Prada cuts share flotation price

Luxury fashion house forced to price its shares at the bottom end of proposed range as it launches on Hong Kong stock exchange Prada was forced to cut the final price of its stock exchange listing in Hong Kong by almost a fifth on Friday, after nervous investors balked at the lofty price tag placed on the Italian fashion house . Despite the glamour surrounding the initial public offering (IPO), which included a 15-minute fashion show for top fund managers in Hong Kong, the maker of Miu Miu dresses and luxury handbags priced its shares at HK$39.50 (£3.13), at the bottom end of the range set by the company earlier this week. As a result the IPO raised £1.3bn, rather than the £1.6bn originally mooted, with the listing valuing the company at £8bn. It was fifth time lucky for Prada, whose previous attempts to float have been derailed by a series of market downturns, including the slump that followed the 11 September 2001 terrorist attacks in the US. Friday’s listing follows the rocky debut of luggage brand Samsonite International in Hong Kong this week – its shares slumped 8% on their first day of trading. Around the world, volatile financial markets have been unsettled by renewed fears of a Greek sovereign debt default. “Luxury demand is very self explanatory and it makes a lot of sense for companies like Samsonite and Prada to list in Hong Kong, but we’re talking about quite a volatile market these days,” said Selina Sia, head of consumer research at Mirae Asset in Hong Kong. “The equity market has its own life and may not have anything to do with reality in luxury goods markets.” Prada is yet to confirm the outcome of the share sale but the offering is said to have been over three times covered by institutional investors. The company sold 423.3m shares, or a 16.5% stake, raising HK$16.72bn (£1.3bn). The stock will start trading on 24 June. Retail investors, who typically play a big part in Hong Kong IPOs, were less enthusiastic after Prada’s prospectus warned that shareholders would have to pay Italian capital gains tax of 12.5% on any profits from selling their shares as well as up to 27% on dividends. That is an unusual situation in Hong Kong, which does not tax capital gains or dividends. Mario Prada started the company selling leather bags, trunks and silverware to the European elite from his store in Milan’s Galleria Vittorio Emanuele in 1913 but it is his granddaughter Miuccia Prada and her husband Patrizio Bertelli who have turned it into a bona fide luxury label with more than 300 stores around the world. The decision to list in Hong Kong was deemed controversial in Italy, but the company said it made sense given China’s relevance as a major economy and its voracious appetite for luxury products. China’s consumption of luxury goods is growing at nearly 20% a year, with the market expected to be worth £17bn by 2015. IPOs Retail industry China Stock markets Fashion Zoe Wood guardian.co.uk

Posted by on June 17, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.