Artemis Eyes Stake in Farfetch
The Pinault family investment arm, which controls Kering, is considering a purchase of the selling shares.
Global online luxury marketplace Farfetch has set a price range for its shares of $15 to $17, but more interestingly, it said in a regulatory filing Wednesday evening that Artemis, the investment arm of France's Pinault family, has indicated an interest in purchasing a stake in the company through its sale of shares.
Artemis controls luxury conglomerate Kering. The French investment firm has only expressed an indication of interest, and has not signed any binding agreement or commitment to purchase shares. Consequently, Artemis could decide to purchase “more, less or no Class A ordinary shares in this offering,” the filing with the U.S. Securities and Exchange Commission said, adding that the underwriters could “determine to sell more, less or no shares to Artemis.”
The Pinault company expressed an interest in buying up to $50 million in Class A ordinary shares. At the midpoint of the pricing range, that would represent 3.1 million shares. The initial public offering prospectus said Farfetch is selling 37.5 million Class A shares. The Class B ordinary shares are not being sold in the IPO, and the company's founder and chief executive officer José Neves is the beneficial owner of those shares. Through his Class B holdings, Neves would control 78 percent of the voting power of the firm's outstanding shares following completion of the IPO. The rights of the holders of Class A and Class B shares are identical, except for voting and conversion rights.
In Wednesday's filing, Farfetch said it plans for trading in its shares to begin on the Big Board on Sept. 21. Using the midpoint of the pricing range, the global luxury marketplace firm would raise $600 million and have a market value of between $4.2 billion to $4.9 billion.
The London-based firm made its intentions to go public known in a regulatory filing with the Securities and Exchange Commission on Aug. 20. The shares will trade under the symbol FTCH. The net proceeds from the IPO will be used to “fund growth and other general corporate purposes, including possible acquisitions,” Farfetch said. The company in May 2015 acquired British fashion and luxury goods boutique Browns.
In its prospectus, the company said that as of June 30, the platform “connected over 2.3 million marketplace consumers in 190 countries to over 980 luxury sellers.” The company said the average order value for the six months ended June 30 was $622.10. Further, the platform provides consumers with access to more than 3,200 different brands. Retailers represent about twothirds of the sellers, with brands comprising the remaining one-third.
The filing also said 98 percent of the retailers that sell on the site have “entered into an exclusive relationship with us.” Farfetch has been spearheading partnerships with major luxury brands that include Burberry and Chanel. The marketplace platform is helping Burberry expand its distribution, and with Chanel it is helping the brand incorporate digital features in its physical stores. Both are utilizing Farfetch's Store of the Future concept to link online and off-line retailing.
The company relies on a revenue-share model, taking a commission on sales and related income from those transactions.
For the six months ended June 30, the loss widened to $68.4 million, or $1.42 a diluted share, from a net loss of $29.3 million, or 75 cents a year ago. Revenues increased 55 percent to $267.5 million from $172.6 million. For the year ended Dec. 31, 2017, the company posted a loss of $112.3 million, or $2.62 a diluted share, on revenues that rose 59.4 percent to $386 million.
Neves founded the company in 2008. Farfetch scored a $397 million investment from JD.com and has been making a big push into the Chinese market. Last year, it introduced 90-minute delivery services in Shanghai, Beijing and Hong Kong. Farfetch also has a strategic relationship with Chalhoub Group for the Middle East.
The prospectus noted that Kadi Group Holding Ltd., an existing shareholder and affiliate of JD.com, also indicated plans to purchase — under certain conditions — additional Class A shares from the offering in an amount that would give it one-third of the Class A representation to maintain its current ownership percentage. ■