New entrants Prada SpA and Samsonite International SA took hits in the Hong Kong market, raising doubts over the continued strength of initial public offerings in a city that has taken the global crown for new listings for the past two years.
Today, bankers involved with Prada’s initial public offering narrowed the prospective price range for the new shares, according to a person familiar with the matter, reducing the Italian luxury house’s top take to $2.3 billion from $2.6 billion, excluding additional shares sold if demand is strong enough. The offering’s final price is expected to be determined tomorrow.
Meanwhile, luggage maker Samsonite fell 7.7% on its first day of trading, after its shares were priced at the low end of their expected range. At one point during the day, they were down nearly 11%.
Both companies face individual issues, including an Italian tax wrinkle for Prada that people involved with the deal said reduced demand among small investors. But market watchers say today’s developments are largely due to global market squeamishness about Europe’s intensifying debt crisis, sluggish U.S. growth and uncertainty over China’s ability to tame inflation through a series of economic curbs.
“IPOs will have to offer attractive valuations and an appealing growth story to bring in investors, since the recent declines in the market have made most listed companies’ valuations more attractive than those of some of the IPOs coming,” said Kenny Tang, executive director at investment firm Redford Asset Management.
Upcoming tests include the completion of Prada’s IPO as well as a slew of new listings, including that of China Everbright Bank, which aims to raise around $6 billion in what would be Hong Kong’s largest IPO so far this year. Others include Beijing Jingneng Clean Energy Co., which plans to raise up to $630 million, and iron ore miner Newton Resources Ltd., which plans to raise up to $301 million. All told, at least five firms are currently seeking to raise more than $7.5 billion in the coming weeks from IPOs.
The Prada IPO shows that, while the maximum raised has been reduced, companies in certain industries can still fetch stronger valuations in Hong Kong than elsewhere.