Farfetch (NYSE: FTCH) stock was up 23% during regular trading hours yesterday. After hours FTCH stock then fell back 8%. This was on the basis of a report that the founder might try to take the online retailer private again: “The founder of British luxury fashion site Farfetch is plotting to take the company private after a disastrous US float. José Neves is understood to be in talks with bankers and top shareholders, who include Cartier-owner Richemont, about a deal that would bring an abrupt end to its short but calamitous stint on the New York Stock Exchange. The company has lost more than 90pc of its value since listing on the market in 2018. It is thought that Mr Neves’s plans to take the company off the stock market could be announced imminently.”
That’s the Telegraph which is a decent enough newspaper. Well plugged into the British financial markets at least, even if not so much into New York.
Another indicator that there might be something happening is the delay in reporting the due results: “Farfetch (NYSE:FTCH) on Tuesday said it would not announce third quarter financial results, previously scheduled for Nov. 29. The company added it expects to provide a market update in due course and will not be providing any forecasts or guidance at this time, and any prior forecasts or guidance should no longer be relied upon.” Now, whether that’s an indicator of some disaster - possible with Shein and so on pushing into the market - or a result of these possible ongoing discussions about going private, well, who knows?
Farfetch stock price from Google Finance
We’ve looked before at Farfetch: “Farfetch (NYSE: FTCH) shares jumped 25% on Thursday, including postmarket, on the back of their results announcement. Some are noting that Farfetch has returned to growth with an 8% sales rise. This is not wholly and exactly true. Nominal sales have risen by that much. But we are in an inflationary environment, and so we need to consider the effects of that inflation. At which point it's not obvious that Farfetch is growing at all. This is one of the damages that inflation does to an economy, it makes it terribly difficult to work out what is really happening, - that then leading to a loss of efficiency in capital allocation and so on.”
On the next set of results we looked again at FTCH: “Farfetch (NYSE: FTCH) stock is down 42% premarket on the back of the results announcement of last night. The results are not, in fact, that bad. They’re just very much worse than everyone was hoping for. Within which is a very important message about markets and prices. It is not objective reality which matters in this short term. Sure, reality gets its look in over time. But the price right now is based upon everyone’s beliefs. And those beliefs are always about what the future holds - therefore the price is based upon hopes. And when those hopes get dashed then the price will move considerably.”
The market does think there’s a basic problem in there. Perhaps going private could be the prelude to solving them. Our rather cynical thought here is that actually that price might well decline, a lot. The insistence that previous guidance is not to be relied upon. We think that might presage a really bad set of results. Which would mean a significant fall in the stock price of course. At which point perhaps the announcement of going private. Or perhaps that’s too cynical, but we do have an unease about those results - which means we think the upside of any deal is going to be limited. It might well be presented as a rescue of an organisation going badly wrong rather than a decent premium to current shareholders.
