Li & Fung was Hong Kong's great trading house — then 95% of its value vanished

Li & Fung was the archetypal Hong Kong trading house. Founded in 1906, it built a vast business as the middleman between Asian factories and Western retailers — sourcing, coordinating and supplying everything from garments to toys for the world's biggest brands. At its peak in 2014 its revenue reached nearly US$20 billion, and it had been a mainstay of the Hong Kong stock exchange for 28 years.

The ground moved under it. As global supply chains matured, brands and retailers increasingly dealt directly with factories, and sourcing shifted onto digital platforms. Li & Fung's customers — traditional brick-and-mortar retailers — were themselves being hollowed out by e-commerce. The company's revenue almost halved, from its 2014 peak to about US$11.4 billion in 2019, and its shares kept falling.

By 2020 Li & Fung had lost about 95% of its market value since 2011. In May 2020 the Fung family, together with the logistics group GLP, took the company private: GLP paid HK$7.2 billion for the shares it did not already own, at HK$1.25 a share, valuing the whole firm at about HK$10.7 billion (US$1.4 billion). On 27 May 2020 Li & Fung delisted from the Hong Kong exchange.

The franchise was not mismanaged into the ground so much as made obsolete: a business built on the friction of connecting buyers and factories lost its reason to exist once that friction disappeared. It is the textbook case of an intermediary whose value was the gap it bridged — and what happens when the gap closes.