Session 7
Topic 1 Financing
International Operations – Prada
Most multinational companies (MNCs) secure equity funding in
their home countries; however, some may choose a global IPO in which “they can
simultaneously access equity from multiple countries” (Madura, 2015, p.
523). In placing the stock, these MNCs
focus on a few countries where they have large subsidiaries that require
financing. The MNC’s stock is listed on
a foreign exchange in the foreign country and is denominated in its local
currency allowing investors to trade their stocks there. The local investors will only purchase stocks
in a global IPO if the MNC offers a large number of stocks locally as this
ensures a more liquid and active local secondary market for the stock, makes
trading them easier for the local investors (Madura, 2015).
Prada
Based on the required readings and research, discuss:
Why did Prada need additional capital?
Why did Prada choose to issue its IPO in Hong Kong? What
were the advantages and disadvantages of doing so?
What circumstances might make a foreign IPO ineffective for
a company like Prada?
What other financing options were available to Prada?
What currency exposure risks did Prada face? How could the
company have hedged against them?
For a family-owned private company such as Prada, how did
the dilution effect of the IPO impact their control of the company?
Sources used in the development of the Prada Mini Case Study
(not required reading!):
Daniel, J.D., Radebaugh, L.H., & Sullivan, D. P. (2015).
International business (15th ed.). Upper Saddle River, NJ: Pearson Education
Madura, J. (2015). International financial management (12th
ed.). Stamford, CT: Cengage Learning
Topic 2. Foreign
Exchange & Accounting issues: Ecuador Dollarization & Parmalat
Scandal
Topic 2B. Parmalat
Scandal. Respond if your surname begins with N-Z
Topic 3. Lessons
Learned
