Shein’s valuation has plunged to about $24 billion after shares in the fast-fashion giant fell 8% on their first day of trading in Hong Kong.
The decline marks a dramatic fall from the company’s peak valuation of nearly $100 billion in 2022.
Known for selling ultra-cheap clothing, including $5 tops and $10 dresses, Shein has faced growing challenges in recent years.
Changes to tariffs and import duties in the United States and Europe have put pressure on its business model.
The company has also faced intense scrutiny over its business practices, complicating earlier attempts to list in New York and London.
After those efforts stalled, Shein turned to Hong Kong for its initial public offering.
Shares traded at around HK$44.60, or $5.68, during morning trading, putting the company’s market value at approximately $24 billion.
Despite the weak debut, Shein Chief Financial Officer Leigh Gui maintained an optimistic outlook at the listing ceremony.
She said the company would continue to innovate and work closely with its supply-chain partners.
Founder and CEO Sky Xu, who is known for keeping a low public profile, did not address the gathering or respond to questions from Reuters.
Market analysts, however, expressed concerns about the company’s prospects.
Charu Chanana, chief investment strategist at Saxo, said the weak debut showed that investors remained unconvinced that Shein’s shares were cheap even after its major valuation decline.
Shein was valued at about 15 times forward earnings, more than twice the multiple given to PDD Holdings, the parent company of rival Temu.
Analysts said the premium valuation could be difficult to justify given Shein’s slower growth outlook and increasing regulatory and trade risks.
Investor demand during the IPO was also relatively modest.
The retail portion was subscribed 5.63 times, while the international offering was subscribed 2.59 times.
That was far below some recent Hong Kong listings that attracted hundreds of times their available shares in demand.
Shein’s IPO shares represented about 6.6% of its enlarged share capital.
Cornerstone investors bought roughly one-fifth of the offering and agreed to a six-month lock-up, leaving only about 5% freely tradable.
A major source of pressure has been changing global trade policies.
The United States last year ended the de minimis duty exemption for e-commerce shipments valued below $800, a policy that had supported Shein’s direct-shipping model.
The European Union has also introduced fees on low-value packages entering the bloc.
The changes have taken a toll on Shein’s finances.
The company’s net income fell 39% last year, while it recorded a loss in the first quarter of this year.
Shein has also warned that its first-half operating profit margin is expected to decline slightly from the first quarter.
Rising customs duties, tariffs, fees and logistics costs in Europe and the Middle East are among the factors putting pressure on margins.
Morningstar equity research director Lorraine Tan said expansion into new markets could help Shein compensate for slower growth in the United States and Europe.
However, she warned that weaker consumer spending in developing markets and high delivery costs could limit the benefits.
Shein has responded by seeking to diversify beyond its ultra-cheap, own-label fashion business.
The company has expanded its third-party marketplace and acquired US fashion brand Everlane in May.
It had earlier acquired French brand Pimkie and British brand Missguided in 2023.
In its prospectus, Shein said it plans to provide marketplace and supply-chain services to more brands.
The strategy could gradually transform the company from a single fast-fashion retailer into a broader platform serving multiple fashion labels.
The Hong Kong IPO also has an important financial purpose beyond raising capital.
Shein has agreed to make about $3.5 billion in cash payments and adjust shares for certain preferred shareholders who invested when the company had much higher valuations.
Analysts described the listing as both a fundraising exercise and a major restructuring of the company’s capital structure.
Shein’s weak Hong Kong debut highlights the dramatic reversal in its fortunes.
From a nearly $100 billion valuation in 2022, the company is now worth roughly $24 billion.
With trade barriers rising, profits under pressure and investor confidence weakened, Shein faces a difficult task rebuilding its position in the global fast-fashion market.
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