Fast fashion retailer Shein has experienced a significant drop in its market valuation, losing nearly £4 billion in its first week of trading on the Hong Kong stock market. The company's shares were priced at HK$48.56 (£4.57) at its initial public offering (IPO) on September 1, raising HK$13.6 billion (£1.28 billion) and valuing the company at just over $26 billion (£19.2 billion).
Despite minor gains early in the week, Shein's shares have fallen 19 percent from their offering price, leaving the company valued at approximately £15.5 billion. This performance marks the second-worst opening five days of trading for companies that raised at least $1 billion on the Hong Kong exchange, surpassed only by Chinese search engine giant Baidu, according to Bloomberg analysis.
Shein, which was founded in China and is now based in Singapore, has seen its valuation decline sharply in recent years. Its IPO valuation is a fraction of the $100 billion it achieved during a private fundraising round in 2022. The decrease in value has been attributed, in part, to crackdowns on the 'de minimis' import duty exemption in the United States and the European Union.
This regulatory action, which closed loopholes allowing Shein to ship small parcels directly to consumers without tariffs, has negatively impacted earnings and investor confidence. The company reported a quarterly loss of £74 million for the three months ending March 31, a stark contrast to a profit of £296 million during the same period the previous year. While the UK is considering similar measures to close the small parcels loophole, it is not expected for several years. The EU and US crackdowns have reportedly redirected goods to the UK, which has a de minimis customs duty threshold of £135, a policy criticized by domestic retailers like Argos, Debenhams, and Currys for creating an uneven playing field.