In a significant development on Wednesday morning, the stock of the online luxury retailer Farfetch Ltd witnessed a notable decline following reports that its founder, José Neves, is contemplating taking the company private. This revelation comes in the wake of a troubled listing on the New York Stock Exchange (NYSE), as disclosed by The Telegraph on Tuesday. Adding to the unfolding narrative, Richemont, the owner of the renowned jeweler Cartier, declared on Wednesday that it has no plans to infuse cash into Farfetch. Richemont is currently in a deal to sell its Yoox Net-A-Porter online fashion and accessories business to Farfetch.
At the time of this publication, Farfetch Ltd stock (FTCH) has witnessed a decline.
Farfetch Ltd
Current Price: $1.16
Change : -0.94
Change (%): (-44.76%)
Volume: 65.3M
Source: Tomorrow Events Market Data
Founder José Neves is currently exploring the possibility of privatizing the British company, which has been grappling with financial challenges since its listing on the NYSE. Neves is reportedly collaborating with advisers from JP Morgan to navigate the potential move. However, Farfetch, in which Neves holds a 15% stake, refrained from providing comments to Reuters when approached for a statement on Wednesday.
Richemont, noting the situation, stated that it is “carefully monitoring the situation” and is reviewing its options regarding the deal, which was initially disclosed in August 2022. The deal entails Richemont receiving an initial 58.5 million Farfetch shares. In a statement on Wednesday, Richemont clarified that it has no financial obligations toward Farfetch and does not foresee lending or investing in the online luxury retailer.
Market response to Richemont’s stance was apparent, with Richemont stock experiencing a 1.6% gain in early trading in Zurich.
Analysts, including those from the Royal Bank of Canada, are speculating on the potential ramifications. If Farfetch were to delist, there could be attempts to renegotiate or even abandon the deal. Some analysts argue that a delisting would decrease the likelihood of the deal materializing.
An undisclosed source mentioned that Richemont has “definitely no intention” of injecting funds into Farfetch but refrained from commenting on whether a delisting would nullify the existing deal.
Patrik Schwendimann, an analyst from Zuercher Kantonalbank, interpreted Richemont’s statement as a clear indication of the company distancing itself from Farfetch. He suggested that the likelihood of the transaction proceeding has diminished, stating, “the assumption for me is now confirmed.”
Richemont emphasized that neither its divisions nor Yoox Net-A-Porter (YNAP) have adopted Farfetch’s platforms, affirming their commitment to running their own sales platforms independently.
Last year, Richemont agreed to sell a 47.5% stake in its YNAP business to Farfetch, with the provision for Farfetch to acquire the remaining stake. However, financial challenges at Farfetch, reflected in a sharp decline in its share price in recent months, have cast doubts on the viability of the deal.
Despite receiving regulatory clearance from European authorities, Farfetch announced on Tuesday that it would not release its third-quarter results, asserting that previous forecasts and guidance could no longer be relied upon. The uncertainty surrounding Farfetch’s future has left stakeholders and the market on edge, eagerly awaiting further developments in this unfolding saga.
