As the global "Labubu" craze fades, Chinese character toy company Pop Mart is enduring a brutal stock correction. Its shares have plunged nearly 60% from their peak, wiping out roughly 50 trillion won ($36 billion) in market capitalization.
30% Plunge in Five Trading Days — Share Buyback Falls Flat
Pop Mart's stock tumbled more than 30% over the past five trading days, Bloomberg reported on Tuesday.
The selloff began after the company posted results that missed market expectations on May 25. The stock recorded its largest single-day drop ever at 23% the following day, then extended losses for five consecutive sessions.
Pop Mart responded by announcing a share buyback program worth 1.3 billion Hong Kong dollars (approximately 250 billion won), but the move proved insufficient to stem the investor exodus.
Pop Mart's price-to-earnings ratio (PER) based on estimated earnings per share has fallen to 10.3 times, approaching a record low. That compares with an average forward PER of 24 times over the past three years — less than half the historical level.
Market pessimism is deepening. Short interest betting against the stock surged 16% from pre-earnings levels to nearly 123 million shares. In the options market, put option volume — wagers on further declines — hit an all-time high as of Tuesday.
No Clear IP After Labubu — Warnings of "Underestimated Growth Slowdown"
The fundamental driver behind Pop Mart's struggles is the absence of a next-generation intellectual property (IP) to succeed Labubu.
The company has promoted follow-up characters such as Crybaby and Molly, but sales have fallen short of expectations.
Pop Mart has been investing in revenue diversification through its existing IP portfolio, including a Labubu animated series and collaborations with Sanrio and the World Cup. The market, however, remains unconvinced.
"What differentiates Pop Mart is its storytelling ability with next-generation IPs like Labubu, but that story is uncertain at present," said Angus Lee, fund manager at Sparks Group.
Melinda Hu, a consumer sector analyst at Bernstein who issued a sell recommendation several months ago, said, "The market is underestimating the challenges ahead for Pop Mart." She added, "There is a high likelihood that the PER will decline significantly and earnings forecasts will be revised downward as growth slows or IP fatigue sets in."
*Chinese Gen Z Spends 580,000 Won on Doll Clothes Against 390,000 Won in Living Expenses — "Labubu Is Like Our Child"*
