Mark Kleinman: LSE chiefs must seize Shein opportunity
Mark Kleinman is Sky News’ City Editor and is the man that gets the City talking in his weekly Morning Wire column. This week he tackles WeWork’s collapse, Alison Rose’s battle with the ICO and the Nationwide ad that’s infuriated other banks
It would be one hell of a rabbit to pull out of the hat. Were Shein Group, the Chinese-founded fast fashion retailer, to decide to float in London next year, it would be the City’s biggest IPO coup for years.
The odds are stacked against it. Even before the company filed confidentially for a US listing last month, the expectation was that a New York share offering would trump any other financial centre.
That may yet be the case. Last week, though, Donald Tang, the American ex-banker who became Shein’s executive chairman in 2022, came to Britain to hold talks with stakeholders including executives from the London Stock Exchange.
I understand that Mr Tang also met with Lord Johnson, the investment minister, during his trip last week. Shein’s IPO deliberations also brought him to London in November, I’m told.
Considering the City as an IPO venue is logical, even if it appears to be swimming against the current tide. Despite LSEG CEO David Schwimmer’s declaration this year that he was “relaxed” about companies choosing New York over London, the examples of ARM Holdings, CRH, Flutter Entertainment and, most recently, TUI Group and Marex Group have painted a sorry picture of the City’s decline as a magnet for multinational companies.
While Shein is at pains to stress that it is not Chinese – it is headquartered in Singapore – the renewed appetite of US lawmakers to target China-linked companies is clear. That brings a set of political risks which might not apply were Shein to pursue a listing in the UK.
It is also forging closer ties to Britain, having snapped up Missguided, the youth fashion brand, in recent months. Shein bought it from Frasers Group, and is reported to be open to future collaborations with the retail conglomerate founded by Mike Ashley.
Valued at $66bn earlier this year, the online fast-fashion retailer has hired Wall Street’s three most significant banks to work on the listing: Goldman Sachs, JP Morgan and Morgan Stanley.
I doubt any of them are robustly arguing that London can outmuscle New York’s deeper, more liquid capital markets. And people close to the situation say that a US flotation remains the likeliest outcome from their deliberations with the company.
The LSE and the government should push hard, though; each talks confidently about the City’s post-Brexit prospects, and London’s financial centre is arguably more important to Britain’s economic narrative than before the financial crisis.
Even if they fail with Shein, the stock exchange and the Treasury have a playbook to deploy with other multinational listing candidates. That should be a clear priority for LSEG in 2024.
Sunak snub helps Toyota get its UK expansion out of reverse gear
What a difference seven months makes. Toyota’s public declaration that it is to consider two new investments in the UK following the relaxation of proposed government restrictions on the sale of hybrid vehicles reflects a growing sense of optimism about car manufacturing in the UK.
Recent announcements from BMW, the owner of Mini, Ford and Nissan have gone some way to dispelling the air of post-Brexit gloom which had engulfed the sector when Honda announced the closure of its plant in Swindon in 2019.
I understand that so dismayed was Toyota by ministers’ previous guidance on hybrid vehicles that senior executives refused to meet Rishi Sunak during his visit to Japan in May.
A meeting was never formally scheduled, so doubtless Downing Street would deny suggestions of a snub. Shuttle diplomacy clearly works, though – even in a hybrid vehicle.
Melrose chief’s next act will have echo of Christmas repeats
It’s a time of the year when the airwaves are dominated by repeats of classics from the past. So no surprise that Simon Peckham, one of the architects of Melrose Industries’ rise through the ranks of Britain’s most significant industrial companies, is busily plotting the launch of a replica vehicle.
Melrose 2.0, as it has been dubbed by people close to Peckham, won’t be a carbon copy of the original. For one thing, it is overwhelmingly likely to be financed privately rather than through the public markets.
And, as I mention in relation to Shein further up in this column, that decision says something significant about the London Stock Exchange’s inability to attract companies for which it should provide a natural home.
‘Buy, improve, sell’ was his mantra for nearly two decades.
Melrose’s track record with companies such as Brush, Elster and GKN implies that Peckham and his colleagues would attract significant demand from public market investors were they to pursue that route to raising capital.
People close to the former Melrose chief say, though, that he now believes the UK market significantly undervalues many of the companies that he might seek to acquire.
With private funding behind him, that means Peckham and his investors should benefit from the ability to buy assets cheaply, even as his latest corporate vehicle epitomises the deepening structural dislocation in UK equity markets.
The number of companies delisting combined with a dearth of substantial new issuance is feeding the negative sentiment towards London.
That won’t concern Peckham, who is said to be more open to working with the management teams of target companies than was the case at Melrose.
‘Buy, improve, sell’ was his mantra for nearly two decades. Like much of the TV you’re about to watch until January, expect a repeat performance from Peckham and his team.