PRADA HAS raised HK$16.7 billion (€1.49 billion) after the first initial public offering by a western luxury brand in Hong Kong was priced at the bottom of a revised price range.
This was nearly a fifth less than the maximum HK$20.3 billion Prada had sought to raise after retail investors in Hong Kong – a city known for its penchant for labels – shunned the Italian fashion house amid a sharp downturn in the market.
Prada sold 16.5 per cent of the company in the global offering at HK$39.50 a share, a person close to the sale said, valuing the company at about $13 billion.
The price represented a valuation of 23 times the company’s estimated 2011 earnings, which still represented a premium to other listed luxury brands. Burberry was last trading at 22.3 times expected earnings, according to Bloomberg data, while Hugo Boss’s ratio was 16.87.
The sale was over three times covered by institutional investors, a person close to the listing said, in sharp contrast to poor demand from retail investors. Prada had planned to sell about 10 per cent of the shares to local subscribers but only half of the retail tranche was filled, resulting in institutional investors taking 95 per cent of the sale, the person said.
Hong Kong’s cash equity market has a large retail investor base and their participation helps keep stocks actively traded. Many were put off by Italian capital gains and dividend taxes, which Hong Kong investors would have to pay, stockbrokers said. Institutional demand suggested Prada’s expansion plan – which includes opening 80 stores a year until 2014 – was a compelling story.
China’s wealthy regard premium luxury products as those that involve a waiting list – such as the Hermès Birkin bag – or those that only come in limited editions, said Torsten Stocker, of Monitor Group. He warned that by rapidly increasing supply, the Italian brand could lose its appeal among consumers looking for status-enhancing products.
The family holding company headed by Miuccia Prada and Patrizio Bertelli, president and chief executive of Prada respectively, will remain the controlling shareholder with 82.5 per cent. – (Copyright The Financial Times Ltd 2011)
