How Pop Mart Escapes the “LABUBU Paradox”?

Pop Mart’s Struggle: How Can It Escape the “LABUBU Paradox”?Pop Mart’s stock has been in a continuous downward trend for the past four months, losing over 40% of its value since its mid-year peak. Short-sellers are intensifying their efforts against this once-celebrated leader in the trendy toy industry. Compared to three or four years ago when the company’s stock was at a low point, Pop Mart’s aggressive stock buybacks back then now seem almost like a distant memory. In the face of this decline, many institutions have begun to question Pop Mart’s future outlook.As of December 12, Pop Mart’s market capitalization on the Hong Kong stock exchange has evaporated by nearly HKD 200 billion from its high in August this year. However, considering that the company’s stock price has tripled since the start of 2023, 2025 could still be a year of strong growth for Pop Mart.Looking back at August, when Pop Mart released its 2025 half-year report, the company’s stock price was at a high point. Its popular LABUBU products were in such high demand that they couldn’t meet the market’s needs. Founder Wang Ning repeatedly mentioned the word “health” during the earnings call. He emphasized: “For us, while growth is important, we also care about the overall health of the company.” The turning point in the stock price coincided with a supply issue for the company’s key IP, LABUBU.After reports of “unhealthy” situations, such as consumers queuing up and even fighting to buy LABUBU products in several regions, Pop Mart took action during the 618 sales event to replenish inventory on a large scale.

LABUBU began its first-ever online pre-sale, and the company started increasing its production capacity to meet the growing demand. Subsequently, the prices for LABUBU 3.0 series began to fall in the second-hand market, though the product’s popularity remained high for two more months.By the end of August, however, the market began to cool down significantly. Scalpers halted purchases due to steep price drops, which marked the beginning of Pop Mart’s stock price decline. Despite this, the company’s performance has remained impressive. On October 21, Pop Mart announced a 245% to 250% year-over-year revenue increase for the third quarter of 2025. Specifically, its Chinese revenues grew by 185% to 190%, while overseas revenues surged by 365% to 370%. However, its stock price dropped by over 8% on the same day.Recently, several foreign institutions have released bearish reports on Pop Mart, further fueling market pessimism. Morgan Stanley lowered its 2026 LABUBU revenue growth forecast and reduced its target price from HKD 382 to HKD 325. Deutsche Bank maintained a “Hold” rating with a target price of HKD 228. Since December 2, the short-selling volume on Pop Mart’s Hong Kong shares has surged by 158%, reaching its highest level since August 2023.Stock prices often reflect more than just company performance—sustainability is also a key factor. Pop Mart’s stock is currently lacking this crucial support. The “Scarcity Paradox”—as noted by Deutsche Bank in its December report—points out that the market is accustomed to predicting future growth based on the explosive growth trajectory of LABUBU in 2025.

However, this strong growth driven by LABUBU hides the significant risks of a supply-demand reversal for Pop Mart.Pop Mart has significantly increased LABUBU’s production capacity—from an average of 10 million units per month in the first half of the year to a projected 50 million units per month by year-end. This shift has directly impacted LABUBU’s scarcity premium, potentially leading to a decline in its popularity. Deutsche Bank has termed this phenomenon the “Availability Paradox.” While Wang Ning has suggested that Pop Mart’s business model aims to transcend the competitive logic of productivity, focusing instead on fulfilling emotional and self-identity needs, he has not openly linked the product to the concept of scarce luxury goods. This is evident in Pop Mart’s actions—while production capacity for hot-selling series like LABUBU has been greatly expanded, product pricing remains within the acceptable range for the general public.However, recent personnel changes may signal a subtle shift in the company’s direction. On December 10, Pop Mart appointed Wu Yue as a non-executive director. Wu had previously served as the President of LVMH Greater China, overseeing the group’s multi-brand operations in the region. This move has led to speculation that Pop Mart may be looking to leverage Wu’s experience and resources in the luxury goods industry to explore higher-end collaborations. Whether this leads to further partnerships remains to be seen.Following this announcement, Pop Mart’s stock price experienced a two-day rebound. Typically, companies experiencing prolonged stock declines will initiate stock buybacks to support the price and send a signal that the stock is undervalued, maintaining market confidence.

However, during the four-month decline, Pop Mart has remained remarkably “calm,” not initiating any buybacks, even in the face of a short-selling attack. In contrast, during the stock price lows of 2022 and 2023, Pop Mart frequently repurchased shares. At that time, the company faced poor performance, and the stock price had dropped below HKD 10. During this period, Pop Mart continued buying back shares, with executives making several additional purchases. By mid-2023, Pop Mart had repurchased approximately HKD 1 billion worth of stock.At the crossroads, Pop Mart today is far from the company it was three or four years ago. Not only has its stock price grown exponentially, but its brand recognition, business model, and product portfolio have undergone a systematic upgrade. As Wang Ning summarized, the company’s business logic has evolved from focusing on “trends” to integrating into the “fashion industry,” and now to focusing on the core concept of delivering “happiness.”In this round of stock price adjustments, the company has not opted for buybacks. This may reflect a deeper consideration of its financial strategy and market confidence. Deutsche Bank has provided two valuation scenarios for Pop Mart: the “bear market” scenario, where LABUBU’s popularity declines in 2026 with no new IP to take over, leading to a drop in both domestic and international revenues; and the “bull market” scenario, where classic IP remains popular and new IPs emerge, leading to a re-rating of the stock.Standing at a crossroads, Pop Mart has made it difficult for investment banks to predict its future. Perhaps even Pop Mart itself needs to take a moment to reconsider its next steps.