What Happened:
Shares of online luxury marketplace Farfetch (NYSE: FTCH) jumped 8% in the mid-day session after 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."
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What is the market telling us:
Farfetch's shares are very volatile and over the last year have had 68 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was one day ago, when the company dropped 44.8% on the news that Richemont reported it has no plans to invest in or lend to the company. According to a statement reported on its website, Richemont emphasized that "following the recent media reports on and announcement made by FARFETCH on 28 November 2023, Richemont would like to remind its shareholders that it has no financial obligations towards FARFETCH and notes that it does not envisage lending or investing into FARFETCH." Richemont noted that it is actively monitoring the situation, including a review of its arrangements with Farfetch announced on August 24, 2022, which remain subject to certain terms and outstanding conditions. It added that "Neither Richemont Maisons nor YOOX NET-A-PORTER ("YNAP") have currently adopted FARFETCH Platform Solutions and they continue to operate on their own platforms."
On November 28, 2023, The Telegraph reported that founder José Neves is contemplating taking the company private, with potential support from Chinese e-commerce giant Alibaba and Swiss luxury conglomerate Richemont.
In a separate development, the company announced the postponement of the release of its third-quarter financial results, initially scheduled for November 29, 2023. It added that "it expects to provide a market update in due course and will not be providing any forecasts or guidance at this time, and any prior forecasts or guidance should no longer be relied upon."
Collectively, these developments introduce an air of uncertainty surrounding Farfetch's business, likely causing concern among investors and diminishing their confidence and expectations in the company's prospects.
Farfetch is down 75.1% since the beginning of the year, and at $1.09 per share it is trading 87.2% below its 52-week high of $8.50 from November 2022. Investors who bought $1,000 worth of Farfetch's shares 5 years ago would now be looking at an investment worth $48.35.
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