HONG KONG Italian fashion house Prada SpA (1913.HK) posted slim gains in its $2.14 billion IPO debut in Hong Kong, defying expectations for a weak start as investors who couldn't buy into the IPO snapped up the stock in a buoyant market.
The Milan-based company is the second to post first-day gains among the billion dollar-plus IPOs in Hong Kong this year, after MGM China (2282.HK), which rose a tepid 1.8 percent.
Many other global brands are exploring options to list in Hong Kong and Prada's performance is critical in attracting such companies to the world's hottest IPO market.
"It may give an idea to other potential brands listing not to price issues too aggressively," said Conita Hung, head of equity research of Delta Asia Financial.
"Consumers are willing to pay a very high premium chasing after brands, but it's not the case for investors. Investors are concerned about reasonable valuation and pricing."
Prada shares closed 0.3 percent higher at HK$39.60 on Friday, after trading as high as HK$40 earlier in the session.
The maker of luxury bags and Miu Miu dresses priced its $2.14 billion initial public offering at HK$39.50 a share, the bottom of a revised indicative range.
Prada's small gain surprised some analysts who attributed this in part to Friday's 1.9 percent rise in the benchmark Hang Seng Index .HSI.
Both commodities trader Glencore (0805.HK) and luggage maker Samsonite International SA (1910.HK) fell on their first day.
Some of the demand for Prada shares on Friday came from fund managers who didn't participate in the IPO, also helping lift the stock.
Prada's IPO received bids for just half the shares on offer for Hong Kong retail investors, compared with more than 2,000 times oversubscription for the IPO of handbag retailer Milan Station Holdings Ltd (1150.HK), the most popular offering in 2011.
Samsonite had demand worth 1.23 times the volume of shares on offer.
The move by consumer-focused companies such as Prada to list in Hong Kong is part of a trend to raise brand awareness in China, the world's fastest growing luxury market.
"We're opening a new wave for the luxury goods sector," Chief Executive Patrizio Bertelli said at a ceremony at the Hong Kong stock exchange.
Bertelli handed a glass-encased, bright-red Prada leather handbag during the traditional ceremony at the exchange, receiving a glass bull from Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd (HKEx) (0388.HK).
"We're positive that the greater China region is going to be one of the most interesting prospects in the luxury industry," Bertelli said, adding that the first listing of an Italian company was "a landmark" for the exchange.
Prada had originally set an indicative price range of HK$36.50 to HK$48 per share, before narrowing it to between HK$39.50 and HK$42.25 each last Thursday.
Prada and shareholders Prada Holding BV and Intesa Sanpaolo SpA (ISP.MI) sold 423.3 million shares in the offering, raising HK$16.72 billion ($2.14 billion).
In a statement on Friday, Intesa said its net income will be boosted by 255 million euros ($365.3 million) from the Prada stake stale. The bank slashed its stake in Prada to 1 percent from 5 percent.
In Italy, luxury leather goods maker Salvatore Ferragamo SpA priced its Milan initial public offering on Thursday at 9 euros a share.
Prada, set up in 1913 by Mario Prada as a business selling leather bags, trunks and silverware to the European elite, has become a global fashion empire, with 319 directly operated stores, a third of which are in Asia-Pacific.
The company received tepid demand from retail investors for its IPO as potential buyers were put off by having to pay Italian capital gains tax.
That, coupled with choppy equity markets, had led Prada shares to fall in grey market trading. Phillip Securities Group said in a report on Thursday night that the stock had fallen 2.9 percent to HK$38.35, pointing to a weak start on Friday.
The IPO valued Prada at about $13 billion, compared with the nearly $80 billion market capitalization of LVMH (LVMH.PA), $28.5 billion for Hermes International SCA (HRMS.PA) and $21 billion for PPR SA (PRTP.PA).
At the revised guidance, Prada would trade at a price to-earnings ratio of 22.8-24.4 times, more in line with global rivals.
(Additional reporting by Donny Kwok; Editing by Chris Lewis and Vinu Pilakkott)