Prada, the Milan-based luxury goods house, is expected to list its shares in Hong Kong in a $2 billion initial public offering on June 24. Prada will follow on the success of organic cosmetics and skin-care maker L'Occitane Internationale, which raised $840 million in Hong Kong last year. Prada's choice of the Hong Kong stock exchange over bourses in Milan, London, and New York is more evidence that the globe's economic center of gravity is shifting to Asia. "Companies want to face their future, not their past," says Sam Kendall, head of equity capital markets for Asia-Pacific at UBS (UBS).
The flurry of international listings is helping Hong Kong boost its IPO tally. In 2010, companies raised $51.8 billion through 95 IPOs on Hong Kong's stock exchange, compared with a total of $48.22 billion in 196 deals on the New York Stock Exchange (NYX) and Nasdaq (NDAQ). So far this year, 25 IPOs in Hong Kong have raised $7.7 billion.
With Asians accounting for as much as 50 percent of luxury sales globally, a Hong Kong listing is a no-brainer, says Aaron Fischer, head of consumer and gaming research at brokerage CLSA Asia-Pacific Markets. The growth prospects for its business in Asia is the main reason Samsonite chose Hong Kong for its IPO, say people involved in the deal who asked not to be quoted prior to the June listing. The world's largest luggage brand, owned by London-based CVC Capital Partners and the Royal Bank of Scotland, projects Asia will account for half its profits by 2012. Coach (COH), the largest U.S. handbag maker, trading on the New York Stock Exchange, plans to list shares in Hong Kong, in the form of depositary receipts, before the end of the year to "raise awareness of the Coach brand among investors and consumers in the China market," said Chief Executive Officer Lew Frankfort in a statement.
Another attraction of Hong Kong is that it allows investment banks to make deals with wealthy investors to buy shares before marketing the IPO to the public—a practice not allowed in the U.S. Such "cornerstone" investors agree to hold their shares for six months after buying at the offering price. Their participation can make it easier to build enthusiasm for the offering. "The retail guys are very affected when they see some billionaire willing to lock himself in for six months," says George Lin, an investment banking executive at Credit Suisse (CS). MGM China (MGM), which is hoping to raise as much as $1.5 billion by listing its Macau operations in Hong Kong on June 3, signed Kirk Kerkorian and Hong Kong property magnate Walter Kwok, according to the prospectus.
It isn't just consumer brands heading to Hong Kong. The world's largest aluminum producer, United Company Rusal, raised $2.1 billion in 2010, and Swiss commodities trading group Glencore International allocated 2.7 percent of its $10 billion global IPO in May to Hong Kong retail investors. "A Hong Kong listing will raise the profile with all the suppliers and customers we deal with over there," says Glencore CEO Ivan Glasenberg. "We thought it was very important to be involved in this region."
The bottom line: Hong Kong is becoming a market of choice for global companies selling shares to the public, with 25 IPOs raising $7.7 billion this year.