The Asian fast-fashion giant Shein is experiencing its most difficult week since its initial public offering on the Hong Kong Stock Exchange. Following a weak debut, the company's shares have plummeted 21,5% in its first three trading days. The decline is attributed to a combination of factors: regulatory pressure in Europe, the elimination of tariff exemptions, and ongoing losses that continue to erode its appeal to investors.
The context is not new. For months, Brussels and several European governments have focused on the business model of platforms like Shein, Temu, and AliExpress. The implementation on July 1st of a flat tax of €3 per item from outside the EU has already caused a drop of between 30% and 40% in imports of small Chinese packages , according to data from French customs. Now, the company faces an even more adverse scenario in the stock market.
A debut with losses and a declining valuation
Shein set its initial public offering price at HK$48,56, but shares plunged as much as 10% in the first few minutes of trading. Although it managed to close the first day almost flat, the trend reversed in subsequent sessions. By Friday's close, the shares were at HK$38,14, representing a cumulative loss of 21,5% and leaving its valuation at around US$26.000 billion, 79% below the US$98.200 billion it reached in 2022.
The IPO, which raised $1.735 billion for Shein, has failed to convince investors. Furthermore, the company has committed to payments of up to $3.500 billion to compensate its strategic shareholders for the loss in value. These include funds such as General Atlantic, Tiger Capital, and the technology giant Tencent. According to the Chinese business daily 36Kr, Shein's initial public offering was accelerated to prevent these investors from redeeming their shares, an option that would have been suspended upon listing.
European regulatory pressure is tightening
On the same day as its launch, France announced sanctions on fast fashion products , a measure that directly affects Shein and its competitor Temu. This sanction comes on top of the €3 per item tax that the EU imposed in July. The impact is already being felt: according to the French app Joko, which analyzes bank transactions from 1,5 million users, Temu's sales fell by 50% between June and July , while AliExpress lost 37% and Shein 15%. The Chinese company has weathered the storm better thanks to its logistics strategy.
Shein opened a massive warehouse in Poland in December 2025, allowing it to ship many orders from within Europe and reduce its exposure to the small parcel tax . This move, similar to Amazon's distribution center strategy, gives it a competitive edge over Temu and AliExpress, which still rely heavily on direct shipments from China. Even so, the company posted a loss of $99 million in the first quarter of 2026, and analysts expect revenue in Europe to be negative this year.
Strategies for surviving the new era
Faced with this situation, Shein is seeking to diversify its business model. The company has expanded its Shein Xcelerator program, which allows external brands to use its production and sales infrastructure, and has acquired companies such as Missguided and Everlane. It is also considering opening more physical stores, although its attempt in Paris in 2025 drew strong criticism and an inspection that revealed the sale of illegal items on its marketplace. The European Commission is conducting an investigation under the Digital Services Act to assess whether Shein is adequately blocking illegal products.
Experts suggest that Shein's future lies in becoming a broader e-commerce platform, reducing its reliance on Chinese fashion and focusing on third-party sellers. Regulatory pressure isn't just coming from Europe: the United States has also restricted the de minimis exemption for low-value orders. All of this is forcing the giant to reinvent the model that made it famous for its ultra-low prices and direct shipping.
The stock market decline reflects investor skepticism in the face of increasingly narrow margins and a hostile legal environment. Although Shein maintains a user base of 273 million active customers and adds thousands of designs daily, profitability has been eroded. Opening new warehouses in Europe and expanding into non-fashion categories could be its next steps to recover lost ground.
