Prada’s Hong Kong Ipo Harvard Case Solution & Analysis

Prada’s Hong Kong Ipo Case Solution  

  1. Subscribers may sanction members of the sales team. Customers of these teams can quickly “deliver” shares to the secondary market, depriving them of a sales franchise. This is called punishment.

Under the terms of the subscription agreement, subscribers will receive 1.20 percent of the total proceeds from the issue or sale of the offered shares as a full commission, and will be required to pay any subscription fees. The company and the Selling Shareholders will pay a commission on the number of Shares they offered and each Selling Shareholder under the Global Offer (assuming the Excess Allocation Option is not exercised)(Global Offering, 2011).

The commission to be paid on the sale of additional shares on the basis of the exercise of the additional lot option, will be paid by Prada Holding BV. In addition, the company and the Selling Shareholders may, in their sole discretion, pay 0.70 percent of the total proceeds from the issue or sale of the Issuing Shares under the Global Offer, which are the number of shares issued by the company and by each selling shareholder.

Assuming the over-allotment option is not exercised in any way based on the bid price of Hong Kong dollars 42.25 (i.e., the median of our bid price range);it is estimated that for the public offering and international listing, as well as the Hong Kong Stock Exchange; Hong Kong fees and commissions will be calculated in Hong Kong dollars 36.50 per share). SFC transaction costs, Hong Kong transaction costs, attorney's and other professional fees, printing costs and other costs related to the global offering are estimated at approximately Hong Kong dollars 332.8 million, which is estimated to cost approximately 46.4 million Hong Kong dollars.

These fees and costs (excluding the subscription fee (paid by the company and the Selling Shareholders as above and the SFC Transaction Fee and the Hong Kong Stock Exchange Transaction Fee per share)) are calculated based on the total number of new shares in the Offer. The same ratio is determined by Prada Holding BV in the same proportion as the total number of shares offered for sale(assuming no placement is made).

Book Building of an IPO and Pricing of Prada IPO

International underwriters ask potential investors for instructions on how they intend to buy shares of the international stock. Potential professional and institutional investors should indicate towards the international stock exchange regarding the number of shares in the offer that they wish to acquire at different or specified prices. This process is called accounting and must continue until the last day to submit a request for a public bid in Hong Kong, otherwise it may roughly stop.

In the case of various offers under the Global Offer; the price of the Shares included in the Offer will be determined on or about the pricing date, which must be on or around 17th June, 2011 (Friday). In any case, it must be on or before June 20th, 2011 (Monday). According to the agreement of the joint book broker (representing the subscriber, the company and Prada Holding BV); the number of shares in the offer to be allotted in the various bids, will be determined shortly before 31st November, 2011.

The bid price per share of the Hong Kong Public Tender Offer is determined by the co-brokers ’price per share of the international brokerage offer in Hong Kong Dollars. In the account of Underwriters, Company and Prada Holdings BV, 1 percent brokerage fee, 0.003 percent SFC transaction fee and 0.005 percents the Hong Kong Stock Exchange transaction fee that are paid by the investors.

The Offer Price will not exceed Hong Kong dollars 48.00 per Offer Share and may not be less than Hong Kong dollars 36.50 per Offer Share, unless otherwise stated, no later than the last day of the accommodation request submitted under this agreement until the morning of the day of the Hong Kong’s public offering. Prospective investors should note that the Offer Price set on the Offer Date is lower (but may not be lower) than the indicative Offer Price Range in this Prospectus.(The Prada Group, 2013).

Lock Up Agreement

In accordance with Rule 10.07 of the Stock Exchange Rules; Prada Holding BV has promised the Hong Kong Stock Exchange that without the prior written consent of the Hong Kong Stock Exchange or if it does not comply with the applicable requirements of the Listing Rules; it will not:

  1. For a period of six months from the date of listing (the "first six months period"), sell or enter into an agreement to sell or otherwise produce options, rights, interest or privileges on: one of the shares indicated in this prospectus (pursuant to Rule 10.07 (2) of the Exchange Rules) of which you are the beneficial owner.
  2. During the six month period from the expiration of the first six month period (the "second six months period"), sell or enter into an agreement to sell or create any option, the right to participate in the parent company's shares, interest or premium, including or after the exercise of such options, rights, interest or fees, he or she would cease to be a controlling shareholder of our shareholders.

Performance of Prada

The performance of Prada IPO is increasing after the announcement of IPO and first day trading. At the time of the first day trading, the Price of Prada’s share was 39.5 Hong Kong dollars, which is increasing day by day and has reached at 54 Hong Kong dollars at the mid of the year 2014.

Capital Structure

The capital structure of the Prada in the initial three years of an IPO is 2 for 1, in which 2 is for the share capital and 1 is for liabilities......................

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