Online fashion retailer Shein's shares dropped about 10 percent in early Hong Kong trading on Tuesday as the company made its long awaited debut, capping a ⁠years-long effort to go public.

The stock began trading at HK$48.56 each, in line with the final price set in the initial public offering that raised US$1.7 billion and valued Shein at US$26.5 billion. The shares then fell to HK$43.8 each.

On its debut, Shein is valued well below its 2022 peak of nearly US$100 billion.

Demand for Shein's stock during the IPO was tepid compared to other high-profile deals in the past year.

The retail tranche was subscribed 5.63 times, while the international portion was subscribed 2.59 times, Shein said in a stock exchange filing on Monday. Some deals have been hundreds of times oversubscribed, especially from Hong Kong's army of retail investors who track IPOs very closely.

"Never been bullish on this IPO. Revenue's not ⁠growing, and a lot of the money raised is basically going back to the earlier investors," said Dickie Wong, ⁠executive director of research at uSMART Securities ⁠in Hong Kong.

"Grey market already dropped below the offering price, cornerstone lock-up doesn't really help."

The amount sold in the IPO represents about 6.6 percent 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 percent freely tradeable.

Known globally for selling US$5 tops and US$10 dresses, Shein has been humbled by tariff and duty changes in the US and Europe that undermine the foundations of its business.

Last year, the US ended the de minimis duty exemption for e-commerce shipments under US$800 that had powered Shein's direct-shipping model. The European Union recently followed suit, imposing fees on low-value packages.

Shein's net income slid 39 percent last year and it swung to a loss in the first quarter.

Shein has said it expects first-half operating profit margin to be slightly lower than in the first quarter, hurt by higher customs duties, tariffs, fees and logistics costs in Europe and the Middle East.

"New markets could help offset slower growth in the US and Europe, but lower spending power in developing markets may limit the benefit ⁠if delivery costs stay high," said Lorraine Tan, director of equity research at Morningstar.

Shein has been trying to widen beyond its own-label ultra-cheap fast fashion, having expanded its third-party marketplace and bought US apparel brand Everlane in May.

In its prospectus it said it aims to offer marketplace and supply chain services to more brands, in the footsteps of French brand Pimkie, and British brand Missguided, which it bought in 2023.

The IPO has helped Shein compensate early investors who invested at much higher valuations. The company has agreed to make cash payments totalling about US$3.5 billion and share adjustments to some preferred shareholders. (Reuters)



Edited by Altis Wong