In 2003, fashion house Michael Kors Holdings was struggling.
“It was losing money and probably would have gone out of business had we not bought it,” said John Idol, its chief executive, in a speech at the University of Pennsylvania’s Wharton School in March. Idol, 53, a former CEO of Donna Karan International, took over the company with partners that included Sportswear Holdings, a Hong Kong-based private-equity firm.
It’s been pretty much champagne and roses for Michael Kors ever since. What was a $20 million-in-revenue business in 2004 is now a $1.3 billion behemoth. Net income for the 12 months ended March 31 was $147 million. And Kors Holdings soared 144 percent in the 90 days after going public in December.
That makes it No. 1 in the Bloomberg Markets annual ranking of the best-performing initial public offerings. The ranking measures the 90-day stock performance of the 179 global IPOs that raised more than $500 million since the bankruptcy of Lehman Brothers in September 2008 through the end of 2011.
Because the IPO market froze for more than a year after Lehman’s collapse, most new listings were in 2010 and 2011.
The success of Michael Kors stands in sharp contrast to the rocky road traveled by one of the most anticipated share offerings of the decade: Facebook.
The social-networking company, whose Web site has more than 900 million users, dropped to $23.70 a share on Friday from its offering price of $38.
For its first week, Facebook was the worst-performing of the 30 largest IPOs since the beginning of 2011.
Travel site operator Kayak, Russian social-networking company VKontakte, Formula One and a dozen other companies shelved planned listings in the weeks after the Facebook listing. Kayak consequently revived its offering and went public July 19. Its shares, priced at $26, shot up more than 30 percent on opening day.
Meanwhile, Kors Holdings, which went public Dec. 14, was still trading at almost double its offering price as of Friday.
Michael Kors has been making clothes since 1981 and has expanded into fragrances and other beauty items. Revenue surged 62 percent for the year ended March 31, while net income more than doubled.
The success of the IPO “tells you we have a great brand with great management, led in particular by Michael and his very clear positioning of the jet-set lifestyle,” Idol says.
The listing has given Idol and Kors, 52, the chief creative officer, the means to live that lifestyle. The founding designer sold stock worth $117 million in the December IPO and $135.7 million in a March secondary offering, while Idol raised $68 million in the IPO and $81.3 million in the subsequent sale, according to company regulatory filings.
Kors Holdings is domiciled in Hong Kong, though Kors himself still works mostly in New York. The China connection is now key to Idol’s strategy, as the company aims to more than double its Greater China stores to 15 by year’s end.
Asia dominated the list of best-performing IPOs, contributing seven of the top 10.
“Since 2008, if you’re looking for strong, sustainable growth, the only areas that have created that have been Asia and to some extent Russia,” says Komal Sri-Kumar, chief global strategist at investment firm TCW, which oversees $128 billion. “What is happening in Asia is that people are rising from middle class to the upper-income group and from lower income to the middle class. All of that contributes to more spending on luxury goods.”
Asia’s new affluence is due partly to the success of the dozens of industrial companies that have gone public in recent years in China, Malaysia, South Korea and other nations. On the list of best-performing IPOs are China Hainan Rubber Industry Group, Korea Aerospace Industries, Malaysia Marine and Heavy Engineering, and Mongolian Mining.
Asian companies have raised more than half of the money gleaned from IPOs since the beginning of 2010, while the U.S. portion has fallen as low as 15 percent in recent years.
China’s growth has been slowing, and Premier Wen Jiabao in March set a 7.5 percent growth target for this year, down from an 8 percent goal in place since 2005. Tempered expansion in that economy has had a serious impact on the stock prices of some companies.
For example, the share price of Malaysia Marine, which builds offshore platforms for oil and gas producers and repairs liquefied-natural-gas vessels, more than doubled in its first eight months of trading before trimming those gains to 28 percent through Friday.
Hainan Rubber’s shares almost tripled in the first six weeks of trading as the Standard & Poor’s GSCI Spot Index of commodities headed for a 32-month high. They’ve plunged nearly 60 percent from that peak, as the commodities index has fallen 8 percent from its April high.
Mongolian Mining, No. 10, jumped 50 percent in its first 90 days of trading yet as of Friday was down 57 percent from its listing price. Still, the coking-coal exporter said in March that revenue had nearly doubled last year and will continue to grow because of demand from China. Mongolia was Asia’s fastest-growing economy in 2011, at 17 percent, according to the World Bank.
Sinking commodities prices pushed one giant trading company, Glencore International, onto the Bloomberg Markets ranking of the 20 worst-performing IPOs. Shares of the oil, coal and metals trader, which launched the biggest offering of 2011, had dropped more than 25 percent after 90 days and remained well below the offering price as of Friday’s close.
The Baar, Switzerland-based Glencore, which sold $10 billion in its London and Hong Kong IPO, recorded profits of $4.05 billion in the 12 months through Dec. 31. The smart investors were those who sold Glencore in the IPO, says Michael Holland, chairman of Holland & Co., an investment company that oversees more than $4 billion.
“The bankers figured out there was a willing IPO market to go after,” Holland says. “As in the case with Facebook or any other IPO that comes with a frenzy and a huge tail wind — as the commodities market had for Glencore — the clear winners were those who sold the stock.”
Glencore’s debut, at least, went smoothly. Facebook’s was plagued by trading errors and questions of whether the firm and the underwriters, led by Morgan Stanley, selectively disclosed non-public information. Negative buzz around Facebook’s IPO was stoked by a 6.7 percent slide in U.S. stocks from the end of April through the company’s May 17 pricing date.
