Fast-fashion retailer Shein saw its shares fall more than 10% in gray-market trading on Monday, ahead of its official debut on the Hong Kong Stock Exchange. Major Hong Kong brokers including Futu Securities, Bright Smart, and Phillip Securities quoted the shares as having dropped over 10% shortly after gray-market trading began. Futu, Hong Kong's largest retail brokerage by volume, showed Shein's stock trading around HK$42. Shein priced its shares at HK$48.56 each, raising $1.7 billion and valuing the company at about $26.5 billion. This valuation is considerably lower than its private market peak of nearly $100 billion in 2022.
This stock market debut follows failed attempts to list in the US and UK due to concerns over labor practices and environmental impact. The $26.3 billion valuation marks a significant drop from its 2022 peak, with the company facing increased competition and global trade tensions. The listing is the largest new share sale in Hong Kong this year, serving as a test of investor appetite for the fast-fashion industry. Shein, founded in China and now headquartered in Singapore, operates a global e-commerce network with sales in over 150 countries.
Shein has been under scrutiny for its environmental and human rights records. The company recently reported a $99 million quarterly loss after the US removed an import duty exemption on small packages. Regulatory pressures are also mounting, with the EU imposing a duty of three euros per item for packages under 150 euros, and France implementing a fee on ultra-fast fashion items that could reach almost 20 euros per garment. These tariff and duty changes in the U.S. and Europe have undermined the foundations of its business model.
Analysts note that the decline in market perception reflects slower revenue growth amidst geopolitical challenges and increased competition from rivals like Temu and AliExpress. While sales in Asia are helping to offset a fall in US revenue, Morningstar's Asia director of equity research, Lorraine Tan, suggested a period of single-digit revenue growth is likely, limiting investor excitement. Shein plans to use the funds raised to upgrade its technological capabilities and boost its international presence, indicating an effort to navigate these challenges and prove its margins in a world of tighter regulation and tariffs.
Existing investors in Shein who participated in the offer include Willett Advisors, Xavier Niel, and Microsoft Corp. Cornerstone investors included Boyu Capital, Tiger Global Management, General Atlantic, Tencent, Greenwoods Asset Management, Taikang Life Insurance, and UBS Asset Management Singapore. The Hong Kong public offering portion was subscribed 5.63 times, and the international portion 2.59 times. Despite this, some investors remain cautious about its valuation due to fluid international trade policies and geopolitical tensions.
