Discussion About Prada

What do you feel are the best justifications for Prada to issues the IPO in Hong Kong? Are there any downsides to their decision to list in Hong Kong?

        Prada Group lunched from 1913 as a family ownership until they decided to dilute the ownership by moving forwards to IPO, by selling their shares in Hong Kong. They have many reasons to decide that to get more liquidity of financial. For the best justifications of this case might be Hong Kong is the high-profile business country and the world’s biggest IPO market. Moreover, Hong Kong is the part of China the county that having the largest population in the world and increasing every year (from figure 2, question1), and economic growing rate now is increasing. By 2020, China is expected to be the largest luxury market because of purchasing power of the population is increasingly every year. For the past three years it has dominated the global IPO market, taking the largest share of listings for 2009, 2010 and 2011 globally in terms of funds raised, raising over US$120 billion, more than the London Stock Exchange and the New York Stock Exchange combined.

• Figure1. GDP, PPP (current international $) using country comparison [pic 1]

However, they have downsides to this decision to move forwards to IPO in Hong Kong. While Hong Kong is the largest IPO market of the world, Prada decided to make their company to go public and raise money in Hong Kong but others companies saw this opportunity too. IPO markets in Hong Kong from China are influx rapidly and hardly from many investors, so, it encourage highly competitive in the Hong Kong market. Second, Preparation for the IPO is more complicate when decided in Hong Kong instead of Milan, because they cross the world to build up the reliability and trustworthiness of their business although their business is the one of high world rank luxury product. Prada begun from Italy and familiar with their country more than China, so they need to prepare lawyers and consultants much more than they decide about IPO in Milan, such as learning Chinese business culture and Mandarin language more to minimize the conflicts between owner and shareholder communication, and Chinese laws to look after the firm and encountered to others firms. The beginning of dilution the ownership of the Prada family contains both upsides and downsides. Therefore, Prada needs to manage it professionally, to resolve the liquidity problems.