Court clears Adidas, says investors weren't misled over Ye controversy
What's the story
Adidas has successfully defended itself against an appeal from shareholders who accused the company of concealing misconduct by rapper-entrepreneur Kanye West (Ye) before their partnership ended in 2022. The San Francisco court ruled that the sportswear giant did not mislead investors, who claimed they lost money after Adidas shares fell when it severed ties with West.
Allegations
Shareholders alleged Adidas concealed risks of West partnership
The HLSA-ILA Funds, the firm representing the investors, alleged that Adidas continued its partnership with West despite being aware of his controversial conduct for years. The filing claimed that Adidas "internally grappled" with West's behavior but misled shareholders by failing to disclose the risk in its reports. However, the 9th US Circuit Court of Appeals in San Francisco ruled in favor of Adidas on Wednesday.
Ruling details
Court emphasized inherent risks of celebrity partnerships
The court emphasized that a reasonable investor would understand that a partnership with a celebrity like West could have "inherent risks relating to improper behavior." A district court had earlier dismissed HLSA-ILA's case, which the firm subsequently appealed. The breakdown of Adidas's partnership with West significantly impacted the German firm's share price in 2023.
Financial impact
Yeezy partnership was a major revenue source for Adidas
The Yeezy partnership with West was one of Adidas's most lucrative collaborations, generating around €1.5 billion (£870 million; $1.17 billion) in sales in 2021. However, the partnership ended after West made anti-Semitic comments and promoted conspiracy theories, resulting in the brand losing hundreds of millions of dollars. The fallout left Adidas with over €1 billion worth of Yeezy shoes in storage, which it later announced would be sold, with some proceeds donated to charities combating hate.