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Devil wears Prada -- and so do speculators

And now on a lighter note...

The financial media are rife with unnamed sources (presumably spokespeople, executives and assorted PR people) confiding in any journalist who will listen that Prada — once again — is considering going public with an IPO. Does one need any other pretext to liquidate a stock portfolio…

We raise the question because Prada has uncanny knack for calling the top of a stock cycle with its IPO ambitions. Most notably, at the peak of the tech bubble Prada first got the IPO itch and then again got it again in 2008. While they probably enriched their already none-to-poor investment bankers in the process, on both occasions the luxury goods company got cold feet and probably saved itself the ignominy of seeing its newly minted shares crash to the ground like a clumsy model on a catwalk.

While Prada strives to be in the avant-garde on the catwalks, it is ultimately a conservative, family controlled and run business that has a lot to lose from a botched IPO and a lot to gain from a successful offering. Therefore, the timing of its IPO is essential, especially in light of the fact that as a luxury goods company like Prada by nature has a cyclical business tied in no small part to the fortunes of financial markets. To be worthwhile, a Prada IPO must fetch a high price. But for a cyclical company like Prada to fetch high price, it’s got to be at the peak of the cycle. And everyone knows what happens at the peak of a cycle…



Disclosure: qqqq spx lvmh.pk