HONG KONG: Italian fashion house Prada SpA rose 1.3 percent in its Hong Kong debut on Friday, defying expectations for a weak start as investors who couldn't buy into the IPO snapped up the stock during a buoyant market session.
Shares of the Milan-based company, traded as high as HK$40, compared with the IPO price of HK$39.50. They were at HK$39.55 at 0441 GMT.
Prada, the maker of luxury bags and Miu Miu dresses, raised $2.14 billion in the initial public offering after pricing it at the bottom of a revised indicative range.
Many other global brands are exploring options to list in Hong Kong and Prada's after-market performance will be critical in attracting such companies to Asia's IPO hub.
Prada's small debut gain surprised some analysts who attributed it to the strength in the broader market, up more than 1.4 percent.
But the message to future Hong Kong IPO hopefuls was clear, analysts said.
"It may give an idea to other potential brands listing not to price issues too aggressively," said Conita Hung, head of equity research of Delta Asia Financial.
"Consumers are willing to pay a very high premium chasing after brands, but it's not the case for investors. Investors are concerned about reasonable valuation and pricing."
Some of the demand for Prada shares on Friday came from fund managers who didn't participate in the IPO, also helping lift the stock.
Prada's IPO received bids for just half the shares on offer for Hong Kong retail investors, compared with more than 2,000 times oversubscription for the IPO of handbag retailer Milan Station Holdings Ltd, the most popular offering in 2011.
Luggage maker Samsonite had demand worth 1.23 times the volume of shares on offer.
The move by retailers such as Prada to list in Hong Kong is part of a trend to raise brand awareness in China, the world's fastest growing luxury market.
"We're opening a new wave for the luxury goods sector," Chief Executive Patrizio Bertelli said at a ceremony at the Hong Kong stock exchange.
Bertelli handed a glass-encased, bright-red Prada leather handbag during the traditional ceremony at the exchange, receiving a glass bull from Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd (HKEx).
"We're positive that the greater China region is going to be one of the most interesting prospects in the luxury industry," Bertelli said, adding that the first listing of an Italian company was "a landmark" for the exchange.
Prada had originally set an indicative price range of HK$36.50 to HK$48 per share, before narrowing it to between HK$39.50 and HK$42.25 each last Thursday.
Prada's better-than-expected debut contrasts with a 7.7 percent first-day plunge for Samsonite last week as investors fretted over high valuations for Hong Kong listings and volatility in global markets.
Samsonite has since recovered, ending Thursday at HK$14.50, matching its IPO price.
Prada and shareholders Prada Holding BV and Intesa Sanpaolo SpA sold 423.3 million shares in the offering, raising HK$16.72 billion ($2.14 billion).
Prada, set up in 1913 by Mario Prada as a business selling leather bags, trunks and silverware to the European elite, has become a global fashion empire, with 319 directly operated stores, a third of which are in Asia-Pacific.
The company received tepid demand from retail investors for its IPO as potential buyers were put off by having to pay Italian capital gains tax.
That, coupled with choppy equity markets, had led Prada shares to fall in grey market trading. Phillip Securities Group said in a report on Thursday night that the stock had fallen 2.9 percent to HK$38.35, pointing to a weak start on Friday.
The IPO valued Prada at about $13 billion, compared with the nearly $80 billion market capitalisation of LVMH, $28.5 billion for Hermes International SCA and $21 billion for PPR SA.
At the revised guidance, Prada would trade at a price to-earnings ratio of 22.8-24.4 times, more in line with global rivals.
Copyright Reuters, 2011
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