Is Labubu going out of style?

Surely
everyone has dreamed at least once of stepping into the shoes of the hero of
Blast from the Past: you unearth an old baseball card that has been gathering
dust in a box for years, and suddenly you become a millionaire. No investments,
no risky bets on forex pairs like EUR/USD or GBP/USD, no
speculation on stock indices such as the S&P 500 or Dow Jones — just
the pure luck of keeping the right item and, voilà, instant wealth.

That
dream continues to inspire many people, who are constantly hunting for
collectibles, things that may not be cheap to buy today but could sell later
for ten times (or more) their value. For a long time, LEGO sets were among the
most popular and profitable items in this field. More recently, however,
virtual items from Counter-Strike have taken their place.

There
are simpler options for those who don’t want to immerse themselves in either of
these worlds, such as toys. One of the most famous examples was Ty Inc.’s
Beanie Babies. People sincerely believed that certain stuffed animals would
become rare items and their value would skyrocket. In fact, some were resold
for hundreds or even thousands of dollars, driven by artificial scarcity
through limited production and the strategic withdrawal of certain models. But
eventually, the
bubble burst, and today, most Beanie Babies are worth much less than
people expected. That story would have served as a lesson, but apparently, it
hasn’t.

Recently,
the Labubu toy became very popular, pushing the market capitalization of its
manufacturer, Pop Mart, above $45 billion in July of this year. This is,
although the previous year’s revenue was only $1.8 billion and net profit was
$439 million. But after peaking in late August, Pop Mart’s stock began to fall
as interest in Labubu toys cooled.

The company’s situation
did not improve when JPMorgan Chase & Co. downgraded
its shares to “neutral,” citing a lack of growth catalysts and
excessive valuation: “We believe the valuation is perfect and that any small
fundamental flaw or negative media news (e.g., falling resale prices and
third-party licensing) could lead to underperformance.”

So, has the Labubu era
come to an end?

If the proposals to impose
stricter oversight of toys and surprise cards for children under eight —
including age verification at the time of purchase and parental consent for
online purchases — actually become law in China, the impact on Pop Mart could be
even worse. In general, it seems clear that enthusiasm for these toys is
waning. Something new will have to take its place.