Farfetch is to be investigated by numerous law firms over allegations it misled investors ahead of its IPO last year, in which it raised $884 million in new capital.
Johnson Fistel, Bragar Eagel & Squire, P.C., and Hagens Berman Sobol Shapiro are all investigating the ecommerce giant over possible “disclosure violations”.
The firms are responding to concerns from respective investors that Farfetch, which went public in September last year, that it “violated federal securities laws and/or engaged in unlawful business practices”.
In March, just over six months since listing on the New York Stock Exchange, Farfetch posted EBIDTA full-year losses of $95.9 million, up from $58 million, alongside losses after tax of $155.5 million rising from $112.3 a year earlier.
This was written off as costs associated with its IPO and its shares hit an all-time high of $30.
However, last week Farfetch revealed another “disastrous” quarter posting a $89.6 million loss, far larger than expected, alongside news that its chief operating officer had quit.
This sent shares plummeting 44 per cent in a single day, currently standing at around $11, prompting analysts at Wells Fargo to remark: “it’s clear that the story has changed meaningfully since the IPO, and Farfetch shares are headed to the ‘penalty box’”.
Hagens Berman partner Reed Kathrein stated: “We’re focused on investors’ losses and whether Farfetch misled investors about the Company’s growth and profitability outlook.”
The company’s stated continued: “The firm’s investigation concerns the veracity of Farfetch’s statements about the Company’s business model, particularly related to the Company’s growth and profitability. These representations allowed Farfetch to go public in September 2018, raising over $880 million.”