Shein’s Purchase of Everlane Faces US National Security Review

The US government is scrutinizing Chinese e-commerce giant Shein's acquisition of American clothing retailer Everlane, according to sources familiar with the matter. The deal, valued at $80 million, was completed in May, triggering a review by the Committee on Foreign Investment in the US (Cfius). Cfius, an interagency panel led by the Treasury Department, began the evaluation following Shein's voluntary initiation of the process.

While clearance typically prevents future challenges, Cfius has the power to block or impose conditions on transactions it deems a threat to US national security. Shein, which maintains significant operations in China, is obligated to comply with Chinese regulations and secure approval for its planned initial public offering in Hong Kong.

The review focuses on potential national-security issues related to Shein's acquisition of a company handling Americans' personal data. Shein's decision to initiate the Cfius review after the deal closed is unusual, as companies typically seek approval before a transaction finalizes. The review is uncertain, with the specific issues raised not publicly disclosed.

Shein's IPO prospectus acknowledges US regulatory risks but does not mention Cfius specifically. Despite the acquisition's relatively small size compared to Shein's $27 billion IPO valuation, it has already faced criticism in the US for allegedly betraying sustainability and supply chain transparency values. Shein has faced legal challenges in the US, including a lawsuit from Texas Attorney General Ken Paxton alleging unlawful sales of toxic products and data sharing with China's government. Shein denies the allegations and is contesting the case.