Luggage maker Samsonite International yesterday became the latest float to sink on its debut as investors turn cold on initial public offerings.
The US-based company fell as much as 11 per cent on its first day of listing, losing a total of 7.72 per cent before closing at HK$13.38.
Samsonite failed to price its float at the top end of the indicative price range of HK$13.50 to HK$17.50, settling at HK$14.50 a share in the end.
Pricing at the top of the range would have given Samsonite a valuation of 26 times forecast 2011 earnings rather than the present 21 times.
Global brands are stepping up their efforts to tap Hong Kong's equity market, hoping that a listing in the city will give them a higher valuation than in their home countries. They also are banking on the growing spending power among Asia's affluent, especially on the mainland, which is now the second-largest economy in the world.
But Samsonite and Italian fashion house Prada, which yesterday ended its subscription to the public, have not made a solid impression on local investors. Samsonite, which raised HK$1.43 billion after taking away expenses and fees, received just 5,830 valid applications from the public, according to a filing with the Hong Kong stock exchange.
Brokers said demand for the Prada listing was equally weak from retail investors, who found the Milan-based fashion house offering costly. Prada aimed to price its shares at an indicative range of HK$36.50 to HK$48, giving the company a valuation of up to 27 times 2011 forecast earnings and up to HK$20.3 billion of proceeds.
Reuters reported yesterday that Prada would be selling its shares at HK$39.50 to HK$42.25 a share, citing sources with knowledge of the transaction.
'Retail investors favour smaller offerings with strong mainland connections,' Mark To, the head of research at Wing Fung Financial Group, said. 'They might have heard of these global brands but given their higher valuations investors would think twice because there's little room for the share prices to go up in the short term.'
Analysts said retail investors didn't want to buy into offerings such as Samsonite because a large proportion of the shares sold in the IPO came from the majority shareholders and the net proceeds would be used to repay debt.
Samsonite's two biggest shareholders, London-based private equity firm CVC Capital Partners and the Royal Bank of Scotland sold 550.14 million shares in the IPO.
CVC Capital Partners bought Samsonite at the height of easy credit in 2007 for US$1.7 billion financed by a loan from RBS. That loan has to be restructured following the financial crisis when sales of Samsonite products plummeted.
To said that if Prada was to price at the bottom end of the range the offering was still expensive compared to its peers such as Burberry and Louis Vuitton, which had been trading in the mid-teens to 20 times forecast earnings.