Shein shares slide on fast-fashion retailer’s stock market debut

Shares in the fast-fashion brand Shein slumped by as much as 10% as the China-founded company made its long-anticipated trading debut on the Hong Kong stock exchange.

The Singapore-headquartered company, once valued at almost $100bn (£74bn), went public on Tuesday pricing shares at HK$48.56, valuing the business at just over $26bn.

However, minutes after the flotation, which raised HK$13.6bn, the stock fell as much as 10%, pushing the online retailer’s valuation below $25bn.

Shein’s share price recovered most of its early trading plunge, closing at HK$48.50, just 0.12% down on its opening price.

“Let global consumers enjoy the sound of fashion,” said Leigh Gui, Shein’s chief financial officer, after a gong was struck to mark the start of trading.

The lacklustre launch as a publicly listed company comes after one of the longest-awaited initial public offerings in recent years, after plans to list in New York were blocked by regulators over forced labour concerns.

Shein also considered a £50bn flotation in London but faced similar questions about its supply chain from campaigners, MPs and investors.

Nevertheless, the company has still floated as one of the world’s biggest listed fashion groups, with a valuation around the same as the Swedish retailer H&M. The Zara owner, Inditex, has a market capitalisation of about $213bn.

Shein reached a valuation of $100bn in an April 2022 fundraising round, making it the third most valuable startup in the world at the time. The plunge in its value since has been driven by regulatory changes around the world that threaten its business model of shipping goods in small packages out of China to take advantage of tax breaks on low-value imported goods.

The company swung to a loss of $99m in the first three months of this year, compared with a net income of $395m the year before, after the US removed its “de minimis” import duty exemption on small packages, hitting its sales in the country.

The EU is also cracking down on the loophole, introducing a €3 (£2.56) duty on small parcels imported from outside the trading bloc in June, and intends to phase it out, while the UK has said it will do the same by October 2028.

On Tuesday, France began imposing penalties on some fast-fashion items to curb the surge in sales of cheap products sold by retailers such as Shein and its Chinese rival Temu.

Paris passed a fast-fashion law in June to address concerns about overproduction, with the penalties calculated using a formula that factors in the number of products sold, their prices and repairability.

The penalties, which are set to increase in 2030, range from €0.25 for a pair of boxer shorts or socks to €12 for a coat, with the amount capped at 50% of the product’s pre-tax sales price.

China’s commerce ministry has called the French law discriminatory and a trade barrier and said it could be in violation of World Trade Organization principles.

Shein, founded by the entrepreneur Chris Xu, runs most of its operations from China but sells all its goods outside the country. It moved its headquarters to Singapore at about the start of 2022, a move viewed by analysts as designed to avoid increasing scrutiny of Chinese companies.

After forced labour concerns were raised, Shein said it had tightened its supplier policies, enforced through regular audits, with any child or forced labour violations becoming grounds for immediate termination of contract.