State Media Warning and Market Reaction

Shares of Pop Mart, the Chinese toy company behind the wildly popular Labubu collectibles, continued to slide on Friday, extending losses from the previous session.

The company’s Hong Kong-listed shares dropped more than 5%, adding to a 5.3% decline on Thursday, putting Pop Mart on track for its first negative week since early May—with losses exceeding 13% so far. Despite this, its year-to-date gains stand at over 160%.

The selloff was triggered by a single statement by the Chinese state media People’s Daily, where it called for stricter regulation of “blind box” toys—a sales model pioneered by Pop Mart.

While the article did not mention specifically mentioned Pop Mart by name, it criticized the addictive nature of mystery packaging, especially among children and young people.

This renewed regulatory scrutiny follows China’s 2023 ban on selling blind boxes to children under eight.

Morgan Stanley Removes Pop Mart from Focus List

Adding to market jitters, Morgan Stanley announced late Wednesday that it was replacing Pop Mart from its China and Hong Kong focus list.

While the investment bank did not specify its reasons for the move, but just days earlier had raised its price target for Pop Mart to 302 Hong Kong dollars (about $38.47), up from 224 HKD.

This may suggest the Morgan Stanley thinks that while Morgan Stanley still believes in the potential of Pop Mart, but the price of the stock may be too high to make it a good short-term investment.

Furthermore, the regulatory scrutiny that Pop Mart faces following People's Daily's comment could also make it a very risky endeavor to invest in the stocks of Pop Mart in the short-term.

In a June 10 report, equity analyst Dustin Wei and his team noted:

“We think the market has fully factored in Pop Mart’s exponential growth in 2025 but may not have strong conviction on the long-term outlook. That said, in view of its lofty valuation, we do not expect this level of outperformance to continue in the next few quarters.”

The Labubu Craze and Global Expansion

Pop Mart first gained prominence with its “blind box” concept, where consumers purchase unmarked boxes—typically priced between $5 and $10—for a chance to collect unique figurines.

The company’s Labubu series, featuring an elf-like character, has become a global phenomenon, attracting attention from fashion and culture publications such as New York Magazine and The New York Times.

To capitalize on demand, Pop Mart has expanded its Labubu product line to include plush toys, pillows, and related merchandise.

Earlier this month, a 4-foot-tall Labubu sold for the equivalent of $170,000 at auction in Beijing, while more affordable versions have sold out across mainland China.

Pop Mart has also rapidly expanded overseas, opening online sales platforms and physical stores in the U.S. and U.K.

The company’s overseas sales in 2024 surged 373% year-on-year to 5.1 billion yuan, surpassing its total global sales in 2021, while mainland China sales climbed to 7.97 billion yuan.

Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies highlighted that PopMart's success reflects the growing interest in collectible toys among both children and adults.

“We’ve seen certain trends like that before... There seems to always be some cute thing that people have to have.”

Despite the recent slump, Pop Mart’s rapid expansion and strong brand recognition have made it a standout among China’s “new consumption” stocks.

However, the company now faces headwinds from both regulatory scrutiny and shifting investor sentiment as the market reassesses its long-term growth prospects.