Shares in Luxury Marketplace Farfetch Soar 50% After IPO, Minting a New Billionaire
Shares of luxury fashion marketplace Farfetch jumped as much as 50% in trading Friday following an initial public offering, making a billionaire out of its Portugese founder José Neves—at least on paper.
After raising $ 672.2 million in an IPO of shares priced at $ 20 apiece Thursday night, the London-based fashion tech firm’s stock rose as high as $ 30.60 during midday trading on the New York Stock Exchange Friday.
Assuming the deal’s underwriters decide to exercise their options on the stock, Farfetch—which lists brands such as Dolce and Gabbana, Fendi, and Givenchy—has attained a valuation of about $ 9 billion while placing its founder in the billionaire’s club.
With Neves’ 44.6 million in shares and options, his stake is worth about $ 1.4 billion on paper, based on filings with the Securities and Exchange Commission. Based on that same document, Neves held onto all his shares in the IPO, though other existing shareholders sold 10.6 million shares and gained $ 212.7 million in the sale.
The valuation suggests investors are expecting the company grow more like a tech firm than a luxury retailer.
Despite its multi-billion market value, the firm’s losses continued in 2017, rising 38% to $ 112.3 million. In comparison, Burberry, another London-based luxury retailer with a valuation of about $ 10 billion, reported revenue of $ 3.6 billion in its last fiscal year ending March.
At the same time, Farfetch’s revenue has outpaced its losses, rising 59.4% to $ 386 million in 2017, with active consumers up 43.6% during the period to just under a million. Its expansion has been helped along by partnerships in significant luxury markets, such as one with China’s JD.com and Dubai’s Chalhoub Group.
And if its SEC filing is anything to go by, the company plans a strategy that involves tech as much as it does clothing. The word “technology” pops up 173 times in the document, only slightly more than the 171 times Farfetch uses the word “fashion.”
Unlike many traditional retailers, Farfetch avoids the headache of managing overstock by holding no inventory of its own.
The company is also developing other sources of revenue. For instance, Farfetch purchased London Boutique Browns in 2015. Now it’s developing the “store of the future” based in those locations, or stores brings more tech into brick and mortar. The firm also launched “Black and White,” a way for fashion brands to build their own e-commerce sites through Farfetch.
