SHEIN drops 2.5% in Hong Kong stock market debut: 'Investors still don't see it as a bargain'
Ultra-fast fashion giant SHEIN opened its first trading day on the Hong Kong Stock Exchange with a 10% drop, which later recovered to 2.5%. The company raised $1.7 billion at a valuation of $26.5 billion.
The ultra-fast fashion giant, SHEIN, opened its first trading day on the Hong Kong Stock Exchange with declines. The stock fell by 10% at the start of the day, but later recovered slightly and is currently losing 2.5%.
The IPO in Hong Kong comes after years of planning and attempts to go public in New York and London, which failed due to various regulatory hurdles. The company raised 1.7 billion dollars in the offering, based on a valuation of 26.5 billion dollars, significantly lower than the 100 billion dollar valuation in a 2022 funding round.
"I think the weak launch shows that even after the huge valuation reset, investors still don't see SHEIN as a bargain," Charu Chan, chief investment strategist at SAXO in Singapore, told Reuters. — "It came to market at a price more than double the multiple of PDD (the owner of Temu), so investors were asked to pay a premium despite slower growth and significant regulatory and trade risks. It's a combination that is hard to justify."
SHEIN gained high popularity during the COVID-19 lockdowns and managed to attract young consumers thanks to the low prices it offers, including 5-dollar shirts and 10-dollar dresses. However, in 2023, the enthusiasm around the company began to fade, amid accusations of forced labor in China and environmental pollution.
"The market has adopted a wait-and-see policy regarding global policy and the recovery of consumer sentiment," added Kenny Ng from Everbright Securities.
SHEIN's net profit fell last year to 2 billion dollars from a peak of 3.4 billion dollars in 2024, and profit margins narrowed to 4.9% from 8.7%. For the first quarter of the year, the company reported a loss of 99 million dollars, amid trade tensions with the US and the European Union. Another blow the company suffered was the decision to cancel the customs duty exemption on cheap packages in the US.
Despite the decline in value, SHEIN is one of the most valuable fashion companies in the world, close to that of the Swedish fashion chain H&M. The most valuable fashion company is Inditex, the owner of Zara, whose market value stands at 213 billion dollars.
SHEIN was founded by Chinese businessman Sky Xu, who in 2012 purchased the domain name Sheinside.com and used it to sell women's clothing online. In 2015, he officially changed the name to SHEIN. Xu usually stays out of the spotlight, so it surprised many when he appeared at the opening bell ceremony this morning.
