Shein reveals ongoing FTC probe in Hong Kong IPO filing

Investing.com -- Shein disclosed that its U.S. business is under investigation by the Federal Trade Commission in documents filed for its upcoming Hong Kong initial public offering, as first reported by CNBC on Tuesday.

The fast fashion company did not specify the focus of the FTC investigation in the filing submitted to the entity that operates the Hong Kong Stock Exchange. The disclosure appears to mark the first public acknowledgment of the probe.

"We are actively cooperating with the FTC … 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," Shein stated in the document.

The company added that the investigation's outcome may require significant monetary payments that could materially affect its financial condition and operating results.

The FTC serves as the U.S.'s primary consumer protection agency, tasked with stopping deceptive or unfair business practices. The agency has previously investigated companies for issues including suppressed reviews, hidden fees, misleading prices, shipping and refund practices, and privacy concerns.

The FTC focuses on "dark patterns," which it describes as design tricks and psychological tactics such as pre-checked boxes, hard-to-find disclosures, and confusing cancellation policies that encourage consumers to part with money or data.

Shein uses countdown timers, gamified discounts, and flash sales on its app to create urgency and drive consumer spending.

The company's Hong Kong listing received recent approval, though no trading start date has been announced. Shein seeks a valuation between $40 billion and $50 billion for the IPO, down from $64 billion in 2024. The Chinese-founded company was valued at $98.2 billion in a 2022 fundraising round following the Covid-19 pandemic.

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