Is Prada's HK IPO too pricy?

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Is Prada's HK IPO too pricy?

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Italy’s Prada has set the indicative price for its initial public offering of shares in Hong Kong.

They are to sell for a price that could raise as much as one point eight billion euros – and values Prada higher than other European luxury goods companies – such as LVMH and Burberry.

The fashion house has also started meetings with Asian investors to gauge demand.

The shares will start trading on 24 June.

Some analysts and investors are worried that potential price may be too high.

Peter Elston, strategist at Aberdeen Asset Management Asia, was one of those but he added. “Luxury goods companies such as Prada have got good, visible top-line growth for the next 20 years. There are high barriers to entry as you can’t go out and create a luxury brand from nothing.”

In Singapore, about 60 investors and fund managers attended a lunchtime presentation by Prada’s Chief Executive Patrizio Bertelli.

Some also expressed concerns about the pricing. “There’s no reason for it to trade higher than LVMH, which has a more diversified portfolio. Prada may be banking on the China story, but all the other luxury brands are also going into China and it’s going to be very competitive and tough there,” said one manager of a Singapore-based fund, who declined to be identified he spoke to Reuters.