Farfetch's former CEO, President and CFO in court battle over ‘serious mismanagement’

Former Directors at Farfetch, Founder and CEO José Neves, Group President Stephanie Phair and CFO Elliot Jordan, are caught up in a High Court dispute over allegations of "serious mismanagement" before the luxury retailer’s collapse.

The three former senior employees of Farfetch, which was placed into liquidation early last year, are being investigated for the circumstances that led to its failure, The Times reported. Liquidator Alvarez & Marsal is concerned about why there appears to have been "such a rapid and drastic deterioration in the company’s finances", according to court documents.

The liquidator also wants to investigate the circumstances leading to Farfetch’s £396 million quick-fire sale to Coupang before it was then placed into liquidation.

Farfetch Founder José Neves

Founded in London in 2007, 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.

In late 2023 Farfetch announced that it would not be reporting its quarterly results as planned amid rumours that Neves was seeking to take the business private. Talks with investors, such as Apollo, stalled but Coupang stepped in at the last minute with a rescue deal at the end of the year. The deal was completed at the end of January 2024.

Coupang's acquisition of Farfetch has not been without controversy. The sale wiped out the stakes of a number of shareholders who initially sought to block the deal saying the business had not been marketed for sale widely enough and that Farfetch could have met its financial obligations by selling off non-core businesses, such as brand group New Guards and fashion boutique Browns, before resorting to a fire sale.

Creditors, owed $400 million, then hit Farfetch with a winding-up petition. This accused José Neves of 'striking a bargain' to offload it to Coupang at the expense of shareholders and of destroying value in the business.

In recent court documents, the liquidator said the company had "effectively written off over $1 billion of debt obligations owed to it by way of the intercompany loans and has effectively been deprived of its ownership and interests in the Farfetch business as a whole and which took place without any public explanation in circumstances where, as recently as August 2023, the company and its directors had stated publicly that its business was in good financial health."

In a recent ruling, Mr Justice Thompsell partially rejected the liquidators’ request to subject two of the directors to oral examination under oath. The judge ruled that it was premature to mandate oral hearings at this stage, stating that there was no compelling reason to require oral testimony over written responses. However, he left open the possibility of revisiting the issue.