Tuesday, 28 April 2020

Farfetch boosts cash flow by $350m as investors show support

Farfetch, like many companies in the current coronavirus crisis, has just raised extra money with a multimillion-dollar sum generated via a private placing to institutional buyers.

The company has raised $350 million in debt via Convertible Senior Notes that will accrue interest at a rate of 3.75% a year. 

It estimates that the net proceeds from the offering will be approximately $340.7 million (or $389.5 million if the initial purchasers exercise their option to purchase additional notes in full), which it intends to use “for general corporate purposes”. 

The initial conversion price of the notes represents a premium of around 35% over the sale price of Farfetch’s Class A ordinary shares on the New York Stock Exchange on Monday.

That’s an unsurprising vote of confidence in the firm. Farfetch could be one of the winners as the world starts to think about emerging from the coronavirus lockdown. The giant online retailer could benefit in the long term from a sectoral shift to online shopping that may happen faster than it otherwise would have done.

It means that, despite the firm still being loss-making, there are investors keen to grab a piece of the pie. Its shares had dipped on their Monday opening this week, but they bounced back sharply later in the day and have continued to rise in Tuesday trading as news of the placing became known. That said, the shares continue to trade at less than half of the price they fetched at their IPO in September 2018.

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