August 9, 2022

DealBook: Prada Prices Shares at Low End, Raising $2.1 Billion

The nervousness that has shaken  global markets this week took its toll  on Prada’s highly anticipated initial  public offering, forcing the Italian luxury fashion house on Friday to price its  shares at the low end of a previously announced range.

Prada, which is based in Milan and is  one of several high-profile Western  companies to list in Hong Kong this  year, priced its shares at 39.50 Hong  Kong dollars, or $5.06, apiece, according  to a person with direct knowledge of the  transaction, who spoke anonymously because the information was not yet  public.

 This means Prada will raise $2.1 billion, rather than the maximum of $2.6  billion that it had targeted with the original price range of 36.50 to 48 Hong Kong dollars,  which was set before the bout of risk  aversion that rattled global markets this  week.

 Greece’s debt woes and nervousness  about the prospects for global growth  sent markets worldwide reeling this week, prompting Prada to revise down its price guidance on Thursday.

 The fragile investor sentiment also  made for a rough trading debut for the  luggage maker Samsonite on Thursday  in Hong Kong. Samsonite shares gained  0.6 percent on Friday, but at 13.46 Hong Kong dollars, they remained below the issue  price of 14.50 Hong Kong dollars.

Those jitters also sent shares of Pandora Media plunging 24 percent on Wall  Street on Thursday, only the second day  of trading for the online radio company.

 Still, Prada’s $2.1 billion listing — the  sum could still rise 15 percent if an over- allotment option is exercised — is the fifth-largest in the biggest in the world  so far this year, according to Dealogic.  Others were the Swiss commodities  trader Glencore, Hutchison Ports,  which listed in Singapore in March, and  the American companies HCA Holdings and  Kinder Morgan.

 The Prada I.P.O. is also the biggest in Hong Kong this year, surpassing that of Shanghai Pharmaceuticals, which raised about $2 billion in May. Glencore raised $10 billion in a dual listing in London and Hong Kong, also last month, but only a small portion of the proceeds came from Hong Kong.

 With a new valuation of $13 billion,  Prada is dwarfed by the likes of LVMH  Moët Hennessy and Hermès, whose  market capitalizations stand at nearly  $80 billion and $30 billion, respectively.  But Prada is priced at a premium to others in the sector on a price-to-earnings basis.

 ‘‘To price a deal this size in a market  that is as difficult as now illustrates that  there is a high level of interest in what is  an undiluted play on the luxury sector,’’  said the person with knowledge of the  deal, adding that the offering had seen  firm interest from high-quality institutional investors from around the globe,  and was nearly three times oversubscribed.

 Prada, whose shares start trading on June 24, intends to use the bulk of the  proceeds to expand and upgrade its  store network. It aims to open an additional 80 directly operated stores a year for the next three years, with 25 of them taking place in the Asia- Pacific region.

 Soaring growth and affluence levels  in much of the region has made Asia the  source of the greatest growth for many luxury and consumer companies.

China, in particular, is fast growing into one of the world’s largest markets for  luxury goods. McKinsey estimated in a  recent study that by 2015, Chinese consumers will account for more than 20  percent of the global luxury market.

Article source: http://feeds.nytimes.com/click.phdo?i=dd9c7405174f47300926ece78f52324d

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