The market likes dual listing

Fashion & luxury likes dual listing to diversify risk and investor base, increase liquidity, and mitigate all those unknowns related to the fluctuations of a single market, especially if it is the Asian ones. In just one month, as many as two companies in the industry have begun trading their shares on a second list, and a third has made known its intention to follow suit. The Swiss group Richemont is leading the way with an announcement disclosed in mid-March. The nearly 20-billion-revenue group specializing in fine jewelry and watchmaking with brands such as Cartier, Van Cleef & Arpels, Chloé, Baume & Mercier, and Vacheron Constantin, has been on the Zurich list for years, and as of April 19, it landed on the Johannesburg stock exchange by moving to a direct listing after discontinuing its certificate of deposit program in South Africa. After that, it was Coty’s turn. Earlier this month, the board of the beauty giant specializing in perfumery and cosmetics, already listed on the Nyse, authorized the company’s top management to consider listing in Paris as well.

An operation in line with its more than 100-year tradition in France. If the process takes off, the group led by ceo Sue Y. Nabi would strengthen its presence in Europe by providing an additional vehicle to reach untapped investors in the old continent market. The operation set up by Thredup was even faster. In fact, the online fashion resale platform, which listed on Nasdaq two years ago, announced a few weeks ago its dual listing on the long-tterm stock exchange, a national stock exchange approved by the US Securities and Exchange Commission (Sec) in May 2019. Thredup is currently only the third company to join, after Asana and Twilio, and the second previously listed. The reason behind this secondary listing would seem to be related to issues of brand image and corporate social responsibility. Amid all this activity, the very project of the Prada group, which first unveiled last July its intention to land in Milan after more than a decade in Hong Kong, seems to have stalled at the moment. The top management of the company, which welcomed Andrea Guerra as its new ceo at the beginning of the year, subsequently stated several times that investigations to verify the feasibility of the operation were underway, but the process was delayed due to technical obstacles. In recent days, however, a number of statements by the heir to the Milanese fashion empire have rekindled the spotlight on a possible listing of Prada on the Italian stockeExchange. «We are optimistic about the hypothesis of a dual listing, although nothing has been decided yet,» Lorenzo Bertelli, Miuccia Prada and Patrizio Bertelli’s eldest son, in fact said during his speech at a luxury conference organized by the British press. «When we listed in Hong Kong in 2011 we saw this opportunity as a way to connect Europe to Asia. Now we see the dual listing in Milan as a way to build bridges between East and West at a time of considerable global tensions». The dual listing would allow the parent company of the Prada, Miu Miu and Church’s brands to tap into European investors as well, which could prove crucial at a time of rising geopolitical tensions in China concerning not only the fate of Taiwan, but also increasingly evident economic inequalities. «The biggest risk for luxury is excessive social tension between rich and poor,» Bertelli added. It seems, therefore, that the company is moving mainly to diversify risk away from the Asian market. China seems to be more distant from Western markets and the Hong Kong financial hub is going through a delicate situation, with several banks moving its offices to Singapore. A dual listing could also be explained as an attempt to protect against further regulatory tightening. «Market volatility caused by the war in Ukraine and also the change of economic and political conditions in Asia after the pandemic are pushing companies listed in Eastern markets to seek more balance and turning to western markets,» Dario Minutella, principal at Kearney Italia for practice fashion, luxury, and lifestyle, explained. «However, a listing in Milan would be in line with the group’s historical heritage. Banks and analysts believe double listing could stimulate growth by diversifying the investor base». This is however a benefit not only for the Prada group. The double listing presents in fact various advantages, as the expert explained. First of all, an increase in liquidity: by listing on several stock exchanges, in fact, a company can attract more investors, potentially increasing the liquidity of its shares, but also attracting a broader base in different regions and markets, allowing the company to access new capital. There is also the factor of risk diversification.

«By listing on different stock exchanges, a company can differentiate its investor base and reduce its dependence on a single country, mitigating risks caused by market or currency fluctuations, or risks related to regulatory changes or geopolitical events,» Minutella pointed out. Being present in several markets can also increase a company’s visibility and reputation, enhancing brand recognition and credibility among investors, analysts, and stakeholders. Some companies might also consider dual listings in a specific stock exchange to access a specialized market, and this could precisely be the case of the Italian stock exchange, which boasts the presence of several companies operating in the fashion and luxury sector, such as Moncler, Brunello Cucinelli, Ferragamo, Tod’s, and Aeffe. «Specializing in this sector could help the financial center to carve out a place for itself as a hub for this type of companies at an international level and lead to further dual listings, in the wake of those underway in the sector,» the Kearney’s expert added. Among the examples, «there are two companies in the sector that have recently listed in New York and that in the future could evaluate the dual listing in Milan, following the same reasoning adopted by Prada, and they are Zegna and Lanvin Group,» Minutella hypothesized. «Such operation would certainly enhance Milan’s role as a luxury hub because the industry is global but has always been particularly linked to Italy. In the case of a dual listing, Zegna could choose Milan because of its piedmontese roots, while the Asian group is generally made up of very Eurocentric brands, even though its flagship label is French. It is very likely, in general, that further dual listings will be announced soon,» he concluded.

Meanwhile, the Italian Stock Exchange is clearing the ground for the arrival of Ferretti yachts. After listing in Hong Kong in March 2022, the luxury yacht company has just received approval for the ipo on Euronext Milan. The controlling shareholder, the Chinese group Weichai, will sell up to 28.75% of its capital, valuing it around 300 million, reducing the stake with the aim of attracting new investors from Europe and the Middle East. (All rights reserved)