🧑⚖️ Class Action Against Farfetch
Investors who bought Farfetch shares before its collapse last year have filed an amended class action complaint. They allege that Farfetch did not disclose significant financial issues. The amended complaint was lodged with the U.S. District Court for the Southern District of New York on June 21, 2024. Plaintiffs Fernando Sulichin and Yuanzhe Fu are expanding their claims against Farfetch, accusing the company and its executives of corporate deception. They claim the company's failure to reveal critical financial problems led to a drop in stock value.
📉 Misleading Financial Health
The plaintiffs argue that Farfetch engaged in a series of costly acquisitions that it failed to integrate properly. This led to inefficiencies and financial strain. They claim Farfetch misled investors to boost its stock price. The complaint alleges that Farfetch's acquisitions, like Stadium Goods and New Guards Group, were not integrated into its platform, causing financial problems. Farfetch's stock dropped by 45% after the NGG acquisition announcement. The plaintiffs say these issues were hidden by the COVID-19 e-commerce boom.
💰 Claims of False Statements
The complaint states that Farfetch's executives made "materially false and misleading statements" about the company's financial health. The plaintiffs argue that Farfetch's leaders misled investors about revenue growth, cash position, and liquidity. They claim that instead of addressing financial issues, Farfetch continued acquiring overvalued and underperforming businesses. The executives painted an overly optimistic picture of the company's health and the success of the acquisitions.
⚖️ Seeking Damages
The plaintiffs claim Farfetch's financial problems surfaced as the pandemic's effects waned. By early 2022, Farfetch knew it could not replicate its pandemic growth but still set unrealistic public expectations. By late 2023, Farfetch faced a liquidity crisis and insolvency. The plaintiffs argue that Farfetch's misconduct inflated its stock value, causing significant damages to investors. They are seeking compensatory damages, interest, and legal fees. Farfetch is accused of violating Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.
Do you think Farfetch will recover from this scandal?
