What Happened:
Shares of online luxury marketplace Farfetch (NYSE: FTCH) jumped 16.5% in the afternoon session after Sky News reported that the company is in discussions with Apollo Global Management to secure emergency funding and stabilize its finances. While Apollo is one of the firms engaged in talks, sources emphasized that a deal is not guaranteed, leaving uncertainty about the form (debt, equity, or a mix) in which the new capital might be provided.
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What is the market telling us:
Farfetch's shares are very volatile and over the last year have had 69 moves greater than 5%. But moves this big are very rare even for Farfetch and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was 13 days ago, when the company gained 8% on the news that Citigroup analyst upgraded the stock's rating from Sell to Neutral amid increasing market volatility and speculation the company could be taken private. The analyst added that, "Near-term guidance has been removed, making it hard to assess the outlook for the business. On the other hand, we could see a potential take private offer with José Neves, who has 77% of the voting rights in the company. However, given there appears to be limited minority protection, we don't have confidence a takeover premium will be offered."
Farfetch is down 83.7% since the beginning of the year, and at $0.72 per share it is trading 90.4% below its 52-week high of $7.53 from February 2023. Investors who bought $1,000 worth of Farfetch's shares 5 years ago would now be looking at an investment worth $30.95.
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