Shein's big Hong Kong debut gets off to a rocky start

Shein's initial public offering on the Hong Kong Stock Exchange has not met expectations, with the company's shares experiencing a significant decline shortly after trading commenced on Tuesday. Despite raising US$1.7 billion (approximately R27.4 billion) during the offering, Shein's shares fell from the listing price of HK$48.56 (R100.20) to HK$43.72 (R90.20).

This weak debut for the fast-fashion retailer, which grew by selling affordable clothing online, signals challenges ahead as regulators, governments, and investors scrutinize its business model. The company's valuation on the Hong Kong exchange now stands at roughly US$26.3 billion (R424 billion), a stark contrast to the nearly US$100 billion (R1.61 trillion) valuation it commanded in private fundraising rounds in 2022.

Shein's efforts to go public have been prolonged, with prior attempts in New York and London met with regulatory hurdles. Chinese authorities ultimately approved the Hong Kong listing in July. The company plans to allocate the raised funds towards enhancing its technology and expanding internationally. However, Morningstar analyst Lorraine Tan suggests that Shein's revenue growth has slowed to below 10% in 2025, comparable to the broader fast-fashion sector.

Shein's appeal has traditionally resided in offering a vast array of trendy, quick-to-produce items at prices that traditional retailers find hard to match. By the end of 2025, the company had around 156 million monthly users in Europe alone, making it one of the most popular online fashion retailers globally. Nonetheless, this same business strategy has come under increasing criticism, facing scrutiny over environmental impact, alleged labor practices, privacy concerns, and copyright issues.

Competitors like Temu and AliExpress have intensified competition for budget-conscious online shoppers. Shein has consistently denied accusations of forced labor, with its executive chairman, Donald Tang, stating the company's "zero tolerance" for such practices. The Hong Kong listing also highlights the challenges Shein faces as governments impose stricter regulations on its low-cost international shipping model.

For instance, the removal of an import-duty exemption for small packages in the United States has already affected the company's financials. Additionally, the European Union has introduced a €3 (approximately R56) duty on items in packages under €150 (about R2,804), with France considering a separate charge on ultra-fast-fashion products that could rise to nearly €20 (R374) per garment.

These additional costs could significantly impact Shein's profitability, especially given its model centered around selling inexpensive individual items. Industry analyst Juozas Kaziukenas predicts that Shein's near-term growth may turn negative, urging the company to reconsider its supply chain strategy instead of relying heavily on direct shipping from China.

Despite moving its headquarters to Singapore in 2021-22 to evade Chinese regulatory scrutiny, Shein's Chinese origins remain integral to its operations. CEO Sky Xu recently visited Guangdong to reaffirm the company's commitment to increasing investment and resources in China, interpreted by analysts as an effort to bolster ties with its home market while preparing for future growth.

The Hong Kong listing represents a new chapter for Shein, transitioning from a high-growth startup to a large global retailer in a more competitive environment, facing heightened scrutiny and greater expectations.