Shares of Pop Mart International Group Limited fell in Hong Kong after Chinese official media made comments calling for stricter regulation of blind box toys and collectible card games, raising concerns about the company’s popular Labub doll business.
Although the comment did not name the company, it scared traders. The company’s share price has risen by nearly 170% this year due to the craze for its monster dolls. Pop Mart usually sells the dolls in blind boxes, meaning buyers don’t know what character is inside until they open them.
The Beijing-based toy maker, with a market value of about $40 billion, saw its share price drop by 5.3% on Thursday and fell by as much as 6.2% today. Shares of Bloks Group Ltd., which sells similar products, dropped by as much as 7.7%.
A special report on Page 19 of People’s Daily quoted legal experts as saying that China should further improve the supervision of “blind cards” and “mystery boxes”, as some current business models are prone to inducing minors to be addicted to purchasing these products.
Leung Chi Kin, an executive director of UOB Kay Hian Hong Kong Limited, said in reference to Pop Mart: “This comment has affected investor sentiment, indicating that there are some signs of overheating in its business. However, since these words were not directly from a government official, the warning effect is not significant.”
In China, due to concerns that blind boxes might lead to addiction, the government has banned their sale to children under the age of eight. Before the authorities implemented such guidelines in 2023, regulatory risks had been a major concern for investors.
Despite a sharp drop in its share price this week, Pop Mart remains the best-performing stock in the MSCI China Index, as consumers’ enthusiasm for its toys has made it one of the hottest growth companies in China. Wall Street analysts have been raising their target prices for the company, citing the growing influence of its intellectual property.
Rihanna and BlackPink member Lisa, among other celebrities, have been spotted carrying toys from Pop Mart, making it one of the most notable global consumer brands from China. Policy makers in Beijing have been trying to encourage such success stories, which may lower expectations for more disruptive crackdowns.
Chinese game card manufacturer Jia You postponed its initial public offering (IPO) in Hong Kong last year due to negative coverage of the industry by Chinese state media. The company resubmitted its listing application in April this year.
