Farfetch’s financial strain persists, casting a shadow just a month after securing its rescuer.
A consortium of investors, known as the 2027 Ad Hoc Group, emerged recently to oppose the impending acquisition of the beleaguered luxury e-commerce platform by South Korea’s Coupang.
Although the deal, unveiled last December and involving a $500 million bridge loan to buoy Farfetch, remains pending, it has already obliterated all equity stakeholders, including company staff. Holding over 50 percent of Farfetch’s convertible notes maturing in 2027, the Ad Hoc Group is demanding immediate repayment of these debts from Farfetch.
Expressing concerns, the Ad Hoc Group apprehends that Farfetch might be contractually bound to its agreement with Coupang, precipitating a decline in the e-tailer’s value under the South Korean firm’s ownership. Complicating matters, Coupang’s bridge loan terms stipulate a hefty $1 billion fee for any competing bidder, along with a $20 million termination fee.
Furthermore, the Ad Hoc Group has accused Farfetch of opacity regarding its financial predicament. Despite projecting $800 million in cash reserves by the end of 2023 last August, the company found itself scrambling for a bailout just four months later. Estimates from Bernstein indicate that Farfetch, which went public in 2018, faced financial obligations of approximately $2.8 billion by the close of 2023, inclusive of convertible notes.
While other backers have acknowledged their losses, luxury conglomerate Richemont, for instance, conceded in a December statement that it did not anticipate the repayment of $300 million in loans extended to Farfetch.
Farfetch and Coupang declined to provide comments on the matter.