Milan Station Holdings, the secondhand designer bag trader, was inundated by would-be investors, with its initial public offering subscribed 2,179 times yesterday, making it the city's hottest share sale ever.
The huge demand means that investors seeking a board lot of 2,000 shares theoretically have to subscribe for 600,000 shares at the offer price of HK$1.67 each, shelling out more than HK$1 million, said VC Brokerage director Louis Tse.
Milan Station's oversubscription amount surpassed that of Tianjin Port Development Holdings, which was subscribed 1,702 times in 2006.
After the markets closed, the price of Milan Station shares rose more than 50 per cent to around HK$2.50 at around 5pm in the grey market, an informal market where people trade shares, said one trader.
'People subscribing are highly speculative,' Tse said. 'It's hard to tell if Milan Station can maintain and expand their business in the future.'
More than 80 per cent of Milan Station's bags are sourced from the public, especially from a close-knit network of socialites and so-called trophy wives. The chain exploits Hong Kong's consumerist culture, in which people quickly tire of possessions. Milan Station offers them an outlet for bags they do not want.
However, rising costs are a concern. The company said the cost of operating outlets in prime locations such as Causeway Bay and Central had risen substantially. Rent surged almost 40 per cent from 2008 to HK$43 million last year.