Farfetch, the struggling luxury e-commerce platform that was on the verge of bankruptcy, secured its survival: The retailer announced on Monday that Coupang, known as the South Korean version of Amazon, would buy it, giving it a $500 million boost.
Farfetch, which is headquartered in London, was once hailed as the most powerful player in luxury fashion. It was listed on the New York Stock Exchange in 2018, and as shoppers and luxury brands joined the site, its value soared, reaching over $23 billion at its highest point in 2021.
But soaring costs and debt, a series of risky bets, and a slowdown in the global luxury market triggered a drop in the company share price to a market value of around $200 million. The troubles led to a frantic search for new funding by its founder and chief executive, José Neves, a 49-year-old Portuguese entrepreneur.
In Coupang, South Korea’s largest e-commerce retailer, Farfetch found a way to avoid bankruptcy and keep operating. Coupang, which went public in New York in 2021, has e-commerce businesses in markets such as South Korea, Taiwan, Singapore, and India, and also provides grocery, payment, and video streaming services.
Greenoaks, a leading global investment firm, is Coupang’s partner in the deal. As part of the agreement, Farfetch shares will be removed from the market and its current shareholders will lose everything. Farfetch shares fell 35 percent in premarket trading on Monday after the deal was revealed.
“Coupang’s established reputation and deep expertise in transforming commerce will allow us to offer outstanding service for our brand and boutique partners, as well as for our millions of customers around the world,” said Mr. Neves, who will stay at the company in an unknown role.
Bom Kim, the founder and chief executive of Coupang, praised Farfetch as “a milestone of the luxury landscape” and “a game-changer in online luxury.”
“Farfetch will renew its commitment to providing the most refined experience for the world’s most exclusive brands while pursuing stable and sensible growth as a private company,” he said in a statement.
A deal for Farfetch to acquire a 47.5 percent stake in its competitor Net-a-Porter from the luxury goods group Richemont has been canceled, Richemont confirmed in a statement on Monday.
Farfetch, which links buyers with independent boutiques and also offers e-commerce solutions for bigger luxury brands and retailers, tried to calm its retail clients on Monday.
“Farfetch will keep operating as usual, but with a stronger financial position and cash situation,” the company said in an email, adding that its partners would “keep working with the Farfetch team as you have for the past 15 years.”
The deal ends a painful year for many former stars of luxury e-commerce. News reports over the weekend suggested that Matchesfashion.com — bought by Apax Partners in 2017 for around $1 billion — would soon be sold to Fraser Group, owned by the British retail mogul Mike Ashley, for around $63 million.