Farfetch facing legal action after £73m loss

Farfetch launches pre-order service in an effort to minimise fashion waste
The luxury online retailer aims to tackle overproduction with its new initiative.
// Farfetch facing legal threats from 5 US law firms
// The online luxury retailer had more than £1.64 billion wiped off its market value last week
// Farfetch posted a bigger than expected loss of £73.26 million for the second quarter

Farfetch is facing legal threats as it emerged that five US law firms are preparing class action suits.

The law firms have joined talks with clients to discuss legal action based on deciding whether Farfetch misled investors about its growth and profitability outlook at its flotation.

The firms Hagens Berman, Holzer & Holzer, Glancy, Prongay & Murray, Johnson Fistel and Howard G Smith have issued alerts to Farfetch investors to join class actions.

“Our investigation concerns whether Fartech has violated the federal securities laws and/or engaged in other unlawful business practices,” corporate litigation boutique Bragar Eagel & Squire said in its statement.

The online luxury retailer, founded in 2007 by José Neves, had more than $2 billion (£1.64 billion) wiped off its market value last week.

The business floated in New York last September in a $5 billion listing, but less than a year later the shares crashed to half the flotation price.

Farfetch posted a bigger than expected loss of $89.6 million (£73.26 million) for the second quarter and announced a $675 million (£551.93 million) takeover of New Guards Group – the Italian fashion group that owns the licence for the Off White fashion label – in a move which Neves said will “transform the luxury industry”.

On this news, the company’s share price fell $8.12 (£6.64), over 44 per cent, to close at $10.13 (£8.28) on August 9, 2019.

Neves blamed the losses on a heavily-discounted market.

To heighten concerns, Farfetch chief operating officer, Andrew Robb announced he would be leaving.

Meanwhile, Net-a-Porter founder Natalie Massenet, jumped ship to Farfetch before its float and is non-executive co-chairwoman.

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