SHEIN-W (00625.HK) fell as much as 10.5% to a fresh listing low of HK$35.86 on Monday after Australia and New Zealand recalled a contact lens sold on the fast-fashion retailer's marketplace, with the lens solution testing positive for Burkholderia cepacia. The stock last traded at HK$36.78, down 8.19%, on turnover of 3.9352 million shares worth HK$145 million.
New Zealand's Ministry of Business, Innovation and Employment said in a Friday statement that a sample of the lenses tested positive for the bacterium in the solution in which they were packaged. "Exposure to this bacterium may pose a risk of eye infection or irritation and an incident was reported in the United Kingdom involving a user who developed an eye infection," the Ministry said. The Australian Competition and Consumer Commission issued a similar recall notice.
SHEIN said it would contact affected customers directly to arrange full refunds to their original payment method and urged owners of the recalled lenses to stop using them and dispose of the product safely. Users who develop redness, pain, discharge or blurred vision after wearing the lenses were advised to seek medical attention promptly.
The recall lands on a stock already under pressure from its own debut. SHEIN listed on the Hong Kong exchange in early September, raising HK$13.6 billion ($1.7 billion) through its initial public offering at HK$48.56 a share. The shares fell as much as 10% on debut day to HK$43.72, and Monday's HK$35.86 trough puts the stock roughly 26% below its IPO price. The listing valued the company at just over $26 billion, behind Sweden's Hennes & Mauritz AB at roughly $30 billion and far below SHEIN's 2022 peak valuation of nearly $100 billion.
Shorts build a 39.7% ratio as Jefferies starts at Underperform
Two other forces compounded Monday's decline. Short selling in SHEIN-W reached $39.82 million, a short ratio of 39.705% as of 12:25 p.m. HKT, according to HKEX data — meaning nearly two of every five shares traded in the morning session were sold short. Separately, Jefferies initiated coverage with an Underperform rating, citing valuation pressure.
Traders pointed to the recall as the session's dominant driver, with the short-selling data and the Jefferies initiation reinforcing rather than originating the move. The stock's intraday range of HK$35.86 to roughly HK$40 spanned about 10% of its value, and the HK$145 million turnover was concentrated in a single morning session.
The regulatory question now extends beyond the lens itself. The recalled product was sold through SHEIN's third-party marketplace, which places product-safety liability on the platform rather than solely on the manufacturer. Australia and New Zealand acted within days of each other, and the UK incident was cited in the New Zealand statement — a pattern that raises the prospect of scrutiny of SHEIN's health and beauty listings in other jurisdictions.
That is the exposure that matters for valuation. SHEIN built its business on a data-driven supply chain that designs, produces and ships low-cost goods quickly, and its marketplace expansion into categories such as contact lenses widens the surface area for exactly this kind of recall. Marguerite LeRolland, senior global insight manager for fashion at Euromonitor International, told CNBC earlier this month that SHEIN will need to redefine its value proposition beyond "low prices and constant novelty," including by curating its marketplace offerings and developing services. LeRolland also said SHEIN needs to improve its brand image as regulators and public opinion become increasingly critical of the company.
The stock's next test is whether other regulators follow Australia and New Zealand. SHEIN has not disclosed the number of affected units, the identity of the third-party seller, or the financial cost of the recall. For a company that listed at HK$48.56 and now trades near HK$36.78, the gap between its IPO valuation and its current market capitalisation is the number short sellers are trading against.
This article is for informational purposes only and does not constitute investment advice.
