Second-hand luxury handbag retailer Milan Station made headlines last week as it warned of an expected loss this year, which it said was to be blamed on continued slow demand for luxury goods.
The news underscores the downfall seen since its initial public offering in May last year.
The public offer for Milan Station's IPO was subscribed a record 2,179 times and its share price rose 66 per cent upon listing. But at time of writing, the stock was more than two-thirds below its offer price.
Trading volumes have also taken a beating, with a 30-day average volume equivalent to a paltry US$70,000 per day. Assuming it could line up investors, Milan Station would find it tough to issue new shares. Any new offering would invariably represent a high number of trading days, a key measure for follow-on equity transactions.
Where did it all go wrong?
The timing of Milan Station's IPO couldn't have been better. Riding on what seemed like a wave of new equity issues by European luxury companies in Asia, it capitalised on investor sentiment and the appeal of high-end brands to mainland consumers.
The listing prospectus indicated that the luxury branded handbag market in China was worth US$1.72 billion in 2009 and is forecast to quadruple by 2014. Such a rosy picture now looks doubtful, as shown by LVMH's third quarter results two weeks ago, which suggested that China's love affair with luxury goods could be flagging.