Shareholders file lawsuit over fraud allegations | kbnmart

After Farfetch collapsed and was rescued by Coupang in late 2023, many shareholders felt they had been wronged. Two of them are now suing the company, accusing it of misrepresenting the difficulties facing its business. New elements have recently been added to the proceedings.

In their amended complaint filed in New York on June 21, plaintiffs Fernando Solichin and Yuanzhi Fu allege that luxury retailer Farfetch intentionally misled investors in order to boost its stock price, despite the fact that Farfetch’s acquisitions logically increased its cash position.

The plaintiffs now base their allegation on the fact that Farfetch chose to blatantly deviate from its business model. Through an intermediary who did not own the stock, the company purchased platforms like New Guards Group or Stadium Goods without taking the necessary steps to integrate those offerings into its existing platform, according to the complaint. The plaintiffs allege that this was a mistake.

They also accuse previous management of insisting on an acquisition strategy despite lower-than-expected sales, while the explosion in online spending during the health crisis allegedly masked the financial impacts of this strategy until the ill-fated 2023 fiscal year. Management is accused of ignoring internal forecasts, while creating unrealistic public expectations for the company’s growth.

In January, a group of institutional investors who own more than 50% of the luxury goods platform challenged Coupang’s acquisition of Farfetch, which is set to close in 2024. A few weeks later, Farfetch’s founder and CEO, José Neves, was one of several members of the management team to leave the company following the acquisition.

Farfetch shareholders weren’t the only ones unhappy with the acquisition. As soon as the announcement was made, Swiss luxury goods group Richemont, which in August 2022 struck a deal with Farfetch to sell its online luxury retail platform Yoox-Net-A-Porter (YNAP), immediately announced it was pulling out of the deal, abandoning plans to sell the company to Farfetch.