“There were very dark clouds on the horizon for the 10 days prior,” says Josef Schuster, founder of Ipox Schuster, which oversees $2.5 billion and invests in IPOs. “The deal was just mispriced.”
Only two Internet/social-networking companies, Zynga and Russia’s Mail.ru, made the Bloomberg Markets list of the 20 best-performing IPOs. And Zynga, along with Pandora and Groupon, were all trading below their offering prices Friday.
Schuster says the poor performance of social-media companies was predictable in the uncertain markets of 2010 and 2011. “It’s a valuation game and also a market game,” he says.
“In the last few years, the market as a whole has been very jittery,” Schuster says. “You have these spurts of enthusiasm during which these companies price. Then you have these periodic increases in global risk, which really affect these companies strongly on the downside.”
Demand for luxury goods has remained strong even through the slide in China’s growth and Europe’s debt crisis.One company that has benefited is Milan-based Prada, which went public in June 2011 in a $2.48 billion Hong Kong IPO that gave the company a higher valuation than those of global peers such as LVMH Moet Hennessy Louis Vuitton, the world’s biggest maker of luxe items.
Prada stock ended the 90-day post-offering period down 2 percent, yet it has risen dramatically since then and was up 42 percent this year as of Friday.
Prada chief executive Patrizio Bertelli said in a May interview with Bloomberg News that he expected 40 percent of the company’s sales to come from the Asia-Pacific region in 2012 and 2013.
Social media may be all the rage among under-35s. But luxury goods in Asia are earning money for investors.
The full version of this Bloomberg Markets article appears in the magazine’s August issue.
|IPO date||Company||Industry|| Country |
|1||Dec. 14, 2011||Michael Kors Holdings||Retail||United States||n 143.75%|
|2||Jan. 7, 2011||China Hainan Rubber Industry||Chemicals||China||n 120.53|
|3||June 30, 2011||Korea Aerospace Industries||Aerospace/defense||South Korea||n 112.26|
|4||Sept. 23, 2009||Sinopharm Group||Pharmaceuticals||Hong Kong||n 66.56|
|5||Dec. 5, 2010||Pandora A/S||Retail||Denmark||n 63.33|
|6||Oct. 29, 2010||Malaysia Marine||Oil and gas services||Malaysia||n 62.33|
|7||Aug. 10, 2011||Founder Securities||Diversified financials||China||n 59.74|
|8||Aug. 8, 2009||National Petrochemical||Chemicals||Saudi Arabia||n 58.50|
|9||Aug. 16, 2010||Jihua Group||Aerospace/defense||China||n 54.86|
|10||Oct. 13, 2010||Mongolian Mining||Coal||Hong Kong||n 50.14|
|11||Oct. 25, 2010||HRT Participacoes Em Petroleo||Oil and gas||Brazil||n 49.58|
|12||May 8, 2009||China Zhongwang Holdings|| |
|Hong Kong||n 43.14|
|13||Aug. 18, 2010||China Everbright Bank||Banks||China||n 39.68|
|14||June 3, 2010||Sichuan Kelun Pharmaceutical||Pharmaceuticals||China||n 38.71|
|15||Dec. 2, 2010||Emlak Konut Gayrimenkul Yatirim||Real Estate||Turkey||n 38.24|
|16||Nov. 5, 2010||Mail.ru Group||Internet||Britain||n 37.87|
|17||Oct. 6, 2009||Verisk Analytics||Commercial services||United States||n 35.68|
|18||Oct. 22, 2010||Statoil Fuel & Retail||Oil and gas||Norway||n 34.74|
|19||Dec. 16, 2010||Swift Transportation||Transportation||United States||n 34.73|
|20||Dec. 15, 2011||Zynga||Internet||United States||n 33.50|
|IPO date||Company||Industry|| Country |
|1||March 22, 2010||OSX Brasil||Shipbuilding||Brazil||–43.37% n|
|2||July 6, 2011||Jastrzebska Spolka Weglowa||Coal||Poland||–40.22 n|
|3||April 8, 2010||Athabasca Oil Sands||Oil and gas||Canada||–38.94 n|
|4||June 21, 2011||Vanguard Health Systems||Health care||United States||–37.28 n|
|5||May 25, 2011||Freescale Semiconductor||Semiconductors||United States||–35.56 n|
|6||April 28, 2011||Pang Da Automobile Trade||Auto||China||–34.49 n|
|7||May 10, 2011||Kosmos Energy||Oil and gas||United States||–31.78 n|
|8||Sept. 24, 2009||Metallurgical Corp. of China||Engineering/construction||Hong Kong||–31.18 n|
|9||March 11, 2011||Zhejiang Semir Garment||Apparel||China||–29.19 n|
|10||Feb. 11, 2011||Garuda Indonesia Persero||Airlines||Indonesia||–28.00 n|
|11||June 9, 2011||Perennial China Retail Trust||REITs||Singapore||–27.86 n|
|12||July 21, 2010||Ocado Group||Food||Britain||–27.00 n|
|13||May 10, 2011||RLJ Lodging Trust||REITs||United States||–26.66 n|
|14||Oct. 26, 2010||Cebu Air||Airlines||Philippines||–25.68 n|
|15||May 19, 2011||Glencore International||Commodities||Britain||–25.47 n|
|16||May 4, 2011||Renren||Internet||United States||–25.07 n|
|17||July 14, 2010||Smart Technologies||Computers||United States|| |
|18||Feb. 26, 2010||Huatai Securities||Diversified financials||China|| |
|19||Oct. 2, 2009|| |
Glorious Property Holdings
|Real estate||Hong Kong|| |
|20||June 16, 2011||Samsonite International||Household products||Hong Kong|| |