs Fund to a “scheme of arrangement deal”, which would require it to meet a higher threshold of shareholder support but could make the takeover quicker if it is achieved.
In a bid to secure the support of more investors of the company, which owns the rights of artists such as Beyoncé, Neil Young, Red Hot Chili Peppers and Justin Bieber, it has increased its offer a share by $0.01 to $1.31, which would value Hipgnosis at about $1.58bn.
The revised offer comes after Blackstone fought off competition for Hipgnosis from the US-based royalties fund Concord Music, which had offered $1.4bn.
“IPO buzz could be in the air” this morning, reports Kathleen Brooks, research director at XTB, thanks to Shein’s plan to file a prospectus for a potential London stock market float:
The question for UK traders is will this lift the spirits of the FTSE 100, after the index fell 0.77% last week. If this does happen this week, then it would take London a step closer to being Shein’s IPO destination.
While this filing does not indicate when its IPO would take place, it could be in the next few months, with Autumn seen as a likely date. The company is expected to be valued at £50bn, which would put it in the top 15 UK listed companies by market cap.
Digital bank Monzo has reported its first annual profit this morning, as it continues to target a stock market flotation.
Monzo reported a pretax profit of £15.4m for the year to March 2024 in its latest annual accounts, up from a £116.3m loss the previous year.
It now has approaching 10 million customers since launching in 2015, and in February secured another £350m in funding from investors, which pushed its value towards £4bn.
Shares in UK pharmaceuticals firm GSK have dropped over 9% at the start of trading, after a Delaware judge ruled on Friday that more than 70,000 lawsuits over discontinued heartburn drug Zantac can proceed.
Judge Vivian Medinilla of the Delaware Superior Court in Wilmington ruled that expert witnesses can testify in court that the drug may cause cancer – a blow to GSK, and fellow former Zantac manufacturers Pfizer, Sanofi and Boehringer Ingelheim.
The news has knocked GSK’s shares to the bottom of the FTSE 100 leaderboard.
GSK told the City that it disagrees with ruling by the Delaware State Court and will immediately seek an appeal.
In a statement, it says:
-
Scientific consensus is that there is no consistent or reliable evidence that ranitidine [or Zantac] increases the risk of any cancer and GSK will continue to vigorously defend itself against all claims
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Ruling to permit claims is not consistent with the Federal Court’s Multidistrict Litigation (MDL) ruling under the same legal standard
Moody’s raises China’s growth forecast to 4.5% for 2024
Credit rating agency Moody’s has raised China’s growth forecast for 2024 to 4.5% from 4.0%, Reuters reports.
Moody’s noted that China’s post-pandemic manufacturing and export-focused growth strategy is taking shape, with trade and manufacturing activity supporting growth in the first quarter of this year.
But, 4.5% would still be a slowdown, as China’s GDP rose by 5.2% in 2023.
Elsewhere in the business world, Frasers – the company behind Sports Direct – has appointed Sir Jon Thompson, the chair of the HS2 high-speed railway, as a non-executive director.
Thompson is an experienced hire – he has previously worked as the former CEO of the Financial Reporting Council, as the CEO of HMRC, and Permanent Secretary of the Ministry of Defence.
Frasers says hiring Thompson is part of its plan of “elevating its board and its confidence in its long-term growth strategy.”
Michael Murray, chief executive officer of Frasers Group (and son-in-law of founder Mike Ashley) told the City this morning:
“I am pleased to welcome Sir Jon to the Board at a very exciting time for Frasers Group. His appointment reflects the progress we have made to date on Frasers’ transformation and Elevation Strategy, as well as our ambitions for the future.
Sir Jon’s expertise in corporate governance and major project management will be invaluable as we enter the next phase of our strategy.”
Frasers has been on a drive to improve its practices, and its image, since the Guardian reported in 2015 that temporary workers at Sports Direct were receiving effective hourly rates of pay below the minimum wage.
Ashley – who we learned in 2017 would challenge subordinates to extreme drinking competitions, which once ended with him vomiting into a fireplace – handed over the running of Frasers to Murray in 2022. He still owns over 70% of the company, though.
Frasers has also recently appointed the boyfriend of Ashley’s youngest daughter to the company’s board.
Labour ‘holds talks with Shein’ over potential London float
The Labour Party has held talks with the boss of Shein to try to persuade the Chinese-founded fast-fashion company to opt for a blockbuster London float, The Times reports this morning.
Jonathan Reynolds, the shadow business secretary, Sarah Jones, the shadow minister for industry, and Chris Bryant, the shadow minister for creative industries, are understood recently to have met Donald Tang, the executive chairman of Shein, to discuss a potential initial public offering in London.
Sources told The Times that Labour, which could come to power after the general election in July, was “very supportive” of Shein listing in the UK.
As Shein was valued at around $66bn in a recent fundraising, it could be London’s biggest ever float….
The Financial Times agrees that landing a flotation of Shein’s size would be “a coup” for the “faltering” UK stock exchange.
The company hit a record of more than $2bn in profits for 2023, surpassing the $700mn of net income it generated in 2022 and $1.1bn in 2021.
By comparison, rivals H&M and Zara owner Inditex reported net profits of SKr8.7bn ($820mn) and €5.4bn ($5.8bn), respectively, in their most recent fiscal years.
Introduction: Online fashion giant Shein to file prospectus for London float
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Online fashion giant Shein is heading closer towards floating on the London stock market – a boost for the City, after the company’s efforts to list in New York hit a snag.
Shein, which was recently valued at $66bn (£52bn), is planning to file a confidential prospectus with the City regulator this month, according to several reports this morning.
This would take it a step closer to a London listing, and let it list more quickly if it decides to take the plunge – perhaps this summer, or in the autumn.
Sky News reported last night that the confidential filing could take place as soon as the coming week, although it could yet take place later this month.
Shein had initially aimed for a Wall Street float, but those ambitions have been rocked by political opposition as tensions between Washington and Beijing have escalated.
Shein, which launched as SheInside in 2011 in Nanjing, China, has taken the fashion world by storm, offering a very wide range of very affordable clothing.
As my colleague Nicole Lipman explained in April:
On today’s “New In” page, there are 8,640 items (yesterday there were 8,760). The most expensive dress of the nearly 9,000 new arrivals – a floor-length, long-sleeved, fully sequinned plus-size gown, available in five sparkly colours – is $67. The cheapest – a short, tight piece of polyester with spaghetti straps, a cowl neckline and an all-over print of Renaissance-style flowers and cherubs – is $7.
I can buy casual dresses, going-out tops, workout leggings, winter parkas, pink terry-cloth hooded rompers, purple double-breasted suit jackets with matching trousers, red pleather straight-leg pants, cropped cardigans with mushroom embroidery, black sheer lace thongs and rhinestone-trimmed hijabs. I can buy a wedding dress for $37. I can buy clothes for school, work, basketball games, proms, funerals, nightclubs, sex clubs. I see patchwork-printed overalls and black bikinis with rhinestones in the shape of a skull over each nipple designated as “punk”. I can buy Christian-girl modesty clothing and borderline fetish wear.
In the grid of product listings, a yellow rectangle indicates if a product is trending: “Trending-Plazacore”, “Trending-Western”, “Trending-Mermaidcore”, and “Trending-Y2K” tags all appear in the new arrivals….
But, Shein’s high-octane ‘test and repeat’ model – in which it churns out thousands of new products a day – is also controversial, and seen the company dubbed “the unacceptable face of throwaway fast fashion”.
Shein has also been accused of using forced labour to produce its low-cost garments. In 2022, Bloomberg discovered that garments shipped to the US by Shein were made with cotton from the Xinjiang region, where China is accused of “serious human rights violations” against the Uyghur Muslim people.
But that probably won’t deter the City from embracing Shein, given the well-documented concerns that the London market is in crisis as some firms shift their listings across the Atlantic.
Also coming up today
It’s a busy day for economic news, with new surveys of factory bosses across the world giving a healthcheck on global manufacturing.
Traders are digesting yesterday’s Opec+ meeting, where oil producers agreed to extend their production cuts into 2025.
Tensions are rising in South Wales, where union leaders are preparing to ramp up industrial action at two steelworks, in a further escalation of a row over almost 3,000 job losses that threatens to become a big general election issue.
And in France, the government has been stung by a credit rating downgrade by S&P Global on Friday night, from AA to AA- with a stable outlook.
S&P Global cited France’s rising debts and lower-than-expected growth – a blow to Emmanuel Macron’s stewardship of the economy…
The agenda
-
7am BST: Russia’s manufacturing PMI for May
-
9am BST: Eurozone manufacturing PMI for May
-
9.30am BST: UK manufacturing PMI for May
-
3pm BST: US manufacturing PMI for May
