Shein is under investigation by the U.S. Federal Trade Commission, a probe that can ultimately have a “material adverse effect” on its financial condition and operations, a filing read, as the ultra-fast fashion company prepares to go public in Hong Kong.
This was according to the company’s draft prospectus at the Hong Kong Stock Exchange, which identified the FTC investigation among the legal risks the company is facing ahead of its planned initial public offering.
The FTC confirmed this, saying it is conducting a consumer protection investigation into Shein, according to a report from Reuters. Shein said it is cooperating with the U.S. consumer protection and competition watchdog.
“Although it is possible that we may reach a settlement with the FTC in connection with the investigation, we currently cannot predict the probable outcome of the investigation and the timing of such outcome, and we cannot rule out that such outcome could occur in the near term,” it read.
“The outcome of the investigation, whether in settlement or otherwise, may require us to make significant monetary payments that could have a material adverse effect on our financial condition and results of operations,” it added.
Further details about the FTC investigation are still scarce, but this is another bump in the road for a company that has been trying—but largely failing—to go public over the last few years in three different markets.
First, Shein tried but failed to go public in the U.S. in 2023 under the weight of immense political pressure. Then last year, its bid to go public in London was stopped by Chinese regulators. Now, the company sets its eyes on Hong Kong, this time with China’s blessing.
Shein is also under investigation in Europe. The European Commission launched its investigation into the company this February for alleged violations under the Digital Services Act, particularly for the app’s addictive design, the lack of transparency in its algorithms, and the sale of illegal products that include child sexual abuse material.
“In the EU, illegal products are prohibited–whether they are on a store shelf or on an online marketplace,” EU’s Tech Chief Henna Virkkunen previously said. “We will assess whether Shein is respecting these rules and their responsibility.”
