Pop Mart shares lower amid calls for tougher regulation and revised investment guidelines

Shares of Pop Mart, the manufacturer of popular collectible toys Labubu, significantly sank in trading on Friday, June 20. Pressure on the securities was exerted by calls from Chinese state media for tougher regulation of the "blind box" market and the decision of Morgan Stanley to exclude the company from the list of priority investments.

The concept of" blind boxes", which brought Pop Mart popularity, involves the sale of unmarked packages worth from $5 to $10 with the opportunity to get a unique figure for the collection. This format proved to be especially popular among young and adult collectors.

The People's Daily, the official publication of the Chinese Communist Party, criticized the "blind box" market in its latest publication, calling for increased state control. In the article, special attention was paid to the growth of expenses of children and adolescents for the purchase of such goods. Pop Mart was not mentioned.

Additional pressure on the company's image was exerted by reports from the Chinese Customs Service about preventing attempts to import counterfeit Labubu products.

Hong Kong-listed Pop Mart shares ended Friday trading down more than 5%, extending their decline after a similar decline the day before. Since the beginning of the week, securities have lost over 13%, which was the worst weekly performance since May. Despite the correction, the stock remains up more than 160% since the beginning of the year.

Morgan Stanley earlier this week removed Pop Mart from its list of focus investments for China and Hong Kong, replacing it with insurance company PICC P&C. The reasons for this decision were not disclosed. Back on June 10, analysts at the bank led by Dustin Wei raised the target level of Pop Mart shares from 224 to 302 Hong Kong dollars ($38.47), predicting long-term growth potential. However, the comments noted that the market has already priced in expectations of sharp growth in 2025, and confidence in the long-term prospects remains limited. The report also emphasized that the high valuation of the company reduces the likelihood of continuing such rapid growth in the coming quarters.

At the peak of quotations on June 12, Pop Mart shares reached HK $ 283.40.

The company is actively expanding its international presence: opens online stores and retail outlets in the United States, Great Britain, and other countries. The Labubu toy series, dedicated to a character with the appearance of an elf, has become a global cultural phenomenon. The products have attracted international media attention, including New York Magazine and The New York Times. Popular products include soft toys, pillows,and themed merch. At an auction in Beijing in June, a four-foot Labubu figurine sold for $170,000, and more affordable models sold out in China in a matter of days.

According to the co-founder of WPIC Marketing + Technologies, Jacob Cook, the interest in Pop Mart reflects a general trend: "Cute images regularly appear on the market, which become objects of mass attraction." He recalled the excitement around plush capybaras last year and noted that adults are also increasingly interested in toys.

Pop Mart's overseas sales totaled 5.1 billion yuan in 2024, surpassing the company's total sales in 2021, when it was 4.49 billion yuan. In the domestic market, sales rose to 7.97 billion yuan in 2024.