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Moment 68: IPO Fever

Investors went crazy over initial public offerings from marquee fashion brands in the mid-Nineties.

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Donna Karan goes public in 1996

Donna Karan goes public in 1996.

Photo By David Turner/WWD Archive

Appeared In
Special Issue
WWD 100 issue 11/01/2010

In the mid-Nineties, investors went crazy over the prospect of initial public offerings from marquee fashion brands. Luxury firms were hotly pursued by the IPO crowd after big money was made on Gucci Group's IPO in October 1995. Investcorp, which owned all Gucci's stock, raised $1.4 billion from its sale of Gucci shares, a nifty profit after paying $246 million for the company in the late Eighties, before Tom Ford and Domenico De Sole engineered one of fashion's greatest comebacks. Gucci's initial success paved the way for IPOs from such companies as Donna Karan International, Saks Fifth Avenue, Guess, Mossimo, Kenneth Cole and Designer Holdings, which at the time made Calvin Klein jeans.

Many of the IPOs made designers extremely wealthy. Ralph Lauren went home with about $440 million after underwriting expenses from the 17.9 million shares he sold in his 1997 IPO, and his remaining shares officially made him a billionaire. At the time of the IPO, Lauren held 46.2 million shares worth $1.455 billion.

Tommy Hilfiger made a bundle for himself and his partners via his IPO on the New York Stock Exchange in the fall of 1992. The company went public at $15 a share, raising $46.9 million, and within a few months the stock was trading at $25. Hilfiger followed its IPO with three secondary offerings which paid off handsomely for a group that included Hilfiger's original backers and top management. The group netted a combined $325 million on an original investment of $206,000. Simultaneously, Apparel International Holdings Ltd., which was controlled by Silas K.F. Chou, Lawrence S. Stroll, Tommy Hilfiger and Joel J. Horowitz, also raised $62.9 million in a November 1993 offering, $127.3 million in a June 1994 offering and $135.4 million in a March 1995 offering.

In 1996, Donna Karan and her late husband and vice chairman, Stephan Weiss, received $58 million from the proceeds of her IPO. Another $58 million went to Takihyo Group, the original backers of the company when it was founded in 1984. Karan and Weiss, through their Gabrielle Studio licensing agreement, also rented the Karan trademark to the company for between 1.75 and 3.5 percent of all sales of the brand, in a deal that incensed many outside shareholders. After the first year, Karan and Weiss' 24.2 percent stake in the firm lost more than half its value since it went public at $24 a share in June 1996. Donna Karan closed a year later around $11.50 on the Big Board. In a year, the couple's 5.3 million shares were worth $61 million, down from $127 million when it was priced in the IPO. Shareholders, too, lost a bundle.

Karan's biggest payday came in 2001 when LVMH Moët Hennessy Louis Vuitton bought the design and licensing company for $643 million.