The family owned European fashion house Prada (Prada, Miu Miu, Church’s) is talking again about going public. That in itself is no surprise, since the firm has begun the process of listing several times during the last decade, only to withdraw at the last moment, citing unfavorable market conditions.
Maybe the real stock market lesson is that we should expect a period of turbulence ahead. In its desire to obtain the maximum price earnings multiple, Prada has made a habit of waiting until close to a market peak before calling its investment banks. On the other hand, maybe it has leaned something from its unsuccessful past listing tries.
What I think is more interesting, though, is that the company is considering both London and Hong Kong as venues for its debut.
Lots of factors go into choosing a home market, including the regulatory environment and listing costs. The two primary ones, in my opinion, are where the listing firm will get the highest price and where the publicity surrounding being a public company–the financial media coverage, the attention generated by periodic earnings reports, and the ability of present and potential customers to become shareholders–will have the post positive effect on the company’s business.
A decision in favor of Hong Kong would be a strong statement by Prada that that’s where it sees the growth in its customer base coming from. I think it would also give Prada a clear advantage over other European luxury goods brands by giving itself a direct emotional link with Asian buyers. And, of course, it would be a coup for Hong Kong as well.
Selecting Hong Kong may also be a bit less chancy since the debut of L’Occitane, a French perfume and cosmetics company, on the Hong Kong exchange earlier this year. That stock, 0973, is up almost two-thirds in price since then and is now trading at 33x current earnings.
Prior to L’Occitane, Hong Kong has had companies listed there, but they have mostly been local brands, or companies whose apparel have mass market appeal–and which would tend to trade at lower PEs than luxury brands.
While it’s impossible to say without examining Prada’s balance sheet and earnings history for possible blemishes, it’s possible that Prada, a higher-end firm than L’Occitane, could IPO at around 30x.
Coming on the heels of a report by London-based consulting firm Z/Yen, that London, New York and Hong Kong are all of equal stature as the leading world stock markets, the Prada story will be an interesting one to watch.