Shein's Hong Kong listing debut sours with 10% plunge after rocky IPO

Shein Global Holdings faced a significant setback in its Hong Kong debut as an initial public offering (IPO), with its shares plummeting by 10% in early trading. Valued at a fraction of its former worth, the company's shares fell to HK$43.72 ($5.57) from the IPO price of HK$48.56 before recovering some losses. The valuation and performance of Shein's IPO mark a test for investor appetite in the internet retail sector, which has struggled due to inflation, trade disruptions, and consumer caution in key markets, including China.

Vey-Sern Ling, a managing director at Union Bancaire Privee, attributed the sharp share price fall on IPO day to Shein's well-known challenges, including slowing growth, rising losses, and regulatory disruptions. The IPO raised HK$13.6 billion, valuing the company at over $26 billion, far below its previous $100 billion valuation.

Despite remaining one of the world's largest listed apparel and fashion companies, Shein continues to face mounting challenges such as higher tariffs, regulatory scrutiny, and intense competition from e-commerce and fast-fashion players like PDD Holdings's Temu and Alibaba Group Holding's AliExpress. The IPO priced Shein at more than 15 times forward earnings, double the valuation of PDD and above the 10.7 times multiple for Hong Kong's benchmark Hang Seng Index.

Investors have been favoring AI and technology-related plays, limiting Shein's appeal as a traditional e-commerce company that relies heavily on price competition. The company's first-day struggles align with a recent trend of sizeable Hong Kong listings experiencing a sluggish start. Shein, founded in China and now based in Singapore, has emerged as a global fast-fashion giant, benefiting from the pandemic-era e-commerce boom.

However, its market debut has raised concerns about its long-term prospects, given the challenges it faces and the valuation's distance from most apparel retailers.