Shein's Everlane Purchase Under US National Security Review
US authorities are conducting a national security review of Shein Global Holdings' purchase of American clothing retailer Everlane, a deal that has added to the regulatory pressures facing the China-founded fast-fashion giant in one of its most important markets. The review, by the Committee on Foreign Investment in the US (CFIUS), an interagency panel led by the Treasury Department, began after the $80 million transaction was completed in May, according to people familiar with the matter who asked not to be identified.
What makes this review notable is its timing. Shein voluntarily initiated the review after the deal closed, rather than before, as is typical for such transactions. According to those familiar with the matter, this post-closing filing was driven by Everlane's financial circumstances, which required the parties to move quickly, and not by government intervention. CFIUS clearance usually prevents future challenges, but the panel also has the power to block, unwind, or impose conditions on transactions that threaten US national security.
The review's focus is on potential national-security concerns arising from Shein's acquisition of a company that handles Americans' personal data, according to one of the people familiar with the situation. Such data has become an increasingly sensitive issue in the context of US-China rivalry, with both countries looking to limit the other's access to citizens' information. Rick Sofield, co-chair of Debevoise & Plimpton's national security practice, said that in the case of Chinese acquirers, CFIUS often closely scrutinizes the acquisition of any large data sets, particularly those that include geolocation and financial information.
A Shein spokesperson said the company is "committed to complying with all applicable laws and regulations in the markets where we operate." The Treasury did not respond to a request for comment, and CFIUS reviews are confidential.
Context of Shein's Operations and IPO
Shein maintains substantial operations in China even after moving its headquarters from there to Singapore several years ago. The company remains subject to Chinese regulators, whose approval was needed for its long-sought initial public offering, which launched in Hong Kong. The Japan Times and South China Morning Post placed the IPO launch on Monday, while The Straits Times said it was on Aug. The US remains among Shein's top markets.
Policy Criticism and Legal Scrutiny
The company's path in the US has been marked by controversy. Public criticism has come from commentators, influencers, and Everlane's founder, Michael Preysman. Texas Attorney General Ken Paxton sued Shein in February 2024 over allegations that it sold toxic products and shared Americans' data with China's government, according to reports. The Federal Trade Commission is also investigating Shein's US business operations for potential violations of consumer protection laws, as reported by one of the outlets.
Shein had previously abandoned plans to list in New York after facing criticism from lawmakers including then-Senator Marco Rubio. In 2023, lawmakers questioned Shein about forced labor, and laboratory testing for Bloomberg found garments made with Xinjiang cotton, prompting allegations of forced labor.
The IPO and Future Hurdles
Shein's IPO prospectus mentions US regulatory risks but does not disclose the CFIUS review, according to the reports. As the review progresses, the outcome remains uncertain. The company faces a complex array of regulatory and legal challenges, all while trying to expand its foot internationally.
The article by The Japan Times, The Straits Times, and South China Morning Post collectively describe the situation, though the IPO date difference emerges: The Straits Times says Aug 24, while the others say Monday. The latter appears more specific, but the articles did not further detail the discrepancy. Regardless, the CFIUS review stands as a significant test for Shein's ability to navigate US national security demands while pursuing growth in its key markets. As the fast-fashion retailer continues integrating Everlane, the outcome of this review will likely have deeper implications for Chinese-acquirer acquisitions in sensitive sectors.