Surfing the IPO Wave: A Chinese Luxury Brand Bets on the Frankfurt Stock Exchange

Abstract

The case examines the disastrous initial public offering of the fictional luxury brand company Mastery AG on the Frankfurt Stock Exchange. Master AG’s shares have fallen dramatically as the Chinese economy slows down and the luxury goods market begins to contract in the face of new anti-bribery legislation. Mastery AG’s shares are now close to worthless and the company wishes to delist yet can’t as it does not own 95% of the shares. Faced with a contracting market and the large costs of listing Mastery AG on the German stock exchange, the company must now decide what to do.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Resources

Exhibit 1: The Development of the Mastery AG Share Price Since IPO on the Frankfurt Stock Exchange

Figure

Initial Price: EURO 15.00 on 11 April 2011.

Source: www.wallstreet-online.de/aktien

Exhibit 2: China’s Domestic Luxury Consumption in Billion US$

Figure

Source: Authors’ own research based on various publications in China consumer goods platforms (www.chyxx.com, https://wenku.baidu.com, http://news.xinhuanet.com, http://caijing.chinadaily.com.cn, http://www.newsijie.com, http://www.sohu.com, http://finance.sina.com.cn)

Exhibit 3: Number of Chinese With at Least 10 Million RMB Over the Years

Figure

Source: Authors’ own research based on Hurun Reports, China Private Wealth Report by Bain Consulting and China Merchants Bank.

Exhibit 4: China’s Growing Middle Class

Figure

Source: Global Insight

Exhibit 5: Number of Deals by Chinese Investors in Germany

Figure

Source: www.pwc.de/china, March 2015

Exhibit 6: Financial Data of Mastery AG Before and After Change of Supervisory Board of Directors

EUR in million

2013

2014

Change (%)

Revenue

167.1

175.1

4.8%

Luxury

104.2

120.7

15.8%

Casual

62.9

54.4

-13.5%

Luxury %

62%

69%

Casual %

38%

31%

Gross profit

60.8

60.6

-0.4%

EBIT 1

12.3

10.7

-13.4%

Net profit

5.4

3.8

-30.3%

Earnings per share in EUR 2

0.36

0.25

-30.6%

1 EBIT represents earnings before net finance cost and tax

2 The computation of earnings per share is based on net profit and 15 million shares.

Source: Mastery AG Annual Report, 2015

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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