Shein shares slide in Hong Kong debut on worries about trade, regulatory risks

Shares in online fast-fashion retailer Shein have fell 8 per cent in their first day of Hong Kong trade on Tuesday, with investors worried about the impact of setbacks that long delayed its listing and have undermined its competitive advantages.

Known globally for selling $5 tops and $10 dresses, Shein has been humbled by tariff and duty changes in the US and Europe. Intense scrutiny of its business practices in the West also hampered its attempts to list in New York and London, which were ultimately blocked by Chinese authorities.

The stock was trading at around HK$44.6 in morning trade, valuing the company at around $24 billion, far below its 2022 peak of nearly $100 billion. Hong Kong's Hang Seng Index .HSI was down 0.6 per cent.

"As a new company listed in Hong Kong, we will continue to innovate, optimise, and cooperate with our supply chain partners for mutual benefit and win-win results," Shein Chief Financial Officer Leigh Gui said at the opening gong ceremony.

VALUATION STILL SEEN AS EXPENSIVE

Founder and CEO Sky Xu, known for disliking the limelight, did not speak at the event though later took pictures with Shein employees on stage. He declined to respond to Reuters' questions.

"I think the weak debut shows that even after the huge valuation reset, investors still don't see Shein as obviously cheap," said Charu Chanana, chief investment strategist at Saxo.

Chanana said Shein was valued at 15 times forward earnings, more than double the multiple for PDD, the owner of rival Temu, which meant "investors were being asked to pay a premium despite weaker growth visibility and significant regulatory and trade risks."

Demand for Shein's stock during the IPO was tepid compared to high-profile offerings from the AI and robotics sectors.

The retail tranche was subscribed 5.63 times, while the international portion was subscribed 2.59 ​times. Some deals have been hundreds of times oversubscribed, especially from Hong Kong's army of retail investors who track IPOs very closely.

The amount sold in the IPO represents about 6.6 per cent of Shein's enlarged share capital. Cornerstone investors took about one-fifth of the IPO and are locked up for six months, leaving roughly 5 per cent freely tradeable.