The much-anticipated Shein IPO debut concluded its first trading week with a substantial stock market slump. The fast-fashion platform saw its shares fall a cumulative 21.5% since trading began on Tuesday. This significant drop positions Shein’s current valuation 79% below its peak recorded in 2022.
Shares closed today at 38.14 Hong Kong dollars, equivalent to $4.86. This marked a 9.19% daily decline from its IPO price of 48.56 Hong Kong dollars, which was the highest point reached so far. Market analysts described the situation as a “disaster” for Shein.
Regulatory pressure is mounting for the company. This week, France introduced penalties of up to 12 euros against “ultra-fast fashion” products. This new measure impacts Shein and its rival Temu.
Moreover, both the European Union and the United States have eliminated tariff exemptions for small packages. These exemptions were vital for Shein’s business model. As a result, new fees are now imposed on each shipment, leading to a provisional 30% to 40% reduction in Shein’s EU deliveries.
Consumer confidence is also a concern. An analyst from BNP Paribas indicated a weakening consumer landscape in both the US and Europe. These regions collectively account for a significant portion of Shein’s revenue, representing 24% and 35% respectively.
Shein raised approximately $1.735 billion through its IPO. However, the company had approved payments exceeding double that amount, roughly $3.5 billion in shares and cash. This compensation was intended for strategic investors due to the substantial collapse in its valuation from $98.2 billion in 2022.
Reports suggest Shein pushed for this public offering to mitigate the risk of investors cashing out their stakes. Chinese official media, which rarely covers the company since it relocated its headquarters to Singapore in 2022, has nevertheless defended Shein. Experts attribute the stock decline to regulatory actions from Washington and Brussels. They argue that Shein maintains remarkable strength in its supply chains and user base, despite numerous challenges.
Founded in 2012 by Chris Xu, Shein initially operated as ‘SheInside’. The company experienced explosive growth during the e-commerce boom of the COVID-19 pandemic. However, its rapid success also brought increased scrutiny over environmental impact, labor practices, alleged sales of illegal products, and deceptive trade practices.
Despite these headwinds, Shein remains a major player in the global fast-fashion sector. It holds a 1.9% market share, placing it third worldwide. This position is just behind Nike (3%) and Inditex (2.5%) within a market valued at $1.7 trillion.
