Farfetch, the luxury retail portal that faced a collapse and was rescued by Coupang in 2023, is now under fire from shareholders. Two shareholders, Fernando Sulichin and Yuanzhe Fu, have filed a lawsuit against the company, alleging that Farfetch misrepresented the challenges it was facing in its business operations. The lawsuit, filed in a New York court on June 21, claims that Farfetch intentionally misled investors to artificially inflate its share price.
The plaintiffs argue that Farfetch deviated from its original business model by making acquisitions such as New Guards Group and Stadium Goods without properly integrating them into the existing platform. This alleged misstep, according to the complaint, led to lower-than-expected sales and financial difficulties that were masked by the surge in online spending during the pandemic.
Management at Farfetch is also accused of ignoring internal forecasts and setting unrealistic growth expectations for the company. The lawsuit claims that the former management team continued with its acquisition strategy despite the financial challenges it was facing.
The takeover of Farfetch by Coupang, scheduled to be completed in 2024, was met with opposition from institutional investors who owned a majority stake in the luxury platform. Following the takeover, Farfetch’s founder and CEO, José Neves, along with other members of the management team, left the company.
Not only did Farfetch shareholders express discontent with the takeover, but Swiss luxury conglomerate Richemont also pulled out of a deal to sell its Yoox-Net-A-Porter online luxury goods sales platforms to Farfetch. This decision came shortly after the announcement of Coupang’s acquisition of Farfetch.
The legal battle between Farfetch and its shareholders underscores the challenges faced by companies in the fast-paced and competitive world of e-commerce. It serves as a reminder of the importance of transparency and accountability in business operations, especially when dealing with investors and stakeholders. As the lawsuit unfolds, it will be interesting to see how Farfetch responds to the allegations and how it plans to address the concerns raised by its shareholders.