Shares in manufacturer Labubu collapse after call for control of 'surprise boxes'

Quotes of China's Pop Mart International - the manufacturer of Labooboo dolls that went viral - sagged after a call in the state press to tighten regulation of the «surprise boxes» market. Morgan Stanley excluded the company's shares from the list of focus investments on China and Hong Kong, and Jefferies warned of possible problems of the entire segment of collectible toys in China.

At the opening of trading on June 20 in Hong Kong, Pop Mart shares sagged 6.2%, later partially recovered the decline. Over the last two days they lost 9%. The reason for the sell-off was an article in «Zhenmin Zhibao» - the official newspaper of the ruling Communist Party of China. The publication called on the Chinese authorities to tighten control over sales of collectible toys in sealed packages, the contents of which the buyer does not know in advance;

This is the format on which Pop Mart has built its business model: «surprise boxes» with characters invented by the company or acquired under license are sold all over the world. Laboob, a toothy elf with a mischievous expression, was a particular success. The doll has become a social media hit thanks to interest from celebrities. Zhenmin Zhibao stressed that the format is gaining popularity among children and teenagers, and suggested strengthening controls to protect minors from impulsive spending.

Shares of Bloks Group, which offers similar products, slipped 9.7 percent in Hong Kong.

Morgan Stanley said without elaboration that it is replacing Pop Mart shares on its list of priority investments in China and Hong Kong with securities of insurance company PICC P&C, reports CNBC. Meanwhile, just a week earlier, the bank raised its target price on Pop Mart shares to HK$302 ($38.47) from HK$224, forecasting long-term growth, напоминает телеканал. 

«The comment [in the Zhenmin zhibao] put pressure on investor sentiment and highlighted signs of overheating in the company's business,» UOB Kay Hian Hong Kong executive director Stephen Leung stated to Bloomberg news agency, referring to Pop Mart. - However, this is more of a mild warning as it does not come directly from officials.»

«Quotes for the entire pop-toy segment will come under pressure in the short term, especially those companies whose stocks have been performing the best since the beginning of the year,» warned Jefferies analyst Ann Lin.

Analyst Jeff Zhang of Morningstar believes that fears of negative repercussions for doll maker Labooboo may be exaggerated. According to him, the company's core audience is adult shoppers, which means that regulatory pressure should not seriously affect the company's business. In addition, Pop Mart's main growth should come from overseas markets, so the risks from Chinese regulation are limited, the economist said.

Pop Mart's collapse of even 9% looks insignificant after their surge earlier in 2025: since January, the stock has risen more than 160%. And last year, when «labooboo mania» began, they were up 340%, making them one of the fastest-growing stocks on the Hong Kong exchange, notes the WSJ.

Over the year, Pop Mart's profit almost tripled, and revenue doubled. At the same time, interest in Laboubou is not dying down. Earlier in June, a full-size version of the doll went for $150,000 at an auction in China. In 2025, the company expects to grow revenue by more than 50% and double overseas sales.