Prada: The IPO Dilemma
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Case Details:
Case Code : BSTA014
Case Length : 14 Pages
Period : 1995 - 2005
Pub Date : 2005
Teaching Note :Not Available
Organization : Prada Group
Industry : Luxury Goods
Countries : Global
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Introduction
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In November 2004, Prada, the $ 1.95 billion privately owned fashion house decided to postpone its much-awaited public issue for the third time. Prada had planned to offer 30% of its shares on the Milan stock exchange to raise $2 billion and repay its huge $830 million debt. The debt had been accumulated while buying other luxury brands, such as Fendi, Jil Sander, and Helmut Lang, as well as building new stores and factories to expand the group's business since 1999.
The postponment of the IPO reflected the dilemma of Patrizio Bertelli (Bertelli), Prada's high profile CEO and the brain behind Prada's stupendous growth in the past 27 years. Bertelli needed the money to put Prada back on track.
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But at the same time, Bertelli who was used to controlling the business tightly, was not comfortable with the idea of becoming accountable to public investors. Meanwhile, Jil Sanders and Helmuth Lang, the designers of the brands named after them, quit in November 2004 and January 2005 respectively. Prada, the group's most profitable brand, was subsidizing all the loss making acquisitions.
Would Bertelli and his star designer, wife Miuccia Prada (Miuccia), widely perceived to be the group's most bankable asset, be able to turn things around for Prada? Would they go ahead and make the IPO and demonstrate that they were serious about growth...
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