Farfetch issued winding up petition after founder accused of 'destroying its value'

Fartfetch has been hit by a winding up petition, which accuses its founder José Neves of 'striking a bargain' to offload the retailer to South Korean retail giant Coupang at the expense of shareholders.

The winding up petition – which sees creditors petition a court to close down a company for unpaid debts – claims its founder "destroyed the value" of the luxury fashion retailer in the lead-up to a $500 million (£396 million) rescue deal by Coupang last month.

Creditors owed $400 million (£316 million) by Farfetch, a sum which is likely to be wiped out by Coupang's takeover, claimed there had been "serious deficiencies" in the company’s governance in a winding up petition filed in the Cayman Islands.

The filing said the deal with Coupang had been rushed through and blamed Farfetch’s management for "entering into unjustified value-destructive steps".

Bondholders have now called for the appointment of a liquidator and demanded an investigation into the conduct of Neves, according to The Telegraph.

Coupang’s deal to buy Farfetch in a pre-pack administration wiped out shareholders and many of the company’s bondholders when it was completed in late January.

The filing claimed the CEO "struck a bargain" to sell the company "in exchange for him remaining involved with or in control of the business which he founded, at the expense of the company and its stakeholders".

Prior to the deal, shareholders sought to have it stopped stating that the company had not been fairly marketed to other potential purchasers and argued that Farfetch could have off-loaded non-core businesses (such as New Guards Group and fashion boutique Browns) itself to meet its financial obligations, rather than resorting to an emergency rescue plan.

Founded in London in 2017, Farfetch was floated on the NYSE in 2018 to much fanfare and at the time it was valued at $6.3 billion. In the five years that followed, it lost 95% of its value. At one stage it was valued at $23 billion, but by 13 December 2023, it had a market value of just $221 million.

One of the first signs that shareholders were not happy with the strategy Neves was taking was the $675 million acquisition of brand house New Guards Group, which took place shortly after the Farfetch IPO in 2019. Shareholders argued that they had bought into a company that operated an inventory light model, based on a marketplace that connected brands and boutiques to global shoppers, not a business that owned and developed brands.

Coupang has stated that its intention is to embark on a period of "steady and thoughtful" growth for Farfetch under its ownership.

Read TheIndustry.fashion's feature 'Farfetch poised for "steady and thoughtful" growth under Coupang? Let's hope so'.