Shein’s $1.7B Hong Kong IPO Drops 10% on Debut

Shein raised $1.7 billion in a Hong Kong initial public offering that was heavily oversubscribed, but the stock fell about 10% on its debut after opening at the HK$48.56 offer price and sliding to about HK$43.80. The listing valued the company at roughly $26.5 billion, down from nearly $100 billion in 2022.

The retail tranche of the IPO was covered 5.63 times and the international portion 2.59 times. Market participants said those subscriptions reflected demand at the offer price rather than a willingness to pay more once trading began. The shares listed at slightly over 15 times forward earnings by some estimates, a multiple above comparable peers and the Hang Seng Index. Several recent Hong Kong listings have attracted far higher subscription levels.

Shein’s reported net income fell 39% in the prior year and the company reported a first-quarter loss. The firm recorded a quarterly loss of $99 million in July. Those results, together with the listing valuation, were cited as reasons some investors held back from buying shares in the secondary market.

Changes to cross-border trade rules have affected Shein’s cost base. The US ended a de minimis duty exemption for low-value parcels last year, and the European Union has introduced charges on low-value shipments. Analysts said those policy changes have increased shipping costs and reduced margins that supported the company’s international growth.

Competition in low-price online retail has increased pressure on pricing, with rivals expanding aggressively. Regulators in major Western markets have opened scrutiny into aspects of Shein’s operations, adding another source of uncertainty for investors.

Investor demand in Hong Kong has recently focused on companies tied to artificial intelligence, robotics and memory chips, sectors seen as offering faster structural growth. Market commentators said that contrast affected appetite for a consumer retail listing such as Shein.

Charu Chanana, chief investment strategist at Saxo, noted investors did not see Shein as “obviously cheap” and treated it more as a retailer facing margin and execution pressure than a high-growth platform. Gary Tan, a portfolio manager at Allspring Global Investments, observed the stock appeared to price in “part of a growth comeback” before the company had produced one. Kenny Ng, strategist at China Everbright Securities International, pointed to weaker financial performance, shifting trade policies and geopolitical tensions as factors making investors cautious. Jianggan Li, chief executive of Momentum Works, said investors were factoring in tariffs, regulatory risks and competition. Dickie Wong, research executive director at uSMART Securities, had warned ahead of the listing that he was not bullish on the IPO, citing weak revenue growth and gains flowing to earlier investors.

The IPO completed Shein’s effort to raise capital after earlier plans to list in New York and London did not proceed. Market participants noted a difference between attracting allocations at the offer price and securing buyers in the open market willing to push the share price higher.