Shares in fast-fashion giant Shein fell as much as 10% on their trading debut on Hong Kong’s stock market on Tuesday, before recovering some of their losses, following years of delay to the company’s plans to list publicly and regulatory setbacks in Europe and in the US.
Shein’s initial public offering opened on 24 August, with the final share price set a week later on 31 August. Trading began the following day, on Tuesday.
The gap reflects standard IPO process, as investors placed their orders over about a week, the banks running the deal then fixed the final price and decided who got shares, and trading opened a few business days later once the exchange gave the final go-ahead.
The listing marks the end of a long search for a stock market willing to take Shein after plans to list in New York and London stalled amid scrutiny over its Chinese supply chains, forcing the company to turn to Hong Kong instead.
New US and EU tariffs on low-cost parcels from China, along with rising shipping costs from the war in Iran, have contributed to Shein’s swing from a $395 million (€340mn) profit to a $99 million (€85mn) loss in the first quarter of this year.
Shein raised about $1.7 billion (€1.46bn), pricing shares at HK$48.56 (€5.33) each, in one of the city’s biggest share sales this year.
“Shein’s Hong Kong listing marks a new starting point,” said Leigh Gui, Shein’s chief financial officer, in a short speech at its listing ceremony.
But in early trading, the shares fell to below HK$44 (€4.83) before losses narrowed.
Tariffs squeeze profits
Shein has built its appeal to customers on ultra-fast, affordable fashion, delivered from China to the West within days.
However, the end of “de minimis” tariff exemptions in the US and the European Union has raised duties on low-value parcels from China, including Shein’s products. Higher logistics costs, driven partly by the war in Iran, have also squeezed the company’s low-price business model and profitability.
Tariff costs have forced Shein to raise prices, “cutting into its main advantage,” said Jacob Cooke, CEO of WPIC Marketing + Technologies.
Back to its roots
Shein, pronounced “she-in,” earlier explored listing its shares in New York and London, and moved its headquarters from China to Singapore in 2021.
But increasingly strict scrutiny by Beijing and by regulators in the US and Europe led it to embrace its Chinese roots and switch to a Hong Kong listing.
Launched in 2012 in China, much of Shein’s operations were in the southern province of Guangdong before it moved its corporate headquarters out of the country.
“Guangdong is Shein’s roots, and the starting point of our journey,” founder Sky Xu said in a speech in February.
Pivoting its focus back to China also highlighted the advantages Shein derives from a supply chain system that “only exists” in Guangdong, said William Ma of GROW Investment Group, referring to its small-batch, fast-response manufacturing model.
Shein has hit other roadblocks in expanding in Europe. In February, the EU launched a probe into the company with a focus on “illegal” products, including alleged child sexual abuse material.
In May, Shein acquired San Francisco-based eco-friendly clothing retailer Everlane, a move some analysts said was not the best fit.
Hong Kong’s IPO boost
The company’s market value was roughly $27 billion (€23.2bn) as it listed in Hong Kong, a fraction of its peak valuation a few years ago.
“Shein has probably missed its golden listing window due to the shift of momentum toward AI and tariffs, which can affect valuations and profitability,” said Gary Ng, a senior economist for Asia Pacific at French bank Natixis.
Still, Shein’s listing is welcome news for Hong Kong, as the Chinese territory makes increasing efforts to hold onto its role as a global financial hub following a downturn in 2023.
Hong Kong’s stock exchange has had a strong year for IPOs, raising more than $40 billion (€34.4bn) so far.
There is also a backlog of companies seeking to list there, said Lorraine Tan at investment research firm Morningstar.