Experts predict that Shein's U.S. IPO is unlikely to happen.

• Experts predict that Shein's public debut in the US may be over after seven months of filing for its IPO, as it encountered numerous obstacles and shifted its focus to the London market.
• Due to national security concerns over its relationship to China, alleged links to forced labor, and claims of an unfair competitive advantage due to customs law loopholes, Shein has faced bipartisan public scrutiny as it pursues an IPO.
• As it grows its U.S. presence, the e-commerce company is capturing market share from well-known retailers such as Macy's and Gap.

The chances of Shein, a Chinese e-commerce company, going public in the US are diminishing, experts say, due to increasing tensions between Beijing and the US affecting business and trade.

In November, the company confidentially filed to go public in the U.S., valued at $66 billion. However, it has faced opposition as it tries to enter the American retail market, including being rejected multiple times by the National Retail Federation, the industry's largest trade association, as previously reported by CNBC.

The e-commerce company, which gained popularity in the U.S. by offering low prices and quick access to new styles, filed for an IPO while positioning itself to take on major market share from U.S. retailers such as Walmart and Target. According to UBS data from last year, the company is expected to challenge Amazon and eBay in the U.S. retail market.

As political resistance to its U.S. IPO grows, Shein is reportedly preparing to confidentially file for a £50 billion offering in London in the near future. The company may have preferred to list in the U.S., as it could have brought a higher valuation than in the U.K., according to Angelo Bochanis, an IPO analyst at Renaissance Capital.

The Securities and Exchange Commission is being called upon by federal and state officials to scrutinize or block the initial public offering in the U.S.

Examining companies with significant presence in China and a strong background in the US is currently popular politically, according to Bochanis.

Bochanis believes that a London IPO could be easier for Shein compared to a U.S. offering, as the British parliament is dissolved and the London Stock Exchange is "desperate for big wins" amid an IPO drought.

If Shein's London IPO is successful, it is unlikely to continue with a U.S. offering, according to University of Florida finance professor Jay Ritter, who specializes in IPOs.

Despite the rising political tensions between the U.S. and China, a prominent Chinese electric vehicle company recently went public in the U.S.

China ties and data privacy

Shein is one of the few China-tied companies that have gained deep brand awareness with U.S. consumers, according to Bochanis.

Politicians from both parties are attracted to Shein due to its high-profile process and large potential offering, making it a target for those wanting to appear tough on Beijing-linked companies.

Although Shein was established in China, its headquarters have been relocated to Singapore. Nevertheless, a significant portion of the company's supply chain remains in the country.

The House Committee on Energy and Commerce wrote to Shein in December, requesting details about the company's user data collection practices and its ties to the Chinese government. The committee warned that any connection to Beijing posed a significant threat to e-commerce, consumer safety, and data privacy and security.

ByteDance, the parent company of the popular social media platform TikTok, received a similar letter from the panel.

According to Susan Ariel Aaronson, a professor at George Washington University, the Chinese Communist Party has the legal right to request any Chinese-owned company to disclose information about its customers. This raises concerns among U.S. officials, particularly with regards to Shein, a company headquartered offshore but with manufacturing ties in China and plans to go public in the U.S. The potential data that Shein could share with the Chinese government has caused apprehension among U.S. officials.

The proposed U.S. ban on TikTok was sparked by that relationship. Congress passed legislation last month that requires TikTok to sell its U.S. assets by Jan. 19 or stop operating in the country.

Several creators on ByteDance's platform have filed lawsuits to block the bill.

The proposed ban of Shein has raised more doubts about a U.S. IPO for the company, despite not having access to the same amount of data as TikTok.

A national security attorney at Holland & Knight, Antonia Tzinova, stated that Congress's ability to pass a law targeting a perceived threat from a Chinese-owned company is stronger than an executive order or presidential order.

Shein shipping concerns

Overcoming political scrutiny beyond data privacy may be more challenging for Shein.

The retailer has faced criticism for years over allegations of forced labor in its supply chain and poor working conditions for its employees.

In 2021, the United States enacted the Uyghur Forced Labor Prevention Act, which prohibits companies from selling goods manufactured in the Xinjiang region of China, known for its Uyghur detention camps, in the U.S. Despite claims by U.S. government agencies that Shein's supply chain has links to the Xinjiang region, the company does not manufacture its own products and instead sources materials from China-based micro-manufacturers that are difficult to track.

Shein has consistently maintained that the forced labor accusations are unfounded, asserting that the company adheres to U.S. law through an internal compliance system.

The company has faced criticism for exploiting U.S. customs law loopholes.

Shein is not subject to certain U.S. import taxes because it does not import its products in bulk to sell from a U.S. warehouse, but rather ships on an order-by-order basis. This has been criticized by rivals as providing Shein with an unfair competitive advantage.

— CNBC's Gabrielle Fonrouge and Reuters contributed to this report.