Shein Faces Challenges in Hong Kong IPO Debut

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September 1, 2026
Stock Market

The fashion retailer Shein saw its shares decline by 8% on the first day of trading in Hong Kong on Tuesday. The downturn stems from investor concerns over obstacles that delayed its listing, impacting its competitive advantage.

Shein, famous for its budget-friendly products like $5 tops and $10 dresses, has struggled due to changes in tariffs and duties in both the U.S. and Europe. The company also faced scrutiny over its business practices in the West, which hampered its efforts to list in New York and London, ultimately blocked by Chinese authorities.

The stock was trading at approximately 44.6 Hong Kong dollars ($5.68) during morning trade, valuing the company around $24 billion (approximately $3 billion), significantly lower than its 2022 peak of nearly $100 billion ($12.8 billion). Meanwhile, Hong Kong’s Hang Seng Index registered a 0.6% drop.

At the listing ceremony, Shein’s Chief Financial Officer Leigh Gui shared a commitment to ongoing innovation and collaboration with supply chain partners aimed at mutual benefit.

CEO Sky Xu, despite usually shying away from public attention, participated in photo sessions with employees onstage, though he did not address questions from Reuters.

“The weak debut suggests that even after a major valuation adjustment, investors do not regard Shein as an obvious bargain,” commented Charu Chanana, Saxo’s chief investment strategist.

Chanana noted Shein’s valuation is 15 times forward earnings, more than double the multiple associated with competitor Temu’s parent company, PDD. This discrepancy implies investors face a premium despite challenges in visibility regarding growth and regulatory trade risks.

The demand for Shein’s stock during its Initial Public Offering (IPO) was less enthusiastic than seen in tech sectors like AI and robotics. The retail tranche registered 5.63 times subscription, while international demand reached 2.59 times. Some IPO deals have attracted retail investors significantly, with subscriptions hundreds of times oversubscribed.

The IPO accounted for about 6.6% of Shein’s expanded share capital. Cornerstone investors acquired approximately a fifth of the IPO and are restricted from trading for six months, leaving only around 5% freely available on the market.

Last year brought significant changes as the U.S. eliminated the de minimis duty exemption for e-commerce shipments under $800, a key component of Shein’s direct-shipping approach. The European Union has followed suit, introducing charges on low-value parcels.

Shein’s net income decreased by 39% last year, leading to a loss in the first quarter. The company projects a slight decrease in first-half operating profit margins, influenced by increased customs duties, tariffs, fees, and logistics costs in Europe and the Middle East.

Director of Equity Research at Morningstar, Lorraine Tan, suggested new markets could offset slower growth in the U.S. and Europe, but delivery costs remain a concern, potentially limiting benefits in areas with lower spending power.

Shein is expanding its scope beyond ultra-cheap fast fashion. The company’s third-party marketplace has grown, and it acquired U.S. apparel brand Everlane in May. The company aims to offer marketplace and supply chain services to more brands, similar to its acquisition of French brand Pimkie and British brand Missguided in 2023.

The IPO has facilitated compensation for early investors who entered at higher valuations, with Shein agreeing to make cash payments totaling around $3.5 billion and share adjustments to some preferred shareholders.