Pop Mart, the world’s most valuable toy manufacturer, has suffered significant financial losses — its market capitalization shrank by nearly $4 billion after sharp criticism from the Chinese newspaper People’s Daily, reports Baltimore Chronicle with reference to South China Morning Post.
An editorial published in the state-run mouthpiece of the Chinese Communist Party accused Pop Mart’s business model of being a “trap” that encourages addiction, particularly among children. The article specifically targeted the company’s “blind boxes” containing random Labubu dolls, which use a mechanism of unpredictable rewards to prompt repeat purchases. The probability of obtaining a rare toy is reportedly less than 2%.
Following the publication, Pop Mart’s shares dropped by 3.6% on Friday, with a two-day overall decline nearing 9%. This market reaction came despite the company’s previously explosive growth — since the beginning of the year, Pop Mart’s stock had surged by 160%, with first-quarter revenue increasing by 100% domestically and an impressive 480% internationally.
Despite this success, the resale prices of some popular toys have started to fall. For instance, the Labubu 3.0 figure, which once sold for nearly 3,000 yuan, lost its rarity value after online sales expanded.
Analysts at UBS and JPMorgan have so far maintained positive forecasts for Pop Mart. However, Chinese authorities have already tightened regulations in response to the controversy, including a new ban on selling blind boxes to children under the age of eight.
Earlier we wrote that why labubu toys are trendy and why they’re so expensive.