Dive Brief:
- Coupang Inc. has completed its acquisition of the assets of luxury e-commerce company Farfetch Holdings, according to a Wednesday press release.
- The $500 million deal between Farfetch, e-commerce firm Coupang and its investment partner Greenoaks was first announced in December 2023, a month after Farfetch’s decision to cancel its Q3 earnings call.
- Last week, an ad hoc group of Farfetch investors announced it had retained legal counsel in order to “to evaluate its options” in regard to the Coupang deal. Through the terms of the acquisition, the note holders — who collectively hold more than half of Farfetch’s 2027 convertible bonds — risk losing their investment.
Dive Insight:
When the acquisition was initially announced, Farfetch said in its statement that the deal meant “holders of its Class A and B ordinary shares and its convertible notes” would not recover “any of their outstanding investments.” In addition, the company said it would delist from the NYSE and be liquidated.
While Coupang’s acquisition wiped out Farfetch’s equity, it also eliminated approximately $1.6 billion dollars of Farfetch debt, much of which was long-dated, with maturities in 2027 and 2030, according to a December 2023 email sent to Fashion Dive by Wedbush Securities analysts led by Tom Nikic.
The 2027 ad hoc note holders, whose convertible bonds are worth approximately $400 million, said in a Wednesday release that they believe “the expedited sale of Farfetch to Coupang is yet another example of serious failings at Farfetch, including a lack of transparency and corporate governance at Farfetch.”
“Despite Farfetch indicating that it would run a sales process through to end April 2024, the sale has been rushed through, seemingly in the face of investor discontent,” the group said.
The group added that they believe the “unjustified speed of the sale process and bridge loan terms have precluded any proper marketing of Farfetch’s assets” to other potential buyers. In addition, they said the “rapid and unexplained deterioration in Farfetch’s financial position, the significantly below market value offer for Farfetch by Coupang” and the terms of the Coupang agreement, which included a fine if Farfetch canceled the deal, “effectively prevented any other interested parties from entering the bidding.”
“Farfetch has taken a consensual outcome off the table which would have been in the interests of its investors, shareholders and employees,” a spokesperson for the group said in the release. “This is another example of why we are so concerned about Farfetch’s actions. We maintain our position and will evaluate all possible litigation steps.”
Meanwhile, Farfetch faces a class action lawsuit, which was filed by shareholders last year, prior to the company’s delisting and Coupang’s acquisition. The suit alleges that Farfetch failed to disclose a “significant slowdown” of growth in the U.S. and China and is currently pending after being transferred from the U.S. District Court District of Maryland to the U.S. District Court Southern District of New York on. Jan. 22.
