Shein Shares Plunge 10% in Hong Kong Debut, Close Near Flat After Rocky First Day

Shein’s shares began trading on the Hong Kong Stock Exchange Tuesday with a sharp drop, falling as much as 10% in early action before paring losses. The stock, priced at HK$48.56 ($6.19) in the IPO, closed at HK$48.50 – down just 0.12% from its offer price. The IPO raised about $1.7 billion (HK$13.6 billion), making it one of Hong Kong’s largest new share sales this year.

“Shein’s Hong Kong listing marks a new starting point,” Chief Financial Officer Leigh Gui said at the listing ceremony.

The troubled debut caps a four-year effort by the China-founded, Singapore-headquartered retailer to go public after plans to list in New York and London were blocked by regulators over forced labor concerns and other scrutiny. Shein moved its headquarters from China to Singapore in 2021-2022, but later re-embraced its Chinese roots to list in Hong Kong.

**Tariff headwinds and a swing to losses**

Investor concerns center on regulatory changes that are undermining Shein’s ultra-low-cost, direct-shipping business model. The U.S. ended the “de minimis” duty exemption for e-commerce shipments under $800, and the European Union followed suit with new fees on low-value packages. Tariff costs have forced Shein to raise prices, “cutting into its main advantage,” said Jacob Cooke, CEO of WPIC Marketing + Technologies, as quoted by multiple reports.

Higher logistics costs partly due to the war in Iran have also squeezed profitability. Shein recorded a $99 million loss in the first three months of this year, compared with a $395 million profit in the same period a year earlier.

The company’s market value at listing was roughly $27 billion, a fraction of its peak valuation of nearly $100 billion in April 2022. “Shein has probably missed its golden listing window due to the shift of momentum toward AI and tariffs, which can affect valuations and profitability,” said Gary Ng, senior economist for Asia Pacific at French bank Natixis, as reported by multiple outlets.

**Tepid demand and valuation concerns**

Demand for Shein’s stock during the IPO was muted compared to high-profile AI and robotics offerings. The retail tranche was subscribed 5.63 times, while the international portion was subscribed 2.59 times, according to Daily Sabah.

“I think the weak debut shows that even after the huge valuation reset, investors still don’t see Shein as obviously cheap,” said Charu Chanana, chief investment strategist at Saxo, as reported by Daily Sabah. She noted Shein was valued at 15 times forward earnings, more than double the multiple for rival Temu owner PDD.

Existing investors who participated in the IPO include billionaire Michael Bloomberg’s family office Willett Advisors, French billionaire Xavier Niel, Microsoft, Indian billionaire Mukesh Ambani’s Reliance, Bolivian American billionaire Marcelo Claure’s Claure Group, and the SoftBank Vision Fund, according to a filing cited by Daily Sabah.

**Regulatory and operational challenges**

The company faces multiple ongoing investigations. The U.S. Federal Trade Commission has a consumer protection probe that could result in significant penalties, Shein has disclosed. The European Commission is examining Shein’s handling of illegal products, the addictive design of its platform, and transparency of its recommendation systems. In February, the EU launched a separate probe focused on “illegal” products including alleged child sexual abuse material, as reported by The Guardian.

On Tuesday, France began imposing penalties on some fast-fashion items under a law passed in June, with charges ranging from €0.25 for items like socks to €12 for a coat, capped at 50% of the pre-tax sales price. China’s commerce ministry called the law discriminatory and a potential violation of World Trade Organization principles, The Guardian reported.

Shein’s daily active users in Europe have fallen around 45% since the EU scrapped its duty exemption on small parcels, according to Josh Gilbert, lead analyst for Asia-Pacific at eToro, as reported by Daily Sabah. “This is less a Shein problem, but more so the end of an era for cheap cross-border shipping,” Gilbert said.

The company has been trying to diversify, expanding its third-party marketplace and in May acquiring San Francisco-based eco-friendly retailer Everlane – a move some analysts called not the best fit. Shein also expects its first-half operating profit margin to be slightly lower than in the first quarter, hurt by higher customs duties, tariffs, fees and logistics costs.

**A capital-structure event**

The IPO also serves to compensate early investors who bought at much higher valuations. Shein has agreed to make cash payments totaling about $3.5 billion and share adjustments to some preferred shareholders, according to Daily Sabah. “This IPO is not just a fundraising event; it is also, and probably more of, a capital-structure event,” said Jianggan Li, CEO of consultancy Momentum Works, as reported by the same outlet.

Despite the rocky start, Shein’s listing is a boost for Hong Kong’s exchange, which has raised more than $40 billion in IPOs this year and has a backlog of companies seeking to list, said Lorraine Tan at Morningstar, as quoted by multiple reports.