A luxury experience
“Borsa Italiana calculates that half the global luxury and fashion market is now listed in Milan.”
Raffaele Jerusalmi, CEO, Borsa Italiana
High finance and high fashion are intertwined in Italy. But the Italian markets are not just about couture as Angela Jameson reports.
In fashion week, Milan’s stock exchange doubles up as a models’ runway. So it is perhaps no surprise that Borsa Italiana and VOGUE Italia joined forces last autumn (2013) in staging a conference where Italy’s leading luxury goods companies and fashion houses explained their businesses to investors and financiers from 88 international investment houses.
Featured brands included world-leading fashion houses Prada, Salvatore Ferragamo and Tod's; renowned drinks group Gruppo Campari and Brunello Cucinelli, known as the ‘king of cashmere.’
Raffaele Jerusalmi, Chief Executive of Borsa Italiana, wants to nurture these showcases for Italian industry, supporting those brands which are listed and encouraging those which are still private to IPO in Milan
"Through this event and others like it, Borsa Italiana confirms its commitment to supporting and developing Italian companies. The luxury, fashion and design sectors are of great importance to the whole Italian economy and in particular Milan. Our city has an ambition to become the world leader in this particular field," he says.
The years immediately after the financial crisis were tough for Borsa Italiana, in common with other exchanges across Europe. The Italian exchange, which became part of London Stock Exchange Group (LSEG) in 2007, experienced lower trading volumes and a decline in the number of IPOs.
But the situation improved in 2013, with seven listings on the main market and 15 on AIM Italia , the market for smaller growth companies that aims to emulate the success of London’s AIM market.
Jerusalmi, who as well as chief executive of Borsa Italiana, is also Executive Director of Capital Markets at the Group, has high hopes for the coming year. "2013 set a record for new listings and 2014 should be strong too," he says.
Moleskine, the luxury notebook maker, kick started the market in 2013 when it listed in April. Famed for its pocket-size notebooks that emulate those used by Ernest Hemingway and Jack Kerouac, Moleskine was Italy’s first listing for almost a year.
Subsequent IPOs came from outside the luxury sector, including WDF, the duty-free shopping retailer and CNH Industrial, created from the merger of Fiat Industrial and CNH.
Demand for deluxe
While these examples confirm Milan’s appeal as a listing venue for sectors beyond fashion, Borsa Italiana is still most closely associated with the luxury goods market, an industry that has experienced rapid growth in recent years, primarily thanks to soaring Chinese demand for designer goods.
Over the past ten years, the market has surged in value and by 2013, it was valued at almost $300 billion. Growth has slowed in the past two years – rising only 2 per cent from 2012 to 2013 - but Italy is capturing market share.
" The overall rate of growth has slowed but Italian brands have gained the largest market share, up from 21 per cent in 1995 to 24 per cent today, almost equalling French brands’ 25 per cent share," says Claudia D’Arpizio, from management consultancy Bain & Company.
This increased demand for Italian luxury goods is boosting market sentiment, prompting more companies to consider listing.
"Interest in European equities - including Italy - has increased, so conditions are more favourable now then they have been in years for IPOs to occur in Italy," says Peter Lenardos, an analyst at RBC Capital Markets.
Luxury ski jacket manufacturer Moncler highlighted the shift in sentiment, with Italy largest flotation since 2010.
Having priced its shares at €10.20 apiece to give a market capitalization of more than €2.5 billion, the company saw its shares soar 50 per cent on the first day of trading. The performance was particularly noteworthy as the flotation took place just nine days before Christmas, when many investors are winding down.
"The extraordinary result from the IPO of Moncler is a symbol of the success of Italian entrepreneurship in the world," said Jerusalmi.
More companies are expected to list in the coming months and there is a fair wind behind them. Over the past four years, the FTSE Italia personal goods index has grown 136 per cent compared with a 12 per cent fall in the FTSE Italia All Share index. And Borsa Italiana calculates that half the luxury and fashion market is now listed in Milan, with a market capitalisation of almost €57 billion.
"We are becoming the centre of reference for the listing of the fashion and luxury goods," says Jerusalmi.
One of Borsa Italiana’s advantages over rivals is the international nature of the investors it attracts. Some 1,200 asset management firms are represented at Borsa Italiana and an assessment of Milan’s largest listed companies shows that 96 per cent of their institutional investors are based outside Italy.
"This diversity means that fashion companies who list here receive global attention," says Jerusalmi.
Many of Italy’s best-known fashion houses remain independent and family-owned, including Giorgio Armani, Ermenegildo Zegna and Dolce & Gabbana.
Yet Italian luxury consultancy Pambianco estimates that as many as 50 fashion and luxury brands are large enough to be listed.
There are also hundreds of up and coming companies, too small to list now but likely to seek flotation as they expand. With this in mind, Borsa Italiana launched ELITE, an advisory service for entrepreneurial businesses.
Set up in 2012 with the Bocconi University business school Elite has already signed up 131 companies
"We can put them in touch with investors at an early stage and help them to prepare to approach the capital markets within three years. This helps to overcome prejudice towards listing from these smaller companies and represents an opening up of capital to third parties,” Jerusalmi explains
Such a development is particularly beneficial in today’s Italian SME market, where corporate finance has traditionally been dominated by bank lending. According to the Bank of Italy, domestic banks are now lending two-thirds less than they were in 2006, leaving smaller companies in real need of alternative capital solutions.
ELITE complements the Borsa Italiana STAR segment, dedicated to mid-ranking listed companies capitalised between €40 million and €100 million. And Borsa Italiana’s retail bond market, MOT, is another source of capital. Benefiting from strong retail investor demand, MOT regularly sees €1 billion of trading a day.
For Jerusalmi, Borsa Italiana, STAR, AIM Italia, ELITE and MOT all share a common aim: to help Italian companies grow by providing them with efficient sources of capital.
Over time, he is confident that together, these venues will contribute to Italian economic recovery and provide a rewarding home for the best of Italy’s fashion and luxury houses.
"Milan and Borsa Italiana offer an ideal match for the world’s fashion elite. We are growing the exchange, growing our services for SMEs and expanding MOT. I am optimistic about further success, as economic recovery develops," he says.