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Luxury IPO products need to show they’re worth the price

In a year dominated by market turmoil, several IPO candidates in the luxury segment are hoping to ride through the volatility, but rising global living costs and varied performance from luxury IPOs means the route to listing is far from easy.

It doesn’t help that many of these luxury IPOs are seeking to come to market during one of the most turbulent times for the global economy since the Global Financial Crisis with inflation rising and people squeezed on their everyday living costs.

“Luxury goods companies are finding the market more challenging because of the impact of inflation, and reduced consumer confidence is hard for businesses to circumvent; investors will find it difficult to assess those businesses with confidence, so they will need to pay discount to reflect risk,” a management consultant said.

IPO candidates include Florentine online luxury fashion retailer Luisaviaroma, which could list between 2023 and 2024, as well as German online watch marketplace Chrono24.

The bumper IPOs of German sports car legend Porsche alongside luxury yacht manufacturer Bellini Nautica are hoping to benefit from their status symbol and high spending customer base. They are likely to compare themselves to high profile peers such as Italian auto giant Ferrari [NYSE:RACE] and yacht company Ferretti S.p.A. [HKG:9638], according to an ECM banker.

But for every Ferrari, which has soared by 264% since IPO, according to Dealogic data, there are those that have not been as successful, and any investor being pitched a luxury premium will have unpleasant memories of the 2018 listing of Aston Martin [LON:AML], down 96% from its IPO price.

Companies in more niche sectors such as accessories and apparel might also find it harder to get the ear of their investors, according to the same banker.

Selle Royal Group, an Italian manufacturer of premium bike seats and accessories, and Pozzi Milano 1876, the Milan-based luxury accessories and furniture brand, are two of the brands in this category.

A clear identity is going to be key, and luxury companies must avoid the urge to try and benchmark themselves against massive conglomerates, a source said, especially as many might not always be like-for-like peers. Companies like Italian Design Brands and Design Holding, which according to the same source will present themselves to investors halfway between high-end furniture and luxury brackets, might have to find closer peers than French fashion giants LVMH [EPA: MC] and Kering [EPA: KER], the two listed comps which they are reported to be seeking to benchmark against.