Prada delays going public
21/04/2008
Italian fashion brand Prada has announced that it will delay its initial public offering (IPO) until the autumn at the earliest.
The brand behind Church shoes, Miu Miu bags as well as the Prada name, had talked about going public in June but has decided that it should postpone because of “market volatility”.
The decision is in spite of high levels of profits. Last month it announced that its 2007 earnings were up by 66.0% to €127 million on sales of €1.66 billion euros, mainly because of strong demand for its leathergoods and accessories.
Prada fears that the current, unpredictable nature of the world's equity markets could result in it being undervalued by the market. It is also aware that many potential investors would have to raise loans to buy its stock, and the credit crunch has made borrowing more expensive.
These factors have already caused a handful of other IPOs to be delayed. However, according to Forbes, Prada is worried that the US economic slowdown might soon spread to luxury goods, even though that sector is usually resilient to downturns; regular customers of high-end goods typically have enough cash to fund their shopping habits, regardless of economic situations.
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