Prada Ipo or Not Essay

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Problem: Prada requires a significant amount of capital both to re-finance debt that is maturing in the next six to twelve months and to finance its intended growth into the Asian (especially Chinese) markets

Alternative Solutions:
#1) IPO: (Initial Public Offering) Cons: High tax and pricing "We received little demand from our (retail) clients for the (Prada) shares. It might be the 12.5 percent tax that scared them away and the pricing itself was expensive when it compared with its peers," said Alfred Chan, chief dealer at Cheer Pearl Investment. "Unlike institutions, our retail clients hold the shares for a much shorter term," he added.

"Consumers are willing to pay a very high premium chasing after brands, but
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“If Chanel was not posting incredible results, no one would know. But if they were public and this was known, some customers would say that the brand was not cool anymore — this is a risk.”

Prada raised US$2.14 billion from a Hong Kong IPO in June last year. That was around a fifth less capital than the company had planned for. As things transpired, retail investors were put off by the prospect of Italian capital gains and dividend taxes, which they were liable to pay (even though the listing was in Hong Kong).
the share price shot up in July but then proceeded to lose around a third of its value to December, as investors panicked about stock market and real estate declines.

The New York Stock Exchange, the biggest in the world by market capitalisation, was arguably a safer choice.

That the share price has been so volatile is a measure of the risk in instigating an IPO in relatively uncharted waters.

Risk is a core reason why other luxury goods companies, with an eye on a Hong Kong listing, have hesitated. Prada was bold in its listing strategy, and that has to be one of the biggest lessons. It is one thing to identify emerging Asia – and China in particular – as the sweet spot of luxury goods opportunity, it is another to act on it

Prada has moved speedily away from a wholesale model, which was shown to have fundamental weaknesses in the aftermath of the 2008 financial crisis –

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