Prada prices HK IPO shares at lower end of range

AP News
Posted: Jun 17, 2011 2:39 AM
Prada prices HK IPO shares at lower end of range

Italian fashion house Prada SpA is selling shares near the low end of the price range in its IPO, a person familiar with the deal told The Associated Press on Friday, as investors flee slumping stock markets and worry about paying Italian taxes.

The company is selling shares at 39.50 Hong Kong dollars, according to the source, who was not allowed to speak officially and declined to be identified.

Prada, which also owns the Miu-Miu, Church's and Car Shoes brands, said Sunday that the shares in the initial public offering would be priced from HK$36.50 to HK$48. Prada is selling 423.3 million shares, or a 16.5 percent stake, so it would raise HK$16.7 billion ($2.1 billion), although that's less than the HK$20.3 billion ($2.6 billion) it could have raised if it had been able to price the shares at the top of the range. The stock will start trading on June 24.

Foreign companies have been flocking to Hong Kong to go public in hopes of profiting from China's strong economy. They also want to raise brand awareness with China's rapidly growing number of consumers.

Prada forecasts that China will be the fastest growing luxury goods market in Asia, driven by strong economic growth, increasing urbanization and higher spending by the rich. China will become the third-largest market for luxury sales worldwide in the next five years, according to market research cited by the company.

But a recent slump in global stock markets, driven by fears about the world economy and Europe's debt crisis, is putting investors off stocks.

In Prada's case, retail investors, who play a big part in Hong Kong IPOs, may also be turned off by the possibility they'll have to pay Italian taxes. The Milan-based company warns in its prospectus that shareholders face Italian capital gains tax of 12.5 percent on any profits from selling their shares as well as up to 27 percent withholding tax on dividends.

That's an unusual situation in Hong Kong, which does not tax capital gains or dividends. The city, a special administrative region of China, has very low taxes compared with other wealthy countries.

Shares of luggage maker Samsonite International S.A., another foreign company that has gone public in Hong Kong, plunged in their first day of trading on Thursday and closed 8 percent lower. Other foreign companies that have listed in Hong Kong this year include Swiss commodities trader Glencore and Macau casino operator MGM China, controlled by Las Vegas-based MGM Resorts International. Luxury handbag maker Coach is also planning a Hong Kong listing.