Concerns that Prada’s stock is overpriced, and a tax hurdle that could shrink investors’ profit, may also dampen enthusiasm for the Italian company.
Prada last week reportedly sold 423.2 million shares at HK$39.50 ($5), raising a less-than-expected $2.14 billion.
The Milan-based firm, which is floating 20 percent of its shares, had previously said it might price the stock as high as HK$48.
The lowered price was a clear signal of weaker-than-expected demand, but some investors may still dismiss the stock as too rich.
“Prada is overpriced when you compare it with other luxury brand companies like LVMH,” Francis Lun, managing director of Hong Kong’s Lyncean Holdings, told AFP.
“The response from retail investors has been disappointing. I think you can blame it on the (share) price and the tax issue. In June, the markets also tanked. All those factors contributed to the lacklustre response,” he added.
The Prada listing comes at a time of unease in global markets which has seen some firms delay or cancel their listings in Hong Kong, the world’s number-one IPO market for the past two years.
Earlier this month, luggage maker Samsonite had a poor trading debut in Hong Kong last week with its shares closing nearly eight percent below their IPO price.
“Samsonite was a precursor for Prada. But I think longer term their prospects are good,” Lun said. “Prada has a good brand and they do well in China.”
Some of Hong Kong’s savvy stock buyers may be turned off by Italian tax rules that could shrink their gains.
Hong Kong and Rome do not have a tax treaty in place so shareholders in the territory would have to pay a 12.5 percent Italian capital gains tax, and lose 27 percent of their dividend income in a separate withholding tax.
Capital gains tax does not exist in Hong Kong and most of the city’s institutional investors are not used to accounting for it. However, it remains unclear how Italy’s tax department would enforce the rules on overseas investors.