June 16 (Bloomberg) — Prada SpA cut the maximum amount it may raise in an initial public offering as Samsonite International SA slumped in its Hong Kong trading debut and Hong Kong stocks slid amid concern China's economy may cool.
The Milan-based luxury goods retailer narrowed its IPO price guidance, bringing the maximum it would raise to $2.3 billion, down from $2.6 billion, according to two people familiar with the matter. It also raised the low end, said the people, who declined to be identified.
Prada's scale-back followed an as much as 11 percent drop in shares of Samsonite, the world's largest branded- luggage maker, from the initial public offering price of HK$14.50. The suitcase maker raised $1.25 billion in the sale last week, less than initially planned.
“The timing of Samsonite's listing isn't that great,” said Masahiko Ejiri, a Tokyo-based fund manager at Mizuho Asset Management Co., which oversees $41 billion. “The global economy might be weaker than expected, so people are just very cautious about buying into equities. It might be the same for Prada.”
Individual investors in Hong Kong have placed orders for only about 50 percent of the 42.4 million Prada shares allocated to them, two people with knowledge of the matter said.
Samsonite is the fourth Hong Kong IPO exceeding $1 billion this year to begin trading. All have dropped from their initial sale price. The luggage maker fell 7.7 percent to HK$13.38 at the 4 p.m. close in Hong Kong, compared with a 1.8 percent drop on the benchmark Hang Seng Index.
The declines by new listings will weigh on Prada as its tries to price its offering, said Philippe Espinasse, former co-head of Asian equity capital markets at Nomura International Hong Kong Ltd. until 2008. Prada's final offering price is expected to be determined by tomorrow, according to the prospectus.
“There's going to be quite a lot of pressure on Prada,” said Espinasse, the author of IPO: A Global Guide. “The fact that retail investors haven't gone for it is going to be an issue.”
Individual investor demand for Prada shares may also suffer because Hong Kong and Italy have not signed a double taxation agreement. Hong Kong investors will be subject to a capital gains tax of 12.5 percent, and a 27 percent tax on dividends, according to its IPO prospectus. The dividend tax will be withheld by Prada, the company said in the prospectus.
“It has not been easy for the investing community to get enough clarity around that situation,” said Mark Konyn, chief executive officer of RCM Asia Pacific Ltd., which helps oversee about $150 billion globally.
Prada is now likely to sell its shares between HK$39.50 and HK$42.25 each. That compares with a range of $HK36.50 to HK$48 earlier, according to the IPO prospectus.
Among 30 companies that have gone public in the Chinese city this year, 22, or 73 percent, have fallen from their offer price, data compiled by Bloomberg show. Prada is scheduled to debut on June 24.
Like Prada, Samsonite narrowed the price range marketed to investors on June 9 to HK$14.50 to HK$15.50 from an initial HK$13.50 to HK$17.50. The IPO, announced in February, raised $250 million less than the maximum originally planned, the Hang Seng Index had its worst monthly slump in a year.
Prada and Samsonite both have highlighted expansion plans in China to investors in Hong Kong.
Samsonite, the 101-year-old luggage maker said May 24 its sales in China rose 50 percent last year. The company aims to expand its Chinese market share to 35 percent in five years from 12.5 percent now. Prada on June 12, said it will open as many as 12 stores in China and another 25 across Asia in the next three years out of 80 globally.
“Where markets are at the moment, it's a pretty tough place,” Parker said today after a listing ceremony at the Hong Kong Stock Exchange. “I feel this is a pretty good way to open, actually. I'm not at all displeased.”
Goldman Sachs Group Inc., HSBC Holdings Plc, Morgan Stanley, UBS AG and RBS managed Samsonite's share sale.
Coach Inc., the largest U.S. handbag maker, plans to list shares in Hong Kong in the form of depositary receipts before the end of the year to “raise awareness of the Coach brand among investors and consumers in the China market,” CEO Lew Frankfort said in a statement last month. The company's stock already trades in its hometown of New York.
L'Occitane, the first French company to hold a Hong Kong initial share sale, gained 25 percent from its IPO price of HK$15.08 in May 2010 to HK$18.90 today.
Mainland China, which doesn't include Hong Kong, Macau or Taiwan, will remain the fastest-growing market for high- end goods in 2011 as sales rise 25 percent to 11.5 billion euros ($16.5 billion), Bain & Co. said May 3. The country may become the world's third-largest luxury market in five years, the consulting company predicted.
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