Shares of online fast-fashion retailer Shein fell over 5% on Wednesday, the second day of trading in Hong Kong. This follows a disappointing debut session where the stock initially dropped as much as 10% but recovered to close near its issuance price of HK$48.56. On Wednesday, the stock closed at HK$46, while the Hang Seng Index ended flat.
Shein raised $1.7 billion in its Initial Public Offering (IPO), valuing the company at $26.5 billion. This valuation is significantly lower than its peak of nearly $100 billion in 2022. The rebound seen late on Tuesday was attributed to stabilization measures, which are often used for large listings to prevent sharp declines on the debut day, according to sources and analysts.
Analysts and investors attribute Shein's weak performance to several factors, including higher import duties in key markets, increasing regulatory scrutiny, and fierce competition from rivals. Brendon Ho, head of investment advisory for Singapore at Arta Finance, noted that Shein's "weak performance reflects investors reassessing a growth story that has become harder to underwrite." He added that revenue growth has slowed, margins are under pressure, and tariffs in the US and EU are undermining its low-cost cross-border model.
Shein has faced scrutiny over its supply chain ethics and environmental impact, which previously hindered attempts to list in the UK and US. The company also reported a $99 million quarterly loss after the US struck down an import duty exemption for small packages, a rule that had significantly aided Shein's rapid growth. Additionally, a new €3 tax on low-value imports in the European Union and the Iran war have further impacted demand, increased costs, and caused delivery delays.
