Farfetch plummets to bottom of PSI-20

The former Portuguese unicorn Farfetch could dismiss up to 2,000 staff or 25% of its workforce as its fortunes tumble on the Lisbon stock market; its shares worth only US$0.5282 – a fall of 27.68%.

It means that staff whose bonuses are paid in shares have seen their bonuses a fraction of what they had been worth around six years ago, after shares lost 40% of their value on the NYSE in November. After 2018, when the company was floated, shares reached a peak value of US$73 each.
Farfetch says it intends to make 800 people redundant before the end of the year, although the viability of the company may require up to 1,400 initially, with one member of staff at the company’s Lisbon office telling the newspaper Público: “We know more about what’s going on from outside the company than from within.”
The luxury goods platform founded by José Neves was founded in 2008 and was tax based in London. It was the first Portuguese unicorn – meaning it was valued at US$1Bn.
In September 2018, Farfetch made its debut on the New York Stock exchange with great fanfare with the Portuguese flag hoisted outside the stock market entrance. At the close of its first day of trading, shares were worth US $28.35 – up 41.75% on the US $20 per share valued at time of the company’s Initial Public Offer. (IPO)
Since then, things have not been going so well in recent months. On November 28 it delayed publishing its annual accounts amid rumours that José Neves was thinking of pulling the company from the sock market. The rumour led to US $382 million being wiped off the value of Farfetch’s shares in just two hours.
On Tuesday this week, Farfetch shares trawled along the bottom of stock market trading platforms at only US$ 0.5 a share — a fall of 27.68% since 29 November.
With 2023 taken as a whole, Farfetch shares have so far lost 86.85% in accumulated losses. The company’s actual Market Cap is now €210 million, which means that the company is now less valuable than any other listed company on the PSI-20 Portuguese Stock Index.
The financial analyst Tom Nikic of Wedbush told Bloomberg that the company’s silence was causing volatility on the stock market.
“For weeks we’ve heard nothing from Farfetch, which is leaving a lot of people confused and waiting for some clarification on the current situation. Investors are getting nervous over this uncertainty”.
In the first half of 2023, Farfetch posted losses of US$ 281.34 million, compared to a profit of US$ 67.67 million in H1, 2022.
Farfetch is also the target of a lawsuit brought by a group of shareholders who claim that the company violated US capital markets federal laws.
According to the lawsuit presented against the company and some of its top executives, Farfetch did not publicly divulge that it was suffering a “a significant downturn” in its growth in the US and China – its two main markets.
It was announced on Thursday by Expresso that the private equity fund Apollo Global Management is considering a rescue deal.
It is one of a number of third parties in talks about providing hundreds of millions of dollars in emergency funding to the British luxury fashion site.
It was unclear whether the new capital would be provided as debt or equity, or a combination of the two.
Richemont, the luxury goods group which owns Cartier – one of the key backers that supported Farfetch’s floatation on the NYSE in 2018 – has said it will not invest additional money into Farfetch, which last month delayed the announcement of its quarterly results.
Farfetch says it intends to “provide a market update in due course” — a statement which sent its shares plunging.
“The company will not be providing any forecasts or guidance at this time, and any prior forecasts or guidance should no longer be relied upon,” it said on 28 November.
Farfetch was among the big winners from the pandemic as online shopping boomed, but has “since lost its way”, says Sky News. “Employing thousands of people, it continues to be loss-making”.