Shares of the luxury e-commerce platform shot up 42.3 percent to $28.45 during their first day of trading on the New York Stock Exchange, valuing the company at more than $8.2 billion. At one point, the stock was up 53 percent.
José Neves, founder, co-chairman and chief executive officer — and now a billionaire, at least on paper — told WWD that it’s all about keeping up the momentum.
“This industry will continue to grow and 25 percent of luxury sales are expected to happen online in the next 10 years,” he said. “So, on Monday, we’ll be back at work focused on those opportunities.”
Neves, who was with the company’s non-executive co-chairman Natalie Massenet on the stock exchange floor when the shares began trading, said Farfetch’s core values would not change following the IPO.
“There is a strong culture here of values and our mission is to be a positive force for fashion, and that’s not going to change,” he said. “We love fashion, we love this industry and we see ourselves as partners for the brands.”
The company has annual revenues of $386 million, but has never turned a profit. Still, its enormous potential, charismatic founder and a compelling story have proven sweet music to investors’ ears.
The hotly anticipated IPO also offered an opportunity for some of the fashion and luxury industry’s biggest players — who for years have been gun-shy about selling their goods online — to get a slice of the “fash-tech” action in what has been a year of private M&A deals.
Earlier this year Compagnie Financière Richemont bought the rest of Yoox Net-a-porter it did not already own in a deal that valued that platform at 5.3 billion euros and pulled it off the Milan Stock Exchange. Last year, Apax Partners purchased Matchesfashion.com, valuing the company at $1 billion.
Artémis, the investment arm of France’s Pinault family, was among the first biggies to declare its interest in Farfetch with plans to purchase up to $50 million worth of the company’s Class A shares. Farfetch would not comment on whether LVMH Moët Hennessy Louis Vuitton, which is publicly quoted in Paris, had taken part in the IPO, too.
Whether LVMH bought in or not, it is clear that the business of selling luxury goods online is becoming an interconnected web, with platforms forging alliances and brand owners jumping in to not get lost in the mix.
Neves and Massenet said having a company like Artémis, whose sister company Kering owns a host of brands, including Gucci, that transact through Farfetch, was a positive and didn’t add to pressure or conflicts of interest.
“We have always had a lot of partners and relationships in the industry, with Kering, LVMH, Mayhoola, Burberry and Chanel,” Neves said. “Now, with the IPO, we have become a neutral platform for the industry, and with regard to our shareholders we’ll do our best for all of them.”
Massenet — who blazed the trail for designer fashion e-commerce by founding Net-a-porter — said the Artémis investment was “a great show of faith and proof of how interconnected this industry is.” She said it was important that Farfetch secure its independence via the IPO, and stressed that Farfetch was more of a brand-enabler.
“Farfetch doesn’t hold inventory, it powers the brands’ inventory” and enables their communication strategies. She added that it was gratifying to see that the industry and the markets respond to Farfetch’s role as a tech platform for the fashion industry.
Asked about the next steps, Neves said it would be business as usual.
At the list price of $20 a share, Farfetch itself raised $672 million, which it plans to use for general corporate purposes and, potentially, acquisitions.
“We’re continuously investing,” Neves said. “We have 1,000 engineers working in the business full-time, including ones in China, and we plan to continue our international efforts and expansion — that won’t change.”
He also pointed to the recent deals that Farfetch has sewn up, including the launch of a dedicated Arabic site with Chalhoub Group that stocks 880 boutiques and brands, and the acquisition of Curiosity China, which helps brands break into — and thrive in — the Chinese market.
Farfetch also owns the London designer retailer Browns, which it’s using as a laboratory to test its Store of the Future technologies and has over the past few months inked deals with Burberry to showcase the brand’s entire offer, and with Chanel to rethink the brand’s customer and in-store experiences.
Of late, Farfetch has developed a host of localized sites that are personalized for the consumer in particular areas of the world, allowing certain markets to pay in installments or with Alipay or JD Pay.
In 2017, the company scored a $397 million investment from JD.com, which became one of Farfetch’s largest shareholders, with Richard Liu, JD.com’s founder and ceo, joining the e-tailer’s board. That investment has become somewhat problematic for Farfetch, however, following rape allegations against Liu in Minnesota. While Liu denies the claims, Farfetch said in its regulatory filings that, “Any charges brought against Mr. Liu and related matters could result in negative media coverage, which may adversely impact our brand.”
Earlier that year, Farfetch purchased the domain name and intellectual property of the ill-fated Style.com, Condé Nast’s short-lived foray into e-commerce. As part of the deal the two formed a “content and commerce” partnership, with Jonathan Newhouse, chairman and ceo of Condé Nast International, joining the Farfetch board.
Five years ago, the publisher of Vogue, GQ and Vanity Fair led a $20 million round of funding into Farfetch. Advance held on to its 14.8 million shares during the IPO, and assuming it retained that stake to the end of the day, saw the value of its investment balloon to $422 million.
Massenet said the plan going forward is to continue to connect brands and shoppers. “The consumer markets are moving quickly, and it is important we keep up.” She said she planned to stay on as executive co-chairman and to continue working with Neves on strategy and communication.
She said the company would be keeping an eye on the consumer, innovating and ensuring that Farfetch remains “the technology platform for the fashion industry.”
The offering was hotly expected on Wall Street with its initial pricing handily topping early expectations. The response underscored the importance of platforms: Farfetch’s marketplace caters to 2.3 million consumers and 980 sellers, making it a real player with scale in the luxury space — where high ticket prices lead to big sales dollars even with a relatively small base of shoppers.
Neves did not sell any stock in the offering, retaining all of the firm’s 42.8 million Class B shares, valued at more than $1.2 billion. Massenet also held on to her 299,010 shares, valued at $8.5 million.
Others did take the opportunity to cash out some of their holdings and the bankers tied to the deal could have rights to sell some additional shares.
Advent Private Equity fund cashed out $54.6 million in the offering, while Farhold (Luxembourg) sold $49 million in stock; Browns Holdings (U.K.) sold $47.2 million and DST Global IV offloaded $44.2 million.
Behind Neves, the biggest stock holder is Kadi Group, an affiliate of JD.com. Kadi is listed as owning 42.4 million Class A shares, or 17.2 percent of those outstanding, a stake valued at $1.2 billion.
Farfetch is now a much more high-profile player in the web and will be under the close watch of investors, who clearly love the company today — but can just as quickly change their hearts tomorrow